The California Supreme Court says a man who learned of a six-figure default judgment against him when his wages were garnished 10 years after the judgment was entered can challenge the ruling, because a lower court shouldn't have applied a two-year time limit when it was clear he was never properly served.
State Supreme Court Justice Martin Jenkins wrote the unanimous opinion, filed Nov. 18.
The underlying case dates to a June 2009 fire that destroyed an apartment building. California Capital Insurance Company determined “careless smoking” on the patio caused the fire, and in March 2010, the company sued Cory Hoehn and Forest Kroll, accusing the roommates of “general negligence” and seeking $472,326 in damages.
When the company attempted to serve Hoehn with a complaint and summons, it mailed a copy to his known address and left paperwork with a woman identified as a “girlfriend,” “co-occupant” and “competent member of the household." The insurer was unable to serve Kroll and dismissed him from the complaint.
In April 2011, the company obtained a default judgment against Hoehn.
The next development, according to court records, came in March 2018 when California Capital assigned its rights to that judgement to Sequoia Concepts. Following a May 2018 execution writ, the Placer County Sheriff’s Office in January 2020 placed a lien on Hoehn’s wages.
Two months later, Hoehn moved to set aside the judgment, declaring he didn’t recall being served and said he didn’t live with the woman who accepted the documents.
Placer County Superior Court Judge Michael Jones refused to vacate the judgement, saying Hoehn had only two years from the ruling to seek its deferral. He also declined to find the judgment itself to be “obtained by extrinsic fraud or mistake,” ruling a proof of service misidentification wasn’t fraudulent.
After a California Third District Appellate Court panel affirmed Jones’ ruling, Hoehn asked the California Supreme Court to intervene.
The case law, Jenkins wrote, “does not absolutely bar a defendant from challenging a default judgment for improper service two years after its entry when, as here, the invalidity does not appear on the judgment’s face. Rather, it limits a defendant’s remedy in these circumstances to filing an independent equitable action.”
That understanding comes from a 1989 California Third District Appellate Court ruling in Rogers v. Silverman, which birthed the so-called eponymous “Rogers rule.”
But the high court said Hoehn actually sought to bring a motion in the original action, an important distinction because debt collection defendants can rarely find legal representation for the allowable independent action owing to a small likelihood of an outcome generating fees. Further, the court noted studies citing the high rate of default debt collection judgments, “likely attributable in part to inadequate and even fraudulent service.”
Jenkins traced the procedural history on time limits to the late 19th Century, including the 1879 state constitution, a 1933 legislative overhaul to court rules and a 1969 repeal and replace effort that “extended the time a defendant could seek relief from a default judgment where constructive service had not resulted in actual notice from one year to two years after entry of judgment.”
However, the court held, there is no legislative language indicating a desire to impose a two-year limit on motions to judgements that aren’t facially void. The Rogers rule came from courts, Jenkins wrote, and there is no indication lawmakers “intended to preclude courts from continuing to exercise their rule-making authority by reconsidering the correctness of time limits judicially imposed on that power.”
After determining it had the power to reconsider the rule, the court did just that, finding it didn’t need to persist.
“Given the limited nature of the inquiry — was the defendant properly served — there will be some cases, and perhaps many, that may be tried on affidavits or declarations alone, and may be as effectively adjudicated by motion three years after entry of the default judgment as after one year,” Jenkins wrote. “And there are some motions brought beyond the two-year limit as to which trial courts will exercise their discretion to hold hearings and allow oral testimony. There is no reason for compelling defendants in either context to proceed by independent equitable action rather than by motion in the original action simply because two years have passed from entry of default judgment.”
Jenkins said Hoehn’s circumstances, as alleged, exemplify why the limits lack a clear, credible rationale and instead stand to perpetuate “the fundamental injustice that results from the lack of notice.”
However, the court did say Hoehn neither showed nor claimed California Capital committed inequitable conduct. But it also said the appeals panel didn’t consider the merits of his claim of “extrinsic fraud or mistake” and said he could raise the issue in the appellate court on remand.
The Consumer Attorneys of California and American Association for Justice filed a support brief for Hoehn through attorney Alan Dell’Ario, of Napa. That brief cited an 1888 California Supreme Court opinion, Bennett v. Wilson, which held: “A void judgment is, in legal effect, no judgment. By it no rights are divested. From it no rights can be obtained. Being worthless in itself, all proceedings founded upon it are equally worthless. It neither binds nor bars anyone.”
Consumer Attorneys of California did not respond to a request for additional comment.
Hoehn was represented by Kazan, McClain, Satterley & Greenwood and Denyse F. Clancy.
California Capital was represented by Edmond B. Siegel & Associates, Andrew Altholz and the Law Offices of Steven J. Horn.