Rohrbasser v. Lederer

179 Cal. App. 3d 290, 224 Cal. Rptr. 791, 1986 Cal. App. LEXIS 1396

• Court: California Court of Appeal
• Decided: March 27, 1986
• Docket: B009224
• Status: Published

Opinions

Opinion

THOMPSON, J.

In this cross-action for fraud, breach of contract, and declaratory relief against cross-defendant, Les E. Lederer, cross-complainant, Daniel M. Rohrbasser, appeals from a judgment entered after the trial court granted the motion of cross-defendant for summary judgment. The principal issue presented by this appeal is whether the trial court erred in determining that the cross-complaint is barred by the doctrine of res judicata. We answer this question in the affirmative and conclude that the judgment should be reversed.

Statement of Facts

In order to understand the facts of this appeal, it will be necessary for us to relate the factual profile of two prior lawsuits in addition to the underlying action of the present cross-action.

A. First Action

On January 26, 1977, Landale S. A., a Swiss corporation (Landale herein), commenced an action for damages against Rohrbasser, Paul Lorda, Landlord Realty Investments, Inc., and others, seeking to recover moneys advanced to the parties for investment purposes.

From the record it appears that this suit was settled. The parties, including Rohrbasser and his attorney, signed a settlement agreement which required, among other things, Landlord Realty to execute a promissory note in favor of Landale in the sum of $350,000 and Rohrbasser and Lorda to guarantee the note personally. Rohrbasser signed a guaranty.

B. Second Action

On January 23, 1978, Landale filed a complaint for money against Rohrbasser, Lorda, Landlord Realty, and others. In the complaint, Landale alleged, among other things, that the parties failed to comply with the terms of the settlement agreement and the personal guarantees. On January 24, 1978, Rohrbasser was personally served with a copy of the complaint and summons. When Rohrbasser failed to answer the complaint, Landale requested on October 30, 1978, that a default be entered against him. The default was entered that date.

On January 23, 1980, a default judgment in favor of Landale was entered against Rohrbasser in the principal amount of $350,000 together with $84,863.01 interest, $5,390 attorney fees, and $93 costs, for a total amount of $440,253.01.

On March 4, 1980, some 18 months later, Rohrbasser filed a motion to vacate the default and set aside the default judgment, together with supporting declarations. The motion was made on the ground of extrinsic fraud and was addressed to the equitable power of the court. In connection with the issue of fraud, Rohrbasser contended that Landale’s attorney, Les Lederer, told him he had been named a party-defendant in the lawsuit as a mere technicality. Further, Lederer told him that if he provided them with information about the location of Lorda’s assets, they would promise never to hold and go against him under the terms of the guaranty. Rohrbasser contended that these representations caused him not to secure counsel or respond to the complaint. Landale filed declarations in opposition to the motion.

On June 19, 1980, the trial court denied Rohrbasser’s motion to vacate the default and set aside the default judgment. The trial court found that there was an insufficient showing of extrinsic fraud based on the declarations before the court, stating that “I don’t think in the totality of the material that has been presented to [the court] that the moving party has sustained the burden of proof necessary to establish the requirement for extrinsic fraud

Thereafter, on July 1, 1980, Landale assigned its judgment against Rohrbasser to Lederer.

Rohrbasser appealed the trial court’s order denying his motion to vacate the default and set aside the default judgment on August 8, 1980. The California Court of Appeal for the Second Appellate District, Division Three, affirmed the trial court’s decision in an unpublished opinion on July 8, 1983. Thereafter, on September 7, 1983, the California Supreme Court refused to grant a hearing.

C. Present Action

In order to enforce the judgment against Rohrbasser, on June 22, 1981, Lederer, as the assignee of the default judgment obtained in the second action, commenced an action against Rohrbasser and others to set aside a fraudulent conveyance. In the complaint, Lederer alleged that Rohrbasser conveyed certain real property to his mother in an attempt to defraud his creditors. In addition to answering the complaint, Rohrbasser filed a cross-complaint against Lederer, raising the same extrinsic fraud claims urged in his motion to vacate the default and set aside the default judgment. Later, Rohrbasser amended his cross-complaint. This first amended cross-complaint is the subject of this appeal.

On March 5, 1984, Lederer filed a motion for summary judgment, claiming that the first amended cross-complaint is barred by the doctrine of res judicata. He contended that the issues raised in the first amended cross-complaint were raised and resolved against Rohrbasser in his motion to vacate the default and set aside the default judgment. Thus, he argued that collateral estoppel precluded a relitigation of these issues.

