Civic Western Corp. v. Zila Industries, Inc.

• Decision Date: 18 January 1977
• Citation: 135 Cal.Rptr. 915,66 Cal.App.3d 1
• Parties: CIVIC WESTERN CORPORATION, Plaintiff, Cross-Defendant and Respondent, v. ZILA INDUSTRIES, INC., a corportation, Defendant, Cross-Complainant and Appellant. Civ. 47686.
• Court: California Court of Appeals Court of Appeals

Page 915

135 Cal.Rptr. 915

66 Cal.App.3d 1

CIVIC WESTERN CORPORATION, Plaintiff, Cross-Defendant and Respondent, v. ZILA INDUSTRIES, INC., a corportation, Defendant, Cross-Complainant and Appellant.

Civ. 47686.

Court of Appeal, Second District, Division 4, California.

Jan. 18, 1977.

Barrett, Stearns, Collins, Gleason & Kinney by William N. Willens, Torrance, for defendant, cross-complainant and appellant.

Gendel, Raskoff, Shapiro & Quittner by Richard S. Berger, Los Angeles, for plaintiff, cross-defendant and respondent.

JEFFERSON, Associate Justice.

This appeal has been taken by defendant and cross-complainant Zila Industries, Inc. (hereinafter, Zila), from a summary judgment granted to plaintiff and cross-defendant Civic Western Corporation (hereinafter, Civic) on Zila's cross-complaint. We affirm in part, and reverse in part.

In oder to more clearly understand the contentions of the parties, we deem it advisable to set forth both procedural and substantive details of this litigation.

Plaintiff Civic filed an action against defendant Zila on October 8, 1971; in its complaint, Civic alleged that, in 1969, Zila had executed two promissory notes in Civic's favor for $125,000 and $342,500 respectively. These notes were secured by Zila's business personal property, inventory and accounts receivable--evidenced by five security agreements executed by Zila pursuant to the Uniform Commercial Code. The complaint further alleged that Zila had defaulted on various of these obligations in August, 1971, and that Civic had exercised its right to accelerate payment of the loans; Civic claimed that $232,597.40 was due.

Contained in the security agreements executed by Zila were provisions requiring Zila, in the event of default, to assemble and make available to Civic the collateral; the agreements further gave Civic the right to enter onto Zila's premises located at 835 Olive Street, Inglewood, to take possession of the collateral and to remain on the premises in order to sell the collateral to satisfy the debt. The collateral was alleged to include 'furniture, furnishings, fixtures, machinery, equipment, inventory, accounts receivable, general intangibles and contract rights' of Zila. Civic alleged that it had demanded possession of the collateral in September, 1971, but that Zila had refused to make it available.

Civic's first cause of action requested injunctive relief, alleging that it was necessary to prevent Zila from 'using, encumbering, or disposing' of said collateral, and to compel Zila to give Civic immediate possession of the collateral in order to preclude irreparable injury to Civic. The second cause of action shought declaratory relief--a judicial determination that Civic was entitiled to enter onto the premises of Zila to take possession of the collateral. The third cause of action sought the appointment of a receiver. The fourth, fifth and sixth causes of action of Civic's complaint were for money lent, for money had and received, on an account stated, and on the notes, all in the aggregate amount of $232,597.40, together with interest thereon. A temporary restraining order was issued October 13, 1971.

On October 28, 1971, the matter was set for hearing on Civic's request for a permanent injunction. The parties entered into a 'Stipulation for Permanent Injunction.' As a result, Zila agreed that it would be restrained '(f)rom preventing or in any manner interfering with the entrance of plaintiff' on the Inglewood premises of Zila for the purpose of taking possession of the collateral. Zila also agreed that it would be restrained from using said collateral either directly or indirectly. The parties also agreed that Civic could conduct a sale of the collateral from the Inglewood premises, and could use 'said premises rent free' for that purpose for a period not to exceed sixty days. It was also stipulated that the injunction was not to become operative if Zila paid to Civic all monies due to Civic, including accrued interest, costs and attorney's fees, on or before November 3, 1971, at 5:00 p.m. The 'Judgment for Permanent Injunction' was filed and signed by the trial judge on October 29, 1971. It enjoined and restrained Zila 'forever and permanently' from interference with Civic's right to entrance on Zila's premises for the purpose of taking possession of the collateral and from Zila's use of said collateral, effective November 3, 1971, at 5:00 p.m. Notice of Entry of Judgment was filed November 5, 1971.

