Clark v. Lesher

• Decision Date: 10 August 1956
• Citation: 299 P.2d 865,46 Cal.2d 874
• Court: California Supreme Court
• Parties: Howard A. CLARK, Appellant, v. Dean S. LESHER, Daniel B. Halcomb and Roy Wolfe, Respondents. Sac. 6687.

Page 865

299 P.2d 865

46 Cal.2d 874

Howard A. CLARK, Appellant, v. Dean S. LESHER, Daniel B. Halcomb and Roy Wolfe, Respondents.

Sac. 6687.

Supreme Court of California, In Bank.

Aug. 10, 1956.

H. A. Savage, Stutsman, Hackett & Nagel and J. J. Nagel, Fresno, for appellant.

Roy E. Wolfe, Madera, in pro. per.

Green, Green, Plumley & Bartow, Green, Green & Plumley, Denslow Green, Madera, S. Everett Phillips, Fresno, and Everett L. Coffee, Madera, for respondents.

GIBSON, Chief Justice.

Clark sought to recover damages from defendants Lesher, Halcomb and Wolfe, alleging that they fraudulently conspired to destroy the good will of a newspaper in which he had in interest. Defendants denied the conspiracy and, by way of affirmative defenses, alleged that the issues tendered by the complaint are res judicata, that Clark had assigned his cause of action to Lesher, and that he is estopped to deny the transfer. The court ordered that the case be tried first on the special defenses, and the jury returned a verdict thereon for all defendants. Judgment was entered accordingly, and Clark has appealed.

For a number of years, Clark and his father owned and published a newspaper in Madera as partners. The father died in September of 1944, leaving his one-half interest in the partnership to be equally divided among Clark and two other children. Clark remained in possession of the newspaper and continued to publish it. The other two heirs sold their interests to Lesher.

R. S. Jay was appointed administrator of the estate, and an action entitled Jay v. Clark was instituted in February of 1945 in which it was alleged that Clark had refused to wind up the partnership or to render an accounting. In that action the trial court found against Clark and entered an interlocutory judgment ordering him to render an accounting and appointing a receiver to take possession of the assets of the partnership and to operate the business until it could be sold as a going concern. In June of 1948, following affirmance of this judgment, Jay v. Clark, 85 Cal.App.2d 88, 192 P.2d 462, Wolfe was appointed receiver in place of the one originally selected, and he took possession of the newspaper from Clark. Wolfe petitioned the court for instructions, stating that there were not sufficient funds on hand to continue operations. The court ordered him to discontinue publication within ten days, to publish a notice of sale for two weeks, and to sell the business within 30 days thereafter. In August, the newspaper was sold to Lesher for $30,750, and, after a hearing at which no objections were made, the court confirmed the sale.

In January of 1949, Wolfe, as receiver, brought an action entitled Wolfe v. Clark and Lesher to quiet title to the proceeds of the sale and to certain items of personal property, including a life insurance policy. Clark filed an answer, asserting his ownership of the insurance policy and claiming a right to the proceeds of sale in an amount representing his partnership interest and compensation for services rendered to the newspaper. Lesher denied that Clark was entitled to any money and alleged that the policy was an asset of the business purchased by him. In June of 1949, while the action was pending, Clark and his wife executed an assignment transferring to Lesher all their interests in the partnership and the estate. The assignment was made as consideration for entry of judgment in a form stipulated by the parties which recited the terms of the assignment and ordered Wolfe to pay Clark $5,000.

Wolfe reported to the court in Jay v. Clark regarding the agreement reached by the parties, and an order discharging him as receiver was then entered in that action.