In opposing the motion, Rohrbasser argued before the trial court, as he does here, that the denial of his prior motion to vacate does not bar his current cross-complaint. He contends that, since he did not present any oral testimony at the hearing on the prior motion to vacate, the issues were not fully developed at the hearing on the prior motion. Therefore, he argues that the doctrine of collateral estoppel is not applicable. In support of his argument, he cites three cases: Darlington v. Basalt Rock Co. (1961) 188 Cal.App.2d 706 [10 Cal.Rptr. 556]; Preston v. Wyoming Pac. Oil Co. (1961) 197 Cal.App.2d 517 [17 Cal.Rptr. 443]; and Rose v. Fuqua (1962) 200 Cal.App.2d 719 [19 Cal.Rptr. 634].

On April 16, 1984, the trial court granted Lederer’s motion for summary judgment, finding that the denial of the motion to vacate operated to preclude those issues raised in the cross-complaint as were actually litigated and determined in the prior motion to vacate. In reaching its decision, the trial court rejected Rohrbasser’s argument, reasoning that the three cases relied upon by Rohrbasser were inapplicable to the case at bench. The trial court concluded that those cases are only applicable to the situation where relief from default was first sought by a timely motion under Code of Civil Procedure section 473.

After the denial of Rohrbasser’s motion for new trial by the trial court on July 10, 1984, Rohrbasser appealed, contending the trial court erred in determining that the cross-complaint is barred by the doctrine of res judicata.

Discussion

I

A motion for summary judgment is appropriate only where no triable issue of material fact exists and where the moving party’s affidavits set forth sufficient facts to sustain a judgment in its favor. (Zimmerman v. Stotter (1984) 160 Cal.App.3d 1067, 1077 [207 Cal.Rptr. 108]; Bank of Beverly Hills v. Catain (1982) 128 Cal.App.3d 28, 33 [180 Cal.Rptr. 67].) A defendant moving for summary judgment maintains the burden of establishing the lack of merit of plaintiff’s action. (Ibid.) Moreover, because of the drastic nature of the relief sought, the affidavits of the party moving for summary judgment must be strictly construed, while a liberal construction must be accorded any affidavits in opposition. (Rowland v. Christian (1968) 69 Cal.2d 108, 111 [70 Cal.Rptr. 97, 443 P.2d 561, 32 A.L.R.3d 496]; Seltzer v. Seltzer (1969) 276 Cal.App.2d 137, 140 [80 Cal.Rptr. 688].)

The defense of res judicata not only is properly raised by a motion for summary judgment, but also is a proper ground upon which to grant a summary judgment. (Seltzer v. Seltzer, supra, 276 Cal.App.2d at pp. 141-142; Kaiser Foundation Hospitals v. Superior Court (1967) 254 Cal.App.2d 327, 330 [62 Cal.Rptr. 330]; Dryer v. Dryer (1964) 231 Cal.App.2d 441, 446 [41 Cal.Rptr. 839].) Moreover, such a plea presents a question of law for the determination of the trial court. (Pillsbury v. Superior Court (1937) 8 Cal.2d 469, 472 [66 P.2d 149]; Baird v. Superior Court (1928) 204 Cal. 408, 412 [268 P. 640].)

The doctrine of res judicata has two aspects. One aspect, which operates as a bar or merger, is not involved in this case. It prevents the parties from relitigating a cause of action a second time and is a complete defense to a second cause of action. (Teitelbaum Furs, Inc. v. Dominion Ins. Co., Ltd. (1962) 58 Cal.2d 601, 604 [25 Cal.Rptr. 559, 375 P.2d439].)

The other aspect, known as collateral estoppel, is involved in this appeal. It causes a judgment in a previous action between the same parties to operate in the second action as a conclusive adjudication as to whatever issues were actually and necessarily decided in the first action. (Ibid.)

In determining the validity of a plea of collateral estoppel, the court must consider (1) whether the issue decided in the prior adjudication was identical with the one presented in the action in question, (2) whether there was a final judgment on the merits, and (3) whether the party against whom the plea is asserted was party or in privity with a party to the prior adjudication. (In re Marriage of Modnick (1983) 33 Cal.3d 897, 904, fn. 6 [191 Cal.Rptr. 629, 663 P.2d 187]; People v. Taylor (1974) 12 Cal.3d 686, 691.)

