Friday, February 21, 2014

Apparently, CT Corp. Wasn't Home ...

Ramos v. Homeward Residential, Inc., D063740 (D4d1 Feb. 20, 2014)

Other than writs about discovery, nothing warms the cockles of the heart of a civil procedure blogger more than a published decision about service of process. Here, the court of appeal holds that a San Diego trial court properly set aside a default judgment because the defendant was never properly served with process though substituted service under Code of Civil Procedure § 415.20 and  the plaintiff’s efforts did not constitute substantial compliance with the service statutes.

Ramos sued Homeward, a mortgage servicer, on a number of theories arising from Homeward’s foreclosure on Ramos’s home. In serving process, Ramos’s process server left a copy of the complaint and summons at Homeward’s branch office in Irvine. The person who was served stated that she was not authorized to accept service, and she was not identified in the proof of service. The server then mailed a copy of the papers to Homeward at the same Irvine address, without addressing them to any officer or named individual. Homeward did not respond to the complaint, and Ramos took its default, eventually obtaining a default judgment for about $250,000. When, several months later, Ramos took steps to execute against Homeward’s assets, Homeward filed a motion to set aside the default and judgment, largely on the grounds that service was improper. The trial court granted the motion, finding that service was defective, and that in any event, Homeward was entitled to discretionary relief from the default. Ramos appealed.

The court of appeal first holds that the trial court was correct in finding service facially defective. Generally, service on a corporation, which is addressed in Code of Civil Procedure § 416.10, can be made by personally serving its designated agent for service or any of of the eleven officers or managers listed in § 416.10(b). Code of Civil Procedure § 415.20(a) also permits so-called substitute service, which for a corporation entails leaving a copy of the summons and complaint with the person who is apparently in charge of the office of the § 416.10(b) persons. Substitute service is then completed by mailing a copy of summons and complaint to the officer in whose office the original was left.

But what happened here was neither personal nor substitute service. Process was simply delivered to a branch office—the proof did not indicate whether that office was one where one of the § 416.10(b) persons was resident. Further, the copy was mailed just to the company in general, not to the § 416.10(b) person, as required under § 415.20(a). So service was, in fact, facially insufficient.

And although a facial defect in service can be excused if the plaintiff presents evidence of substantial compliance, Ramos failed to meet that burden. Although the service of process statutes are liberally construed, in the context of substitute service on a corporation, the court holds that substantial compliance requires proof that one of the § 416.10(b) persons—not just some employee of the corporation—had actual knowledge of the action. Since there was no evidence of that in the record, the trial court's finding that Ramos had not substantially complied was supported by substantial evidence and thus would stand.

Finally, the court holds that, in the alternative, the trial court also correctly found that Homeward was entitled to discretionary relief from default under § 473.5, which should be liberally afforded in the interest of resolving disputes on the merits. Although § 473.5 relief is inappropriate when the defendant’s lack of notice was caused by active avoidance of service or inexcusable neglect, the record supported no such finding. Although Ramos claimed that Homeward never designated an agent for service to the Secretary of State, Homeward presented evidence that it had designated CT Corp. as its agent in 2007, well before Ramos attempted service in the case.


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