Bree v. Beall

• Decision Date: 15 January 1981
• Citation: 114 Cal.App.3d 650,171 Cal.Rptr. 73
• Court: California Court of Appeals Court of Appeals
• Parties: James BREE, etc. et al., Plaintiffs, Cross-Defendants and Respondents, v. Richard Earl BEALL, etc. et al., Defendants, Cross-Complainants, and Appellants. Civ. 22042.

Page 73

171 Cal.Rptr. 73

114 Cal.App.3d 650

James BREE, etc. et al., Plaintiffs, Cross-Defendants and Respondents, v. Richard Earl BEALL, etc. et al., Defendants, Cross-Complainants, and Appellants.

Civ. 22042.

Court of Appeal, Fourth District, Division 1, California.

Jan. 15, 1981.

Stephen L. Wheeler, Fallbrook, for defendants, cross-complainants and appellants.

Larkin & Appelt and David M. Larkin, Vista, for plaintiffs, cross-defendants and respondents.

STANIFORTH, Acting Presiding Justice.

James Bree's dba Cortez Development Co., Inc., (Bree) suit sought damages for breach of a subcontractor's agreement from Richard Beall Construction Co. and Richard E. Beall, individually (Beall). R. E. Beall Construction Co. (the Company) cross-complained against Bree for damages for breach of a subcontractor's agreement and sought foreclosure of a mechanics' lien. This dispute was by stipulation submitted to arbitration. The arbitrator's award entered March 15, 1979 ordered Bree, inter alia, "shall pay to Beall the sum of $11,515 ... with legal interest to the date of payment of this award from August 17, 1977, in full satisfaction of all claims made on this action." (Italics added.)

During the pendency of these proceedings, the United States Revenue Service (IRS) served Bree with a notice of levy (Nov. 2, 1978) naming R. E. Beall Construction Co. as the taxpayer debtor owing back taxes in the sum of $24,491.82. Beall's attorney (Wheeler) notified Bree's attorney (Larkin) on March 19, 1979, by letter: "This is ... to advise you that I hold an attorney's lien on the Judgment and any payment thereon should be made to my trust account." Bree after receipt of the Wheeler letter paid the entire amount of the arbitrator's award ($12,804.68) to the IRS (Mar. 23, 1979). Three days later, judgment was entered in the superior court conformable to the arbitration award, against Bree and in favor of the individual Beall for the principal sum of $11,515 plus interest. The sum paid by Bree in response to the IRS notice of levy exceeded the total judgment and accrued interest then owing. Bree demanded a satisfaction of judgment. Attorney Wheeler responded by letter (Mar. 28, 1979): "... I do not feel bound to provide a Satisfaction of Judgment for the following reasons: A. The Judgment is in favor of R. E. Beall, individually while the tax lien is against the corporation (R. E. BEALL CONSTRUCTION CORPORATION). B. I have a lien against the Judgment for attorney's fees, a fact of which you were advised approximately two (2) weeks (sic) ago."

On that same day, Beall assigned the judgment to Phil Kosh who promptly sought foreclosure of the mechanics' lien granted by the judgment and to levy execution on Bree's bank account. Bree countered with motions to recall and quash the levy of execution and sale order, to compel satisfaction of the judgment, and to amend the judgment nunc pro tunc to correct the judgment to show "R. E. Beall Construction Corporation " as the judgment creditor. After hearing the trial court granted each of Bree's motion. Beall, the Company and assignee Kosh appeal from these orders.

ISSUES

On appeal Beall contends (1) that the order amending the judgment nunc pro tunc substituting R. E. Beall Construction Co. in place of Richard Earl Beall constituted error, (2) that the IRS levy was ineffective against the judgment, (3) the IRS levy does not have priority over the attorney fees and court costs incurred in this litigation, (4) that Bree upon receiving notice of attorney's lien was obligated at least to inquire as to its nature and extent before paying the IRS levy.

FACTS

These further facts aid in resolution of the issues presented. The framing subcontract with Bree was executed by Richard E. Beall in his individual capacity and referred to a California contractor's license in his name. Both the individual Beall and the Beall corporation executed the retainer agreement with Attorney Wheeler agreeing to a contingency fee of one-third of any recovery made in the Bree lawsuit and granting him a lien against any judgment to protect his court costs and attorney fees. In response to Bree's suit against both Beall and the Beall corporation, the R. E. Beall Construction Corporation filed the cross-complaint upon which the arbitrator's award was ultimately made. On September 1, 1978, Bree's attorney was notified of a request to substitute the individual Beall in place of the corporate Beall. Individual Beall (Oct. 16, 1978) in connection with an unrelated matter granted an additional lien for attorney fees against the judgment to Attorney Wheeler in the sum of $2,453.10.

