Kulesa v. 21st Century Ins.

Filed 9/27/06 Kulesa v. 21st Century Ins. CA1/5

NOT TO BE PUBLISHED IN OFFICIAL REPORTS

California Rules of Court, rule 977(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 977(b). This opinion has not been certified for publication or ordered published for purposes of rule 977.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FIRST APPELLATE DISTRICT

DIVISION FIVE

Mary Kulesa and James Kulesa (Kulesas) appeal from a judgment entered after the trial court: (1) set aside a default and default judgment entered against respondent 21st Century Insurance Company (21st Century); (2) construed the Kulesas’ complaint to be a petition to compel arbitration; and (3) granted 21st Century’s motion to deny the petition. The Kulesas contend the court erred in (i) precluding them from conducting discovery before setting aside the default; (ii) granting 21st Century’s motion to set aside the default and default judgment; and (iii) construing their complaint to be a petition to compel arbitration. We will affirm.

I. FACTS AND PROCEDURAL HISTORY

At the heart of this dispute is the Kulesas’ pleading captioned “COMPLAINT TO COMPEL ARBITRATION OF UNINSURED MOTORIST CLAIM” (Complaint), by which they contended that 21st Century should be compelled to arbitrate the Kulesas’ uninsured motorist claim, even though the statutory limitations period had expired.

According to the Complaint, the Kulesas were involved in an automobile accident with an uninsured motorist on January 22, 2003. They submitted a claim for uninsured motorist coverage under their policy with 21st Century, which acknowledged receipt of the claim on June 23, 2003. In correspondence from July 2003 through December 2004, 21st Century indicated that it was reviewing the claim but needed additional information and time to make a coverage determination. In each of these letters, 21st Century represented that this process would take an additional 60 days.

The last of the letters, dated December 6, 2004, requested the diagnosis codes for the Kulesas’ injuries and tax identification numbers for each provider referenced on their medical bills and records. The correspondence also advised the Kulesas that it would take approximately 60 days--until early February 2005--to complete the claims review process.

The Kulesas served a demand for arbitration on February 2, 2005. However, the two-year limitations period for demanding arbitration or filing a complaint based on an uninsured motorist claim had expired on January 22, 2005. (Ins. Code, § 11580.2, subd. (i)(1), (2), & (3).)^[1] 21st Century refused to arbitrate.

In their only cause of action in the Complaint, the Kulesas alleged that 21st Century should be compelled to arbitrate their claim notwithstanding expiration of the limitations period. Specifically, they argued, 21st Century knew the limitations period would expire on January 22, 2005, but failed to warn them in the December 2004 letter that they should take action to preserve their rights under the uninsured motorist statute, since the claim review process would extend beyond January 22. Thus, the Kulesas urged, 21st Century waived, and should be estopped from asserting, the statute of

limitations defense.

21st Century was served with the Complaint and summons on April 5, 2005. On May 20, 2005, a default was entered at the Kulesas’ request, after 21st Century failed to timely file a responsive pleading. A default judgment was entered against 21st Century on June 1, 2005.

A. Order Setting Aside 21st Century’s Default

21st Century filed a motion to set aside the default and default judgment under Code of Civil Procedure section 473, subdivision (b), contending that the default was taken due to attorney “mistake, inadvertence, surprise, or neglect.” The motion included a declaration from 21st Century’s attorney, Randy Moss, who explained in some detail that his firm had failed to file a responsive pleading due to an “unusual administrative error” and “further unfortunate and unusual clerical errors,” which caused Moss to be unaware of the Complaint and the date by which a responsive pleading would have to be filed. The hearing on 21st Century’s motion was scheduled for July 11, 2005.

On June 10, 2005, the Kulesas noticed the depositions of 21st Century and a 21st Century staff attorney, Greg Wood, for June 27, 2005. The notice also required 21st Century to produce documents regarding the transmittal of the claim file to Moss’s law firm. The Kulesas contend these depositions would allow them to test the attorney’s affidavit of fault and investigate whether client neglect contributed to entry of the default.