Of the three questions, the second question—whether there was full presentation of the issue of fraud on the motion to vacate the default judgment resulting in a final order on the merits—is placed in issue by this appeal.

II

It is well settled in California that a judgment procured by extrinsic fraud or mistake may be attacked either by a motion in the same action or by an independent action in a court having equity jurisdiction, and that each remedy is distinct and cumulative. (Bacon v. Bacon (1907) 150 Cal. 477, 484 [89 P. 317]; Estudillo v. Security Loan etc. Co. (1906) 149 Cal. 556, 565 [87 P. 19]; Huffv. Mendoza (1980) 109 Cal.App.3d 677, 680 [167 Cal.Rptr. 348]; Rose v. Fuqua (1962) 200 Cal.App.2d 719, 724 [19 Cal.Rptr. 634]; Wilson v. Wilson (1942) 55 Cal.App.2d 421, 426 [130 P.2d 782]; Jeffords v. Young (1929) 98 Cal.App. 400, 406-407 [277 P. 163].)

In Estudillo, our Supreme Court, in expressing the rationale for this well-established principle, stated; “The burden of proof rests upon no one more heavily than upon a plaintiff seeking relief upon the ground of fraud, and he ought not to be unduly hampered as to the means of making proof. In support of a motion he is limited to ex parte affidavits of voluntary witnesses unless the court in its discretion permits a wider latitude. In a separate suit he may bring unwilling witnesses into court by subpoena, and he may take their depositions. The [latter] remedy is ampler and more efficacious, and the case is one which demands the amplest and most efficacious remedy.” (149 Cal. at p. 564; see 8 Witkin, Cal. Procedure (3d ed. 1985) Attack on Judgment in Trial Court, § 201, p. 600.) Moreover, the better practice is to seek a summary disposition of the issue upon motion and “if defeated in that proceeding to commence a separate action for relief upon the ground of the plaintiff’s fraud ...” (Estudillo v. Security Loan etc. Co., supra, 149 Cal. at p. 565.)

We recognize that the Estudillo rationale does not apply “where the trial of an issue on a motion is as comprehensive as the trial of the same issue in a suit.” (Sartén v. Pomatto (1961) 192 Cal.App.2d 288, 300 [13 Cal.Rptr. 588].) For example, in Darlington v. Basalt Rock Co., supra, 188 Cal.App.2d 706, the court held that an equitable action to set aside an order approving compromise of a minor’s disputed claim is barred by a prior denial of a motion to vacate the same order made on precisely the same grounds. The Darlington court, in finding that a detailed presentation of the issues of fraud and mistake was had on the motion to vacate, stated: “The transcript of proceedings upon the motion is properly before us by stipulation made at oral argument. We have reviewed that record in detail. It reveals that the judge hearing the motion repeatedly made clear that he was not restricting plaintiff to affidavits. He urged plaintiff’s counsel to produce anything that they felt necessary. He emphasized his concern and interest in assuring that he had not erroneously foreclosed any rights of the minor at the time of hearing the petition for compromise. The attorney who had represented plaintiff at the time of the compromise was interrogated by the court and both counsel. Although he was not sworn as a witness, defendant’s counsel specifically waived the oath and plaintiff’s counsel, although not directly doing so, apparently joined in the waiver by voluntarily questioning the attorney witness. The hearing covered a major portion of a court day.” (188 Cal.App.2d at p. 709.)

Similarly, in Preston v. Wyoming Pac. Oil Co., supra, 197 Cal.App.2d 517, the court also held, citing the Darlington case, that an equitable action to set aside a default judgment is barred by the prior denial of a motion to set aside such judgment on the same grounds asserted in the equitable action. In reaching this conclusion, the Preston court noted that the hearing on the motion to set aside the default and default judgment lasted three days and included the oral testimony of nine witnesses. (197 Cal.App.2d at p. 521.)

Accordingly, the test is whether the person attacking the judgment made a detailed presentation of the issues of fraud or mistake on his motion to vacate, or was given a full opportunity at the time of the hearing to develop the issues by oral testimony. Otherwise, it is still the rule that denial of the motion is not res judicata of the issues and the subsequent independent equitable action can be maintained. (See, e.g., Huffy. Mendoza, supra, 109 ; Skouland v. Skouland (1962) 201 Cal.App.2d 677, 679 [20 Cal.Rptr. 185]; Rose v. Fuqua, supra, 200 Cal.App.2d 719, 724.)