Included in the "Stipulations of Fact for Arbitration" was the following critical language: "That RICHARD E. BEALL, individually and doing business as R. E. BEALL CONSTRUCTION CO. and R. E. BEALL CONSTRUCTION CORPORATION may be considered one party for the purposes of this litigation, and judgment rendered against one may be rendered against all of said parties."

The arbitration award declared "Bree shall pay to Beall " and the judgment entered on the arbitration award provided "RICHARD EARL BEALL recover on his cross-complaint from ... Bree." (Italics added.)

DISCUSSION

I

The individual Beall argues prejudicial error occurred when the trial court corrected the judgment substituting the corporate Beall in place of the individual Beall as judgment creditor. The contention ignores the fact that the cross-complaint upon which the judgment was ultimately obtained was filed by the corporate Beall and of even greater significance is the stipulation clearly and specifically agreeing that the individual and corporate Beall "may be considered one party for the purposes of this litigation...." The recitation of the ebb and flow of the individual versus corporate right/responsibility in the contract, lawsuit and pleading, arbitration documents, award and judgment suggest this conclusion: the trial court's warranted treatment as the parties' express stipulation provides of the corporate and individual Beall as "one party."

The stipulation in question was drafted by Beall's own counsel; if there is any uncertainty as to its meaning and effect, and we find none, the stipulation must be construed most strongly against the drafting party. (Civ.Code, § 1654.)

If the entire process be viewed with charity, then at minimum it can be said the signed pleadings and the stipulation of the parties point unerringly to a clerical error in the arbitration award and in the judgment itself. In Meyer v. Porath, 113 Cal.App.2d 808, 811, 248 P.2d 984, the court stated: "A finding, express or implied ... that a clerical error exists in the judgment in question is, if supported by substantial evidence, a conclusive finding which binds an appellate court on review." (See also Bastjian v. Brown, 19 Cal.2d 209, 215, 120 P.2d 9.) Here, clearly, substantial evidence supports the court's conclusion there was a clerical error in the judgment.

II

Beall next complains that the IRS levy was ineffective against the judgment in this case since it named the corporation, not the individual Beall, as the debtor-taxpayer. Internal Revenue Code section 6332, subdivision (a), provides:

"(A)ny person in possession of (or obligated with respect to) property or rights to property subject to levy upon which a levy has been made shall, upon demand of the Secretary, surrender such property or rights (or discharge such obligation) to the Secretary, except such part of the property or rights as is, at the time of such demand, subject to an attachment or execution under any judicial process."

It should be noted parenthetically, seven days after payment of the judgment proceeds to the IRS, a further IRS levy was served (Mar. 30, 1979) naming Beall individually. Beall's argument rests on the fact that the judgment was entered in favor of the individual instead of the corporation or both. In George v. Bekins Van & Storage Co., 83 Cal.App.2d 478, 481, 189 P.2d 301, it was held:

"If a judgment is corrected because of a clerical error or mistake either by amendment or the substitution of a wholly different judgment, the amended or substituted judgment speaks as though originally entered in its amended or substituted form." (Italics added.)

The individual Beall's rights must be measured against the judgment as corrected, not the original, uncorrected judgment.

Finally the stipulation of the parties makes this argument most specious. That stipulation alone would have warranted payment of an IRS levy (assuming no other intervening equities) made against either the individual or corporate Beall for they are one party "for the purposes of this litigation."

III

Beall next contends the IRS levy does not have priority over attorney fees and court costs incurred in this litigation. In analyzing this assertion, we start from this premise:

"It is now well settled and indeed beyond argument that federal law rather than state law determines the priority of competing liens where one of them is a tax lien asserted by the United States." (Business Title Corp. v. Division of Labor Law Enforcement, 17 Cal.3d 878, 884, 132 Cal.Rptr. 454, 553 P.2d 614.)

Section 6323, subdivision (b)(1-8) ¹ "clearly and unequivocally create super-priorities, even against previously filed tax liens (...) of which a certain class of attorneys' liens is one." (Adco Service Inc. v. Graphic Color Plate, 137 N.J.Super. 39, 347 A.2d 549, 553; Connecticut Mutual Life Insurance Company v. Carter, 5th Cir., 446 F.2d 136. ²

The United States Supreme Court declared this Act gives priority to eight specified classes of non-federal lien "even when the Government has filed notice of the tax liens." (United States v. Kimbell Foods, 440 U.S. 715, 738 fn. 41, 99 S.Ct. 1448, 1463 fn. 41, 59 L.Ed.2d 711.)

Thus the pre-1966 rule of priority in time giving priority in right and the requirement of "choateness" do not apply where the conditions of ...