Opinion
G030553. G030691.
11-3-2003
NEWPORT SPORTS CORPORATION et al., Plaintiffs and Respondents, v. SHAHNAZ E. TEHRANI, Defendant and Appellant.
Glenn H. Johnson for Defendant and Appellant. Wei Yu Ren, in pro. per., for Plaintiff and Respondent.
No appearance for Plaintiffs and Respondents Newport Sports Corporation, Yarrow Point Ventures, Newport Beach Tennis Club, D & W International Ltd., LLC, Freedom Escrow, and David Kang.
* * *
Shahnaz Tehrani appeals from a judgment in favor of respondents Newport Sports Corporation, Yarrow Point Ventures, Newport Beach Tennis Club, D & W International Ltd., LLC, Freedom Escrow, Wei Yu Ren, and David Kang. Tehrani argues the trial court failed to grant collateral estoppel effect to a prior judgment involving the same issues and the same parties. We agree with Tehrani as to one of her causes of action, and therefore reverse the judgment in part, affirm in part, and remand for further proceedings.
I
FACTS
This case has a fairly complex history. D & W International Ltd., LLC (D & W) was formed in 1997. Its members were David Kang and Wei Yu Rens family. In June 1997, D & W purchased 100 percent of the stock of Newport Sports Corporation (Newport), the primary asset of which was the Newport Beach Tennis Club (the Club). Kang signed on behalf of the buyer in that transaction.
In August 1997, Ren apparently learned that Kang had made fraudulent representations to her regarding the purchase of the Club. Ren hired a law firm to investigate, and learned that Kang had been convicted of bank fraud. Despite this information, she continued to allow Kang to act on Newports behalf.
In November 1997, Shahnaz Tehrani loaned $70,000 to Kang. In addition to a promissory note, Kang executed security interests, including a Leasehold Deed of Trust, Security Agreement, Assignment of Rents, Fixture Filing, and various UCC-1 financing statements, on behalf of Newport and D & W. One of the security interests pledged "all assets of the Newport Beach Tennis Club" as security for the loan. According to Tehrani, while Kang made interest payments for approximately one year, he had never repaid the principal as required by the promissory note.
At some point thereafter, D & W, Newport, the Club, and Ren, individually and in her capacity as personal representative of her mothers estate (the D & W plaintiffs) sued Tehrani and Kang, among others, to quiet title on the Club (the D & W action). Apparently, plaintiffs key argument was that Kang had no authority to execute the security interests.
While the D & W action was pending, Newport wished to sell the Club to Yarrow Point Ventures, LLC (Yarrow). Rather than hold up the sale of the Club until the conclusion of the D & W action, Newport agreed to place $135,000 in escrow to satisfy any debt to Tehrani. The parties entered into a stipulation substituting Tehranis liens against the Club for the funds in escrow. These funds were later interpled with the court pursuant to a subsequent stipulation.
In June 2000, after a bench trial, the court found that Kang, who by then was apparently no longer involved in Newport, was authorized to execute the security interests. The court reviewed the evidence, including the organization of D & W and Kangs prior acts on D & W and Newports behalf. The court also noted that even after Ren learned of alleged fraudulent representations by Kang and his felony conviction, she continued to allow Kang to act on Newports behalf. Moreover, Ren and Newport had previously taken a contrary position in a prior lawsuit, asserting that only Kang had authority to act for the corporation. The court therefore found it was inappropriate for Ren to adopt an inconsistent position. Further, Kang had ostensible authority to act on the corporations behalf. Thus, the court found defendants liens, including Tehranis, valid and enforceable. The court declined plaintiffs request to invalidate the security interests, and deemed the defendants, including Tehrani, the prevailing parties.
Thus we arrive at the instant actions. In October 2000, Newport filed a complaint for declaratory relief against Tehrani, claiming Tehrani had no legal or factual basis to support her claim on the escrow funds, and seeking a declaration to that effect. Tehrani filed a cross-complaint alleging claim and delivery against all defendants
(D & W, Yarrow, Freedom Escrow, Ren, and Kang), breach of contract against Kang, fraud, and conspiracy to defraud against Kang and Ren. Tehrani also sought a writ of possession for the escrow funds.
The instant actions were assigned to a different judge than the D & W action. Following a bench trial, the court concluded that judgment must be entered in favor of the plaintiffs, stating: "1. The law cited by the plaintiff regarding the need for a security agreement seems applicable and persuasive. Neither Tehrani nor Kang met the requirements of Commercial Code section 9203. [¶] 2. This plaintiff [Newport] gave no security in the property of the tennis club. The documents signed by Kang had their origin in a loan to him. They were not based upon any dealings of the tennis club. Although Kang was a shareholder of the club, the loan was obtained in his individual capacity. [¶] 3. The fraud which Kang may have visited upon Tehrani can not [sic] be charged to the plaintiff. [¶] 4. Nothing that Ms. Ren did — or did not do — can be considered fraudulent conduct by the plaintiff. [¶] 5. Nothing that occurred in [the D & W action] alter [sic] the foregoing conclusion or compels any contrary finding."
Tehrani now appeals. No respondents briefs were filed by any party.
II
DISCUSSION
Requests for Judicial Notice
Tehrani requests that we take judicial notice of the trial courts statement of decision in the D & W action. Pursuant to Evidence Code section 452, the request is granted.
Tehranis next requests judicial notice be taken of a declaration by her attorney filed in connection with a petition for a writ of mandate that was ultimately denied. Pursuant to Evidence Code section 452, we take judicial notice that the declaration was filed, but not the accuracy of its contents.
