What is Required for Substituted Service in California?

In the recent California appellate decision in Chinese Theater LLC v. Starline Tours USA, Inc.,  Plaintiff and respondent Chinese Theater, LLC (Chinese Theater) obtained a default judgment against defendant and appellant Starline Tours USA, Inc. (Starline) for $232,670.36.

Starline moved to quash service and to vacate the default judgment on the grounds the judgment was void due to improper service of process.

Starline appealed from the trial court’s order denying its motion, contending the trial court erred in denying it relief because Chinese Theater failed to effectuate substituted service in accordance with Code of Civil Procedure section 415.20.

The appellate court concluded the entry of default and entry of a default judgment were void due to improper service of process on Starline

There was insufficient evidence the attempted substituted service was properly effectuated on a person apparently in charge of Starline’s business office.

The appellate court therefore reversed the trial court’s order denying Starline’s motion, vacated the entry of default and vacated the default judgment.

Chinese Theater brought this action against Starline in August of 2020, alleging breach of a sublease and seeking damages in excess of $225,000

Cruz M. Gonzalez, a registered process server, attempted to personally serve the summons and complaint on Starline on behalf of Chinese Theater.

According to his declaration of reasonable diligence, Gonzalez first attempted to serve Starline, a corporate entity, on August 20, 2020, at 10:58 a.m., but he determined the business address of 2715 S. Tubeway Avenue in the city of Commerce was not accurate and that the correct address was 2130 S. Tubeway Avenue.

He did not explain how he determined the initial address was incorrect.

Gonzalez went to the 2130 S. Tubeway address at 3:00 p.m. on August 26, 2020, but was unable to gain access due to a locked gate.

Gonzalez returned the next day at 2:17 p.m., and “Sub-Served on person in charge Roberto Molina.”

The declaration of due diligence prepared by Gonzalez identifies Starline as the corporate defendant, but does not identify any corporate officer or agent listed in section 416.10 as the individual on whom he attempted service.

Margarita Abeshyan, another registered process server who worked for the same entity as Gonzalez, signed a declaration of service by mail attesting to serving Starline with another copy of the summons and complaint by mail on August 31, 2020.

They were addressed to Kamrouz Farhadi, president of Starline, 2130 S. Tubeway Avenue, Commerce, California 90040.

On December 10, 2020, Chinese Theater filed proof of service of summons on Starline with the court. The proof of service declaration was signed by Gonzalez and attests to substituted service on Starline’s president, Kamrouz Farhadi, at the 2130 S. Tubeway Avenue address.

Paragraph 5b is checked, stating service was made on August 27, 2020, at 2:17 p.m. on “Roberto Molina (Gender: M Age: 55 Height: 5’3” Weight: 180 Race: Hispanic Hair: gray Other:) Person in Charge).”

The box at subparagraph (b)(1) for substituted service on a business is also checked which states service was made on “a person at least 18 years of age apparently in charge at the office or usual place of business of the person to be served. I informed him or her of the general nature of the papers.”

Starline did not make an appearance in the action, and the clerk entered default at Chinese Theater’s request on July 13, 2021. Chinese Theater submitted paperwork in support of entry of a default judgment. Default judgment was entered by the court on August 25, 2021, in favor of Chinese Theater for $232,670.36.

Over a year later, on January 9, 2023, Starline filed a motion to quash service. It also sought to vacate both the entry of default and the default judgment.

The motion included a declaration from Kamrouz Farhadi, identified as the chief executive officer of Starline. Farhadi attested to the following facts: Roberto Molina was not a person in charge of Starline’s offices and was not an employee, officer or director of Starline. Rather, he was a bus washer employed by a related entity called Screamline Investment Corporation.

Molina also does not speak fluent English, and he was not an agent authorized to accept service on behalf of Starline. Farhadi further stated: “I understand that a default judgment has been obtained by Plaintiff in this action based on the improper service on Mr. Molina.”

Farhadi does not expressly deny receiving the summons and complaint left with Molina or the duplicate copies served by mail. There is nothing in the record demonstrating how Farhadi became aware of the action and the default judgment, although ex parte papers included in Starline’s appellate appendix reference service of papers on Farhadi for a judgment debtor examination, after which the motion to vacate was filed.

After entertaining argument from the parties and taking the motion under submission, the court issued a written order denying the motion on August 23, 2023. The trial court found that substituted service was valid, and therefore there was no basis for vacating the default judgment.

The issue before the appellate court was narrow. The facts are minimal and undisputed.

Service of the summons and complaint on Starline, a corporate entity, was made by personally delivering copies to Molina, an employee of a related business entity that operated from the same principal place of business as Starline, followed by sending duplicate copies via regular mail to Farhadi, the chief executive officer of Starline.

The issue was whether this constituted valid substituted service on a corporate entity under section 415.20.

The answer to that question turns on whether Molina is properly deemed to be an individual “apparently in charge” of Farhadi’s principal place of business within the meaning of section 415.20. Based on the record, the appellate court concluded Molina was not apparently in charge.

Whether a judgment is void due to improper service is a question of law that is reviewed de novo.

Moreover, the appellate court defers to the trial court’s factual findings if they are supported by substantial evidence.

Our Supreme Court recently observed that an elementary and fundamental requirement of due process in any proceeding which is to be accorded finality is notice reasonably calculated, under the circumstances, to apprise interested parties of the pendency of the action and afford them the opportunity to present their objections.

Failure to give notice violates “the most rudimentary demands of due process of law.

California courts have held that compliance with the statutory procedures for service of process is essential to establish personal jurisdiction. Thus, a default judgment entered against a defendant who was not served with a summons in the manner prescribed by statute is void.

Substituted service is a valid, statutorily-authorized alternative method of effectuating service of process under California law. (See, e.g., § 415.20.)