21st Century filed a motion for a protective order, seeking to prohibit the depositions. 21st Century asserted that the information sought would be protected by the attorney-client privilege, that the depositions would be unduly burdensome, oppressive, and further that they would be unnecessary because the only evidence required for relief from default under Code of Civil Procedure section 473, subdivision (b) was the attorney’s affidavit of fault.

The trial court granted 21st Century’s motion and quashed the deposition notices, while permitting the Kulesas to argue, in opposition to 21st Century’s motion to set aside the default, that they needed the depositions to be able to oppose the motion.^[2]

The Kulesas renewed their discovery request in opposition to 21st Century’s motion set aside the default and default judgment. After a hearing on July 25, 2005, the court granted 21st Century’s motion, finding that attorney neglect was the cause of 21st Century’s failure to timely respond to the Complaint. The written order reflecting the ruling was not filed, however, until October 7, 2005. Notice of entry of that order was served by 21st Century on October 24, 2005.

B. 21st Century’s Demurrer and Motion

In August 2005, having been relieved of its default, 21st Century filed a demurrer to the Complaint on the ground that it failed to state a cause of action and was uncertain. Alternatively, 21st Century requested that the court deem the Complaint a petition to compel arbitration (Code Civ. Proc., § 1281.2), deem the demurrer a reply to that petition, and deny the petition. 21st Century argued that the Kulesas had waived their right to demand arbitration by failing to file a complaint, institute arbitration proceedings, or reach agreement with the insurer as to the amount due, within the two-year limitations period set forth in Insurance Code section 11580.2, subdivision (i)(1).

By order filed on September 28, 2005, the trial court deemed the Complaint to be a petition to compel arbitration, denied the petition on the ground that the Kulesas had failed to comply with the statutory requirements for uninsured motorist arbitration, and concluded the demurrer was moot. The order was served by mail by the court clerk on that same date. On October 5, 2005, 21st Century served notice of entry of the

September 28 order. The Kulesas did not timely appeal from the September 28 order.

C. Judgment and Appeal

After the order setting aside the default judgment against 21st Century was ultimately filed on October 7, 2005, the court, on October 18, 2005, entered judgment in favor of 21st Century pursuant to its September 28 order. The judgment added nothing of substance to the September 28 order denying the deemed petition to compel arbitration, but merely restated the court’s ruling that the petition to compel arbitration had been denied. Notice of entry of judgment was served on December 16, 2005.

The Kulesas filed a notice of appeal on December 19, 2005, which stated they were appealing from “the judgment of dismissal which was filed on October 18, 2005.” The notice of appeal was filed more than 60 days after the September 28 order was filed and served by the court clerk, and more than 60 days after the order setting aside the default judgment against 21st Century (entered on October 7), but less than 60 days after notice of entry of the order setting aside the default judgment (October 24), and less than 60 days after notice of entry of judgment (December 16, 2005).

D. 21st Century’s Motion to Dismiss the Appeal

21st Century filed a motion to dismiss the appeal on the ground it was untimely. On February 23, 2006, we denied the motion, noting, however, that we lacked jurisdiction to review the trial court’s appealable order of September 28, 2005, which had denied the Kulesas’ deemed petition to compel.

Because the parties now ask us to revisit the jurisdictional issues, we set forth the basis of our prior decision on the motion to dismiss.

An order denying a petition to compel arbitration is an appealable order. (Code Civ. Proc., § 1294, subd. (a).) The Kulesas had to appeal that order within 60 days of the clerk’s mailing a file-stamped copy of the order (September 28), or within 60 days of service of notice of entry of the order (October 5), whichever came first. The Kulesas did not file their notice of appeal until December 19, more than 60 days after both events. Their appeal of the order denying arbitration was therefore untimely. (Hobbs v. Bateman Eichler, Hill Richards, Inc. (1985) 164 Cal.App.3d 174, 190-191 (Hobbs) [failure to appeal from orders denying motion to compel arbitration precludes review].) Furthermore, the fact that a judgment was later entered on October 18, restating the order, did not initiate a new period in which the order could be appealed. (See Carpenters 46 Northern Cal. Counties Conf. Bd. v. David D. Bohannon Organization (1980) 102 Cal.App.3d 360.)