On November 11, 1971, defendant Zila filed an answer to Civic's complaint, denying that Zila was in default; the answer alleged that Zila had agreed to the permanent injunction to prevent a receiver from being appointed while it was negotiating with another prospective lender; it charged that Civic had filed a false claim, and that the judgment entered following the stipulation was void, due to the alleged fraud and duress of Civic in obtaining Zila's consent to the stipulation.

Zila also filed a cross-complaint. In its first cause of action, it sought an accounting; it claimed that Civic had not accounted for the proceeds of accounts receivable which Zila had assigned to Civic during the course of their business relationship, and asserted that the assignment transactions were so involved and complicated as to require an accounting to determine the financial status of the parties with respect to each other; the total volume of these transactions was asserted to be in the area of $2,000,000.

The second cause of action was for trespass. Zila alleged that on November 4, 1971, agents of Civic had wrongfully taken possession of Zila's premises in Inglewood by ejecting Zila's employees from those premises and changing the locks on the doors. ¹ As a result, Zila asserted that its president had been prevented from entering the premises to obtain Zila's books and records, materials needed by him to negotiate a new loan. Malice was claimed on the part of Civic, and exemplary damages were sought.

A third cause of action in Zila's cross-complaint sought declaratory relief, and a fourth cause of action sought to have the injunctive judgment declared void. The cross-complaint was amended on December 1, 1971, by adding causes of action against Civic for forcible entry and forcible detainer. It was alleged in these causes of action that Civic (apparently while in possession of the premises conducting the collateral sale) had removed Zila's telephone system, had taken possession of Zila's incoming mail, and had retained possession of Zila's books and records, thus effectively putting Zila out of business. Civic demurred to this amended cross-complaint, a demurrer sustained with leave to amend on January 11, 1972.

The first amended cross-complaint filed thereafter contained five causes of action; it sought (1) an accounting; (2) damages for trespass; (3) damages for forcible entry; (4) an unlawful detainer judgment; and (5) declaratory relief determining that the stipulation for an injunction and the injunction judgment were void, as having been obtained through fraud, deceit and duress. Civic again demurred, at this time claiming that the trial court had no jurisdiction of the subject matter of the action, because the permanent injunction judgment was a final judgment from which no appeal had been taken. On June 2, 1972, the demurrer to the first amended cross-complaint was sustained without leave to amend as to the fourth cause of action for unlawful detainer only, but overruled as to the other four causes of action stated in the cross-complaint. The trial court rejected Civic's claim that it had no jurisdiction, stating that '(1) the Stipulated judgment was not a final judgment as to all issues (2) Proceedings to set aside a judgment may be made either in an independent action or in the same action.'

Civic filed an answer to the cross-complaint on June 21, 1972, denying its allegations. Here the matter rested until October 7, 1974, when Civic sought summary judgment against Zila on the cross-complaint. Civic again made the 'lack of jurisdiction' argument, and filed the declarations of its attorneys setting forth the procedural history of the litigation in support of its motion.

Zila filed a counter-declaration of attorney Ruben, advising the court hat Civic had sold Zila's collateral on or about December 27, 1971, and had submitted a statement to Zila on January 27, 1972, stating that Civic had realized $240,000.79 from the sale. At this point, Zila claimed in the declaration opposing Civic's motion for summary judgment that Zila owed Civic $226,679.78, and that there was an excess collected by Civic of $13,321.01. The declaration indicated that Civic had also collected accounts receivable in the sum of $3,331.38; that Civic was thus holding $16,652.39 in excess of any amount owed to Civic by Zila. Civic claimed, however, that it had expended $2,200.43 in attorney and collection costs in connection with the sale, and that the excess held by it was $14,451.96. This amount, according to Ruben's affidavit, was being retained by Civic to apply against additional attorney fees it might incur during the present litigation. An additional item to be considered, according to Ruben, was possession by Civic of $9,141.06 in uncollected accounts receivable.

In opposition to the summary judgment motion, Zila also filed the declaration of its president, Edwin W. Rose, who stated that there was a discrepancy between the amount Civic had claimed was due on the chattel mortgage as of October, 1971, and that claimed dur as of January 27, 1972, in computing the proceeds of the collateral sale. Rose's affidavit also mentioned two other items, totalling over $8,000, which he claimed had not been properly credited to Zila. Rose stated that Civic had offered Zila an accounting by granting agents of Zila access to Civic's records, but that those records failed to show the respective amounts of respective accounts...