As relevant here, section 415.20, subdivision (a), provides that in lieu of personal service on a corporate officer or authorized agent listed in section 416.10, “a summons may be served by leaving a copy of the summons and complaint during usual office hours in his or her office . . . with the person who is apparently in charge thereof, and by thereafter mailing a copy of the summons and complaint by first-class mail, postage prepaid to the person to be served at the place where a copy of the summons and complaint were left.” (§ 415.20, subd. (a).)

The Judicial Council Comment to section 415.20 states that when substituted service is made on a corporate entity in this fashion, the “papers must be delivered to a person who is apparently in charge of such office, such as the personal secretary of the person to be served, and such delivery must be made during the usual office hours.

The process server must set forth in his affidavit of service facts showing that these requirements were complied with.

The appellate court had to define the phrase “apparently in charge” in section 415.20, subdivision (a), to evaluate what is required for effective substituted service.

Chinese Theater contended Starline is asking for the phrase to be read as requiring service only the person “actually” in charge of the office. Starline denied that is its argument, and the appellate court would reject it if it was.

Courts that have considered the “apparently in charge” language, as well as the related phrase “competent member of the household” in section 415.20, have all concluded that, in order to satisfy the statutory requirement, the person subserved at either a business location or a residence must have some reasonable connection to the individual to be served or hold some sort of close relationship to that individual that ensures the likelihood the documents will be passed on to the intended recipient.

For instance, in Bein v. Brechtel-Jochim Group, Inc., the process server had attempted service multiple times at the defendants’ residence. Each time, the process server was denied access to the area by the gate guard stationed at the community’s entrance.

The process server ultimately left the papers with the gate guard, followed by mail service to the residential address.

In affirming the trial court’s ruling this constituted valid substituted service under section 415.20, subdivision (b), Beinexplained, the gate guard in this case must be considered a competent member of the household and the person apparently in charge. The defendants authorized the guard to control access to them and their residence. We therefore assume the relationship between the defendants and the guard ensures delivery of process.”

Bein elaborated, saying that in order for substituted service to be effective, service must be made upon a person whose relationship with the person to be served makes it more likely than not that they will deliver process to the named party.

Here, the gate guard’s relationship with the defendants made it more likely than not that he would deliver process to them].

Similarly, in another case, a process server unsuccessfully attempted personal service at the business address listed on the defendant’s letterhead.

The business address was not an office, but rather, a private post office box rental store. During the third attempt, the process server left the documents with the mail store clerk. He thereafter mailed the documents to the same address by first class, postage prepaid mail.” (Ibid.)

In upholding the validity of the substituted service there, Hearn relied on the analysis in Ellard v. Conway which held that a postal store manager was a person apparently in charge for purposes of section 415.20.

Indeed, Ellard explained the Postal Annex manager knew the defendants and told the process server they received mail there. The process server left a copy of the summons and complaint with the manager and described the contents of the documents. It was the Postal Annex manager’s duty to deliver mail to the defendants as lessees of the post office box. Under these circumstances, it was more likely than not the manager would deliver the summons and complaint as well.

The appellate court concluded the phrase “apparently in charge” cannot reasonably be read to validate service on any employee found at a business location.

There must be some indication warranting a finding the employee is someone “apparently in charge” and reasonably likely to deliver the service documents to the intended recipient and the service declarations should reflect some basic facts upon which the finding was made.

There is no substantial evidence here supporting a finding Molina was such a person.

Gonzalez did file a proof of service of summons form, the filing of which created a rebuttable presumption that service was proper.

Evidence Code, § 647 states the return of a registered process server establishes a presumption, affecting the burden of producing evidence, of the facts stated in the return.

But the presumption is only one affecting the burden of producing evidence.

A rebuttable presumption affecting the burden of producing evidence is merely a preliminary assumption in the absence of contrary evidence.

Evidence Code section 604 states that a presumption affecting the burden of producing evidence requires the trier of fact to assume the existence of the presumed fact unless and until evidence is introduced which would support a finding of its nonexistence, in which case the trier of fact shall determine the existence or nonexistence of the presumed fact from the evidence and without regard to the presumption.

The process server’s return may be impeached by contradictory evidence.

Starline offered contrary evidence that undermined the declaration that Molina was a person apparently in charge of Farhadi’s business office.  

Farhadi said Molina was not employed by Starline, but by a related entity, and he was employed as a bus washer—not someone who worked in the office or would reasonably have a relationship with Farhadi.

Chinese Theater was unable to produce any additional evidence that warranted a finding that a bus washer employed by a separate but related entity operating from the same business address was reasonably deemed to be “apparently in charge” of Farhadi’s business office within the meaning of section 415.20.

Because service of process was not properly effectuated here, Starline was entitled to seek an order vacating the default as void.

The court may, upon motion of the injured party set aside any void judgment or order 

Because the law strongly favors trial and disposition on the merits, any doubts in applying section 473 must be resolved in favor of the party seeking relief from default.

Starline’s motion should have been granted.

LESSONS:

1.         Failure to give notice violates “the most rudimentary demands of due process of law.

2.         California courts have held that compliance with the statutory procedures for service of process is essential to establish personal jurisdiction. Thus, a default judgment entered against a defendant who was not served with a summons in the manner prescribed by statute is void.

3.         Substituted service is a valid, statutorily-authorized alternative method of effectuating service of process under California law. (See, e.g., § 415.20.)

4.         The appellate court concluded the phrase “apparently in charge” cannot reasonably be read to validate service on any employee found at a business location.

5.        There must be some indication warranting a finding the employee is someone “apparently in charge” and reasonably likely to deliver the service documents to the intended recipient and the service declarations should reflect some basic facts upon which the finding was made.