The notice of appeal was filed, however, within 60 days after the October 18 entry of judgment, leaving the possibility that some other purported error, reviewable upon appeal of that judgment, could still be challenged. Thus, we denied the motion to dismiss the appeal in its entirety, while holding that we lacked jurisdiction to review the denial of the arbitration petition on the merits. (See Hobbs, supra, 164 Cal.App.3d at pp. 190-191 [order denying motion to compel arbitration could not be reviewed, but other aspects of judgment could be].)

II. DISCUSSION

The Kulesas contend: (1) the issuance of the discovery protective order was an abuse of discretion; (2) granting relief from the default without allowing the noticed depositions was an abuse of discretion; and (3) the court should not have deemed the Complaint to be a petition to compel arbitration. 21st Century argues that we have no jurisdiction to hear any of these challenges. We consider the Kulesas’ arguments, and the jurisdictional considerations as to each, in turn.

A. Issuance of Protective Order Precluding Discovery as to Attorney Fault

The Kulesas contend that the trial court erred in precluding them from taking the deposition of 21st Century and its staff attorney to test the veracity of the attorney-fault affidavit submitted in support of its motion for relief from the default. A protective order is an interim order and is not immediately appealable. (Bartschi v. Chico Community Memorial Hospital (1982) 137 Cal.App.3d 502, 507-508.) It is therefore properly reviewable upon appeal of the judgment.^[3] A trial court’s discovery ruling, however, is not to be disturbed unless the court has abused its discretion. (Liberty Mutual Ins. Co. v. Superior Court (1992) 10 Cal.App.4th 1282, 1286-1287.)

Under Code of Civil Procedure section 473, subdivision (b), relief from a default judgment is mandatory when a party requests relief and the attorney files an affidavit of fault attesting to his “mistake, inadvertence, surprise, or . . . neglect.” (Code Civ. Proc., § 473, subd. (b).) The attorney neglect does not have to be excusable. (Beeman v. Burling (1990) 216 Cal.App.3d 1586, 1604-1605 & fn. 14.) As noted, 21st Century’s attorney submitted an affidavit of attorney fault.

The Kulesas contend that the only way they could determine whether the default was truly due to attorney fault was to take the depositions of 21st Century and its staff attorney Wood, who was served with the Complaint and summons. If the client is involved in the neglect, the Kulesas argue, the statutory requirement that the default be “caused” by attorney neglect is not satisfied. (See Solv-All v. Superior Court (2005) 131 Cal.App.4th 1003, 1010-1011.) Furthermore, the Kulesas insist, the statutory language that the default should be set aside “unless the court finds that the default or dismissal was not in fact caused by the attorney’s mistake, inadvertence, surprise, or neglect,” would be meaningless if the court could look only at the affidavit of the attorney taking the blame.

The trial court did not abuse its discretion in precluding the Kulesas’ requested discovery. In the first place, a number of courts, including in this appellate district, have concluded that the attorney’s fault need only be a proximate cause of the failure to file a timely responsive pleading, whether or not the client or other cause may have contributed to it as well. (See, e.g., Benedict v. Danner Press (2001) 87 Cal.App.4th 923, 929-932 [the proximate cause standard for legal malpractice actions, that a lawyer’s negligence need not be the only proximate cause of a client’s injury so long as there is causation in fact, also applies to the causation requirement under Code Civ. Proc., § 473, subd. (b)]; Milton v. Perceptual Development Corp. (1997) 53 Cal.App.4th 861, 867 (Milton) [applying legal malpractice standard of proximate cause].) Here the trial judge found that attorney mistake or neglect was the cause of the default. A trial court’s determination on the causation issue must be affirmed if it is supported by substantial evidence, regardless of whether the evidence might give rise to conflicting inferences. (Milton, supra, at p. 867.) The attorney affidavit of fault provides substantial evidence in support of the trial court’s decision. At any rate, the court’s decision to deny discovery on the issue was not so irrational or arbitrary as to constitute an abuse of discretion. The attorney affidavit of fault provided reasonable detail of the underlying circumstances, specifically stating that the client provided the Complaint to counsel sufficiently in advance of the date to file a responsive pleading, and the client immediately alerted counsel when it received notice that a default had been taken. The motion to set aside the default was then promptly filed. There is no indication that the Kulesas’ discovery request was anything more than a fishing expedition, or that the depositions would have provided any basis on which the trial could properly have refused to grant the motion, even if it were presented under the discretionary provisions of Code of Civil Procedure section 473.