Newport was apparently suspended from its status as an active corporation by the Secretary of State as of October 15, 2002. Tehrani has presented us with a printout from the Secretary of States web site to this effect, and as it is not reasonably subject to dispute, we take judicial notice of this fact pursuant to Evidence Code section 452, subdivision (h).
Finally, Tehrani asks that we take judicial notice of an action entitled GSM v. D & W International Ltd., et al. (Super. Ct. Orange Co., No. 795715), which was referred to by the trial court in its statement of decision in the D & W action. We take judicial notice that such a case existed pursuant to Evidence Code section 452, subdivision (h).
Standard of Review
The potentially dispositive issue is whether collateral estoppel bars relitigation of the enforceability of Tehranis lien. This is a pure question of law, which is reviewed de novo. (Ghirardo v. Antonioli (1994) 8 Cal.4th 791, 799.)
Collateral Estoppel
After two parties have litigated to judgment and subsequently find themselves in court again, the first judgment "operates as an estoppel or conclusive adjudication as to such issues in the second action as were actually litigated and determined in the first action." (Todhunter v. Smith (1934) 219 Cal. 690, 695.) This doctrine is sometimes referred to as issue preclusion, or more commonly, collateral estoppel.
There are three requirements to the doctrine. First, the issue decided in the prior case must be identical with the one now presented. Second, there must be a final judgment on the merits in the prior case. Finally, the party to be estopped must have been a party to the prior adjudication. (Stolz v. Bank of America (1993) 15 Cal.App.4th 217, 222.)
There is no question that the second and third elements are met. The final judgment in the D & W action is in the record, as is the statement of decision. Newport was one of the named plaintiffs in the D & W action, and is the only plaintiff here in the declaratory relief action. Also named as plaintiffs in the D & W action were D & W, the Club, and Ren, each of whom is also named as a defendant in Tehranis cross-complaint.
Thus, the only question left is whether the issue decided in the prior case is identical to the one now presented. In the D & W action, the D & W plaintiffs sought to invalidate the liens of several creditors, including Tehrani, by arguing Kang was not authorized to execute security interests on behalf of Newport and D & W. In the instant action, Newport argued that Tehrani did not have an enforceable security interest in the escrow funds (which replaced the lien) because she gave value only to Kang in his individual capacity rather than Newport. This is merely another way of restating the argument that Kang did not have authority to execute the security interests on Newports behalf, which was rejected by the trial court in the D & W action.
There is no principled distinction between Newports arguments in the two cases. Newports decision to file the instant declaratory relief action was merely an attempt to relitigate the issues already decided in the D & W action, and the doctrine of collateral estoppel was recognized to prevent precisely such a situation. The court in the D & W action found that "Defendants respective liens are valid and enforceable." The court in this case should have given effect to that decision. Accordingly, judgment should have been granted in Tehranis favor on the declaratory relief action and on the first cause of action of her cross-complaint for claim and delivery.
The Interpled Funds
Because we find in Tehranis favor on the decisive issue of whether the trial court should have granted collateral estoppel effect to the decision in the D & W action, we need not consider her contentions regarding the procedural irregularities surrounding disbursement of the escrow funds. Whether the funds were disbursed properly is irrelevant in light of our decision that the judgment must be reversed as to the declaratory relief action and as to the cause of action in Tehranis cross-complaint for claim and delivery.
Trial Courts Ruling on Conspiracy to Defraud Cause of Action
Tehrani argues the trial courts ruling failed to address her cause of action for conspiracy to defraud against Ren and Kang. The ruling states: "3. The fraud which Kang may have visited upon Tehrani can not [sic] be charged to plaintiff. [& para;] 4. Nothing that Ms. Ren did — or did not do — can be considered fraudulent conduct by the plaintiff."
Conspiracy is not a separate tort, but a form of vicarious liability by which one defendant can be held liable for the acts of another. ( DE Vries v. Brumback (1960) 53 Cal.2d. 643, 650; Kidron v. Movie Acquisition Corp. (1995) 40 Cal.App.4th 1571, 1581.) Thus, conspiracy provides a remedial measure for affixing liability to all who have "agreed to a common design to commit a wrong" when damage to the plaintiff results. (Agnew v. Parks (1959) 172 Cal.App.2d 756, 762.) Once a defendant is accused of a tort directly, arguing that defendant conspired to commit those same torts is meaningless. (Kidron v. Movie Acquisition Corp., supra, 40 Cal.App.4th at p. 1581.)
Ren was accused of the tort of fraud directly — she, along with Kang, is named as a defendant in the third cause of action, entitled "Fraud." Thus, the trial court did not need to rule separately on the conspiracy cause of action, because it was essentially the same as the cause of action for fraud with a different label attached.
By concluding that "the fraud which Kang may have visited upon Tehrani can not [sic] be charged to plaintiff" and "[n]othing that Ms. Ren did — or did not do — can be considered fraudulent conduct by the plaintiff" the trial court found that Tehrani had failed to prove this cause of action. As Tehrani only argues that the trial court failed to rule entirely and does not argue in the alternative that the ruling was in error, she has waived that argument, and we need not consider this point further.
III
DISPOSITION
The judgment is reversed with respect to the declaratory relief action and the first cause of action of Tehranis cross-complaint (claim and delivery). The judgment is affirmed in all other respects, and the matter is remanded for further proceedings consistent with this opinion. Tehrani is entitled to her costs on appeal.
WE CONCUR: SILLS, P. J., OLEARY, J.