Moreover, contrary to the position taken by trial court and urged here by Lederer, these principles apply regardless of whether the prior motion is made pursuant to Code of Civil Procedure section 473, or is addressed to the equity power of the court. (See, e.g., Olivera v. Grace (1942) 19 Cal. 2d 570, 573-576 [122 P.2d 564, 140 A.L.R. 1328].)

Lederer, however, appears to disagree with the position taken in Rose v. Fuqua, supra, 200 Cal.App.2d at pp. 723-724, and Huffs. Mendoza, supra, 109 Cal.App.3d at pp. 681-682, that if the motion to vacate is based merely on affidavits, then its denial does not bar an equitable action seeking the same relief. Rather, Lederer appears to contend that, if one elects to seek relief by way of a motion to vacate a default judgment procured by extrinsic fraud or mistake, the party must first request the right to present oral testimony in support of the motion and have such a request either be denied or limited by the trial court in order to avoid the denial of the motion serving as a bar to a subsequent independent equitable action seeking the same relief.

One could reason that such a requirement would save judicial resources and avoid imposing needless expenses and burdens on the opposing party. But such a requirement would have the opposite effect. It not only runs against the grain of the rationale allowing these distinct and cumulative remedies, but also fails to recognize that in certain courts such as the Central District of the Los Angeles County Superior Court, which is the case here, a request to present oral testimony in support of a motion is rarely, if ever, granted. (See, e.g., rule 206(b) of the Law Departments Policy Manual, Los Angeles County Superior Court [stating that in Central District matters, oral testimony is not normally permitted].)

Thus, the practical consequences of such a requirement would be to eliminate the use of the summary disposition of issues on motion as envisioned by the Estudillo court, because of the severe restrictions which are presently imposed on the use of oral testimony to support a motion.

California Rules of Court, rule 323(a), which became effective on January 1, 1984, provides: “Evidence received at a law and motion hearing shall be by declaration and affidavit and by request for judicial notice without testimony or cross-examination, except as allowed in the court’s discretion for good cause shown or as permitted by local rule. A party seeking permission to introduce oral evidence, except for oral evidence in rebuttal to oral evidence presented by the other party, shall file, no later than three court days before the hearing, a written statement setting forth the nature and extent of the evidence proposed to be introduced and a reasonable time estimate for the hearing. When the statement is filed less than five days before the hearing, the filing party shall serve a copy on the other parties in a manner to assure delivery to the other parties no later than two days before the hearing.”

As previously noted, “[t]he burden of proof rests upon no one more heavily than upon a plaintiff seeking relief upon the ground of fraud . . . .” (Estudillo v. Security Loan etc. Co., supra, 149 Cal. at p. 564.) Under such circumstances, it would be foolhardy for one to seek summary disposition of such an issue by motion, knowing that unless one requests the right to present oral testimony a denial of the motion would constitute a bar to an equitable action seeking the same relief. The more prudent course would be to seek such relief in an independent action where the restrictions of rule 323(a) do not apply, especially where the need of the opposing party’s testimony is demanded by the facts of the case. Consequently, instead of resulting in the gainful use of judicial time, summary disposition of issues by motion would have been effectively eliminated.

From our examination of the facts in this case and comparing them to those of Darlington v. Basalt Rock Co., supra, 188 Cal.App.2d 706, and Preston v. Wyoming Pac. Oil Co., supra, 197 CaI.App.2d 517, we “are unable to say that [Rohrbasser] made a detailed presentation of the [issue] of [fraud] on [his motion] to vacate, nor can it be said that [he] had a full opportunity at the time of the [hearing] to develop the [issue] by oral testimony.” (Rose v. Fuqua, supra, 200 Cal.App.2d at p. 724.) Moreover, we can only say that “[t]he record before us discloses nothing more than the fact the [motion] to vacate the default [was] heard upon affidavits. This does not afford opportunity for cross-examination of witnesses nor does the judge have the opportunity to see and hear the witnesses which is so necessary in a case of direct conflict in testimony.” (Ibid.)

We therefore hold that Rohrbasser’s motion to vacate the default and to set aside the default judgment cannot operate as a bar to the cross-complaint.

Conclusion

The summary judgment of the trial court is reversed. The matter is remanded and the trial court is instructed to deny Lederer’s motion for summary judgment.

Rohrbasser is to recover costs on appeal.

Lillie, P. J., concurred.