We are mindful as well that Code of Civil Procedure section 473, subdivision (b), was intended to provide prompt and mandatory relief from default upon the submission of the attorney affidavit of fault, and the trial court’s decision was consistent with this aim as well as the public policy favoring adjudication of claims on the merits. (Avila v. Chua (1997) 57 Cal.App.4th 860, 868 [the law strongly favors trial and disposition on the merits, and any doubts in applying Code of Civil Procedure section 473 must be resolved in favor of the party seeking relief].)

B. Order Setting Aside the Default

The Kulesas next contend that the trial court erred in setting aside the default and default judgment that had been entered against 21st Century. Contrary to 21st Century’s assertion, we have jurisdiction to review the court’s order. The Kulesas, however, fail to establish that the order was erroneous.

1. Jurisdiction

An order setting aside a default judgment is directly appealable where, as here, the judgment vacated was a final appealable judgment and the order is not conditioned on a second order. (Elsea v. Saberi (1992) 4 Cal.App.4th 625, 628.) The 60-day period to appeal began when 21st Century served notice of entry of the order, on October 24, 2005. Sixty days from that date is December 23, 2005. The notice of appeal was filed on December 19, 2005, within that period.

21st Century argues that the notice of appeal purported to challenge the “judgment of dismissal” that was filed on October 18, 2005, not the order setting aside the default judgment--so even if an appeal from the order would have been timely, the Kulesas did not properly appeal from it.

This is a fairly close question. The notice of appeal must identify “the particular judgment or order being appealed.” (Cal. Rules of Court, rule 1(a)(2); Sole Energy Co. v. Petrominerals Corp. (2005) 128 Cal.App.4th 212, 239 [appeal from judgment could not be construed as appeal from a new trial order, “which was directly and independently appealable”].) Although we broadly construe a notice of appeal to encompass all interim rulings of the trial court as well as the judgment itself, the order setting aside the default judgment was not an interim order, but an appealable order. Nevertheless, the notice of appeal requested the clerk to include in the transcript the order setting aside the default and the relevant moving and opposition papers. It was therefore plain on the face of the notice of appeal that this was one of the issues the Kulesas intended to challenge, and this fact was certainly not a surprise to 21st Century. In the interests of justice, we deem the notice of appeal sufficient to challenge the order setting aside the default judgment.

2. Merits

21st Century’s motion to set aside the default and default judgment was based on the mandatory relief provision in Code of Civil Procedure section 473, subdivision (b). To satisfy the requirements of this statute, the party seeking relief must submit an affidavit (or declaration) indicating that the failure to timely respond to the Complaint was due to the attorney’s mistake, inadvertence, surprise, or neglect. (Code Civ. Proc., § 473, subd. (b).) In this matter, the declaration of 21st Century’s attorney explained that 21st Century forwarded the Complaint to his firm in advance of the deadline for filing a responsive pleading, and the failure to do so was entirely the fault of the firm. The trial court had no discretion to deny the relief mandated by statute. (J.A.T. Entertainment, Inc. v. Reed (1998) 62 Cal.App.4th 1485, 1492.)

The Kulesas do not state any basis for claiming the order setting aside the default was erroneous, except to contend that it was an abuse of discretion to issue the order without permitting the Kulesas to take discovery. We have rejected that contention ante. The Kulesas fail to establish error in the granting of 21st Century’s motion under Code of Civil Procedure section 473.