The present action was commenced by Clark about two weeks after entry of the stipulated judgment in Wolfe v. Clark and Lesher. The allegations of the complaint may be summarized as follows: Upon the death of Clark's father, Lesher, who owned a newspaper in an adjoining county, bought one in Madera and appointed Halcomb as manager. Lesher and Halcomb conspired to eliminate Clark's newspaper as a competitor, and, in furtherance of the conspiracy, Lesher purchased the rights of the two children who, in addition to Clark, inherited the deceased's partnership interest in the newspaper. Without the knowledge or consent of Jay, Lesher brought the action entitled Jay v. Clark in the name of the administrator for the purpose of ousting Clark from possession of the newspaper. After entry of the interlocutory judgment in Jay v. Clark, Lesher and Halcomb approached Wolfe, telling him that they would arrange to have him appointed as receiver of the partnership, in which event he was to discontinue the publication of the newspaper. Wolfe agreed to the plan, and Lesher and Halcomb procured the order appointing Wolfe as receiver, without the knowledge or consent of the administrator and without notice to Clark. Although the interlocutory judgment directed that the business be sold as a going concern, Lesher, Halcomb and Wolfe conspired to obtain an order authorizing cessation of publication. In an ex parte proceeding conducted without securing the consent of the administrator and without giving notice to Clark, Wolfe, by knowingly misrepresenting that there were not sufficient funds to continue operations, procured the order directing that publication of the newspaper be discontinued within ten days, that notice of sale be given for two weeks, and that the business be then sold within 30 days. The newspaper could have been sold to best advantage while being published and circulated and defendants knew that cessation of its publication would cause irreparable damage to its owners. When publication ceased, there was a total destruction of the good will of the newspaper. Immediately thereafter, advertisement and subscription rates of Lesher's newspaper were raised. In collaboration with Halcomb and Wolfe, Lesher entered a bid to buy the newspaper, offering to raise any other bid by $200. Lesher's bid was accepted, and the assets of the newspaper were delivered to him.

A general demurrer to the complaint was sustained without leave to amend, and judgment was entered accordingly. On appeal, the judgment was reversed on the ground that the complaint stated a cause of action in tort for fraudulent conspiracy to destroy and depreciate the good will of the partnership. Clark v. Lesher, 106 Cal.App.2d 403, 235 P.2d 71. Defendants answered, denying the fraudulent conspiracy and alleging affirmative defenses. As we have seen, the case then proceeded to trial on the special defenses, and the jury returned a verdict for defendants.

Was Clark's Cause of Action Res Judicata?

One of the special defenses relied on in support of the judgment is that the issues tendered by the complaint are res judicata. This defense was left entirely to the jury without any guidance regarding the legal force and effect of the prior actions. ¹ There can be no doubt that this was error, but defendants argue that plaintiff was not prejudiced because, they assert, the record shows as a matter of law that the issues raised here are res judicata. An analysis of the judgment rolls in the prior actions shows, however, that this contention is unsound.

In its primary aspect the doctrine of res judicata operates as a bar to the maintenance of a second suit between the same parties on the same cause of action. See Panos v. Great Western Pack. Co., 21 Cal.2d 636, 134 P.2d 242. It is clear and, indeed, conceded, that the two prior actions described above the accounting suit by Jay as administrator of the estate of Clark, and the quiet title suit by Wolfe as receiver of the partnership are based upon entirely different causes of action from plaintiff's action for damages for conspiracy to defraud.

In its secondary aspect res judicata has a limited application to a second suit between the same parties, though based on a difference cause of action. The prior judgment is not a complete bar, but it '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, 219 Cal. 690, 695, 28 P.2d 916, 918. This aspect of the doctrine of res judicata, now commonly referred to as the doctrine of collateral estoppel, is confined to issues actually litigated. It is not an easy rule to apply, for the term 'issue' as used in this connection is difficult to define, and the pleadings and proof in each case must be carefully scrutinized to determine whether a particular issue was raised even though some legal theory, argument or 'matter' relating to the issue was not expressly mentioned or asserted. See discussion, Sutphin v. Speik, 15 Cal.2d 195, 99 P.2d 652, 101 P.2d 497; Pacific Mut. Life Ins. Co. v McConnell, 44 Cal.2d 715, 724, 285 P.2d 636; 3 Witkin, California Procedure, p. 1948 et seq.

There is, however, little difficulty in applying the rule in the present case. The first action, by Jay as administrator of the estate of the deceased partner, sought an accounting, sale of partnership assets, payment of debts and distribution of the surplus. The defendant, sued as surviving partner, answered, denying that any sum was due. An interlocutory judgment was rendered in favor of plaintiff, for an accounting from defendant, for the sale of the property and payment of the debts, and for the appointment of a receiver. This judgment determined issues relating entirely to the partnership business, its property and its liabilities. The plaintiff Jay, as administrator, was not even a defendant in the subsequent action by Clark for conspiracy and fraud, and the three defendants in the subsequent fraud action were not parties to Jay's accounting suit. The fraud and conspiracy theory of individual liability of persons not parties would have been completely irrelevant in Jay's action, and the issue was never raised.

The same is true of the...