1989 precedent on default judgments overturned

The state Supreme Court on Monday rendered a unanimous ruling that was hailed by the appellant's attorney as a triumph against debt collectors who win default judgments against defendants who never knew they were served in the first place.

The court ruled that it's not too late for a man to challenge a default judgment in a negligence claim that he was responsible for a fire at his former apartment building. The appellant, Cory M. Hoehn, was not at the building when the fire occurred, according to his lawyer, and never received notice of the claim or the $486,528 judgment against him until his wages began to be garnished years later.

The ruling was hailed by Denyse F. Clancy, a partner with Kazan, McClain, Satterley & Greenwood who represented defendant Hoehn pro bono. "They have restored the rule of notice and due process to California citizens," she said in a phone interview.

A waiter at a Truckee restaurant, Hoehn told her his story when she came in for a meal in February 2020. He explained that he was having his wages garnished nearly a decade after the 2011 judgment.

The court reversed a 1989 precedent that gave defendants two years to challenge default judgments, which was considered a "reasonable" amount of time. Advocates for Hoehn's appeal said the ruling could have significant implications in other collections cases in which defendants are not properly served.

"We do not lightly part ways with longstanding Court of Appeal precedent. But we conclude that such a step is appropriate in this case," Justice Martin J. Jenkins wrote for a unanimous court.

"The Rogers rule lacks either a statutory basis or a clear and credible rationale," he added. "We hold that a section 473(d) motion to vacate a judgment that is void for lack of proper service is not subject to the judicially imposed two-year limitation." California Capital Insurance Co. et al. v. Hoehn, 2024 DJDAR 10673 (Cal. S. Ct., filed Nov. 28, 2022).

The case was remanded to the 3rd District Court of Appeal, which had ruled for Sequoia Concepts Inc., the collection agency which was assigned the rights to the judgment by California Capital Insurance Company in 2018 and pursued the case.

Encino attorney Steven J. Horn, who represents Sequoia Concepts, could not be reached for comment. During oral arguments in September, he said the decades-old rule - Rogers v. Silverman, 216 Cal.App.3d 1114 (1989) - should remain in place.

"It's workable and it's effective and it brings the matter to a conclusion, which is what we need in litigation," Horn told the justices.

Clancy said Hoehn - a teenager at the time of the 2009 fire - had never been served with a summons or the complaint, which had been delivered to his girlfriend, with whom he did not live.

An insurance company investigator said "improperly discarded smoking materials" was responsible for the blaze, according to the ruling.

Several organizations and individuals wrote amicus curiae briefs in favor of Hoehn and said the case will help defendants like him who are not properly served with complaints.

"So many people out there are taking advantage of people like [Hoehn]," said Paul L. Hoffman, director of UC Irvine School of Law's Civil Rights Clinic, in a phone interview. As a result, "there are a lot of people who will get out of unfair judgments they didn't know about."