C. Deeming the Complaint to be a Petition to Compel Arbitration

As previously noted, we have no jurisdiction to review the September 28 order denying appellants’ deemed petition to compel. The Kulesas contend that we may nevertheless review the trial court’s “intermediate order“ deeming the Complaint to be a petition to compel arbitration. They contend that the order was erroneous because a petition to compel arbitration must allege an agreement to arbitrate, and their Complaint did not. (See Code Civ. Proc., § 1281.2.) This error was prejudicial, they add, because they would have been able to amend the Complaint if a demurrer had been sustained, while they were unable to amend the petition once it was dismissed. They claim that they would have been entitled to amend the Complaint because “viable issues relating to waiver and estoppel to assert the 2 year statute of limitations were raised by the pleadings.”

The Kulesas are incorrect on all points. First, the statement deeming the Complaint to be a petition to compel arbitration was not an “intermediate order” separate and distinct from the September 28 order denying the petition to compel. To the contrary, the conclusion that the Complaint was in reality a petition was just one of three sentences comprising the September 28 order, and only articulated the legal basis for it. The court’s finding in this regard is not separately appealable. (See Hobbs, supra, 164 Cal.App.3d at pp. 190-191 [where defendants failed to appeal from appealable orders denying motion to compel arbitration, errors in such orders could not be reviewed on subsequent appeal from judgment].)

Second, the court did not err in concluding that the Complaint, which contained only a single cause of action that sought to compel arbitration, was in reality a petition to compel arbitration. To the extent that failure to allege an agreement to arbitrate might otherwise be considered a deficiency in the pleadings, it was satisfied by reference to the uninsured motorist statute which provides for arbitration.

Third, even if the court had construed the Kulesas’ pleading as a complaint and had sustained the demurrer, the Kulesas still fail to identify any additional facts they could have alleged that would have supported their theories of waiver and estoppel. The appellants have the burden of proving that they could have amended their pleadings to cure the defect. (Schifando v. City of Los Angeles (2003) 31 Cal.4th 1074, 1081.) Unable to suggest new allegations that would cure the deficiency in their pleadings, they were not prejudiced by their inability to file an amended pleading.

III. DISPOSITION

The judgment is affirmed.

BRUINIERS, J.^*

We concur.

JONES, P. J.

SIMONS, J.

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^[1] “(i)(1) No cause of action shall accrue to the insured under any policy or endorsement provision issued pursuant to this section unless one of the following actions have been taken within two years from the date of the accident: (A) Suit for bodily injury has been filed against the uninsured motorist, in a court of competent jurisdiction. (B) Agreement as to the amount due under the policy has been concluded. (C) The insured has formally instituted arbitration proceedings by notifying the insurer in writing sent by certified mail, return receipt requested. Notice shall be sent to the insurer or to the agent for process designated by the insurer filed with the department.” (Ins. Code, § 11580.2, subd. (i).)

^[2] In its tentative ruling, the court stated: “While not agreeing that there never will be a case where the deposition of opposing counsel in the CCP 473 attorney-fault context is appropriate, the court grants the protective order with the following caveat: Plaintiff is free to argue in opposition to the motion for relief that she needs to depose counsel for the Defendant Insurance Company in order adequately to oppose the Motion. The judge before whom that Motion is pending has the option -- similar to that under [Code Civ. Proc., § 437c, subd. (h)] to continue the motion for relief until the deposition has occurred.” The tentative ruling became the order of the court after oral argument.

^[3] 21st Century argues that a challenge to a protective order should be raised in an appeal from the order setting aside the default judgment. For this proposition, it refers us to Armstrong v. Gates (1973) 32 Cal.App.3d 952, 954, 957 (Armstrong). In that case, on appeal from an order setting aside a default judgment, the court considered whether a protective order that had been issued in connection with the motion to set aside the default judgment was erroneous. (Id. at p. 957.) But the court in Armstrong did not decide that it would have lacked jurisdiction to consider the order upon review of the judgment. In any event, we determine post that we have jurisdiction in this appeal to review the order setting aside the default judgment, so even under 21st Century’s reading of Armstrong we would have jurisdiction to review the order denying the Kulesas’ requested discovery.

^* Judge of the Superior Court of Contra Costa County, assigned by the Chief Justice pursuant to article VI, section 6 of the California Constitution.