Deas v. Knapp

• Decision Date: 04 March 1982
• Citation: 181 Cal.Rptr. 76,129 Cal.App.3d 443
• Court: California Court of Appeals Court of Appeals
• Parties: Charles M. DEAS, Plaintiff and Respondent, v. Charles H. KNAPP, Defendant and Appellant. Civ. 48211.

Page 76

181 Cal.Rptr. 76

129 Cal.App.3d 443

Charles M. DEAS, Plaintiff and Respondent, v. Charles H. KNAPP, Defendant and Appellant.

Civ. 48211.

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

March 4, 1982.

Hearing Denied May 20, 1982.

Siegfried Hesse, Oakland, Charles M. Fisher, Hayward, for defendant and appellant.

John Sutter, Oakland, for plaintiff and respondent.

ELKINGTON, Acting Presiding Justice.

Plaintiff Charles M. Deas, claiming to be a creditor of defendant real estate broker, Charles H. Knapp, on behalf of himself and others similarly situated, commenced an action to set aside several conveyances of real property from defendant Charles H. Knapp to his son, defendant Keith C. Knapp, on the ground that they "were made with the intent to hinder, delay or defraud creditors" of defendant Charles H. Knapp. Judgment was thereafter entered in favor of Deas (plaintiff) and those whom he represented (class plaintiffs) and the conveyances were declared "annulled and set aside."

Defendant Charles H. Knapp has appealed from the judgment. Defendant Keith C. Knapp has not so appealed.

Defendant Charles H. Knapp (hereafter appellant), as we interpret his appellate contentions, makes three principal arguments.

The first is that as to the instant fraudulent conveyance action "the Supreme Court in [Deas v. Knapp (Feb. 19, 1981) 29 Cal.3d 69, 171 Cal.Rptr. 823, 623 P.2d 735] ruled that appellant could relitigate the basis of the underlying judgment" upon which the class plaintiffs' claims to be his creditors was based, something that the trial court of the fraudulent conveyance action erroneously failed and refused to do.

The contention is calculated to extend "lengthy administrative and judicial proceedings," the continuation of which was roundly criticized in the concurring and dissenting opinion of Mosk, J., and Bird, C. J., in Deas v. Knapp, supra, 29 Cal.3d 69, 80-81, 171 Cal.Rptr. 823, 623 P.2d 735. We shall here endeavor to dispose of that issue permanently.

The judgment of the "underlying action" in which the class plaintiffs' status as judgment creditors of appellant was adjudicated, was founded upon two factual determinations.

The first was that appellant, contrary to law (Bus. & Prof.Code, §§ 10240-10248), had overcharged plaintiff and class plaintiffs on trust deed loans, thus becoming liable to them in damages according to section 10246. (See Deas v. Knapp, supra, 29 Cal.3d 69, 73, 171 Cal.Rptr. 823, 623 P.2d 735.) That finding alone supported the judgment. " '[I]f in any case there be one clear, sustained and sufficient finding upon which the judgment may rest, every presumption being in favor of the judgment, it will be here concluded that the court did rest its judgment upon that finding, or those findings, and the others may and will be disregarded.' " (Brewer v. Simpson, 53 Cal.2d 567, 584, 2 Cal.Rptr. 609, 349 P.2d 289.)

Moreover, it appears conceded, at least no contrary contention is made, that appellant had, in fact, so overcharged plaintiffs.

Additionally, the trial court of the earlier action then made a second factual finding, i.e., that the conduct of appellant in overcharging on the trust deed loans was "fraudulent."

In the course of time that judgment, declaring plaintiff and class plaintiffs to be judgment creditors of appellant Knapp, became final, and subject to the well-known rule of res judicata. (See 4 Witkin, Cal. Procedure (2d ed. 1971) Judgment, § 147 et seq., p. 3292 et seq.)

The judgment remaining unsatisfied, plaintiff and class plaintiffs sought its partial, or total, payment under the procedures established by the "Real Estate Education, Research and Recovery" fund (hereafter "recovery fund") established by Business and Professions Code sections 10470-10483.

The recovery fund is maintained by real estate license fees, and under certain circumstances may be used by the Real Estate Commissioner to satisfy claims against licensees founded upon their "fraud, misrepresentation or deceit." But, manifestly to protect the fund against collusive or other such unjust claims, the statute provides that such claims against the recovery fund even though reduced to final judgment, are not conclusive against the fund, or the commissioner.

In the recovery fund proceedings, after lengthy administrative hearings and, as noted, extended judicial proceedings (which generated three appellate court opinions including the above mentioned Deas v. Knapp, 29 Cal.3d 69, 171 Cal.Rptr. 823, 623 P.2d 735), this court finally ruled, by an unpublished opinion, that although violation of the statute had been established as determined by the first of the trial court's findings, nevertheless fraud, according to the second, had not. Our decision was based upon uncontroverted evidence that although appellant Knapp had violated the subject statutes, thus becoming liable in damages to plaintiff and class plaintiffs, he had not fraudulently done so, because he had made known to them the manner in which he was conducting his business with them. Under the related statutes (Bus. & Prof.Code, §§ 10470-10483) which allow recourse to the recovery fund only upon claims based on fraud, it was held that at least as to the class plaintiffs the recovery fund was unavailable.

Appellant here insists that by virtue of the recovery fund proceedings, the judgment, insofar as it established plaintiffs other than Deas (i.e., the class plaintiffs) to be creditors of appellant, had lost its res judicata effect, and that he should have been allowed to relitigate it at the trial of the instant fraudulent conveyance action.

The argument is patently without merit. Deas v. Knapp, supra, 29 Cal.3d 69, 80, 171 Cal.Rptr. 823, 623 P.2d 735, expressly holds in general, and particularly as to the case at bench, that the statute here under consideration "does not modify the prior judgment's conclusive effect on issues other than fraud, misrepresentation, deceit, or conversion of trust funds ...." (Emphasis added.)

The earlier judgment, and Deas v. Knapp, supra, 29 Cal.3d 69, 171 Cal.Rptr. 823, 623 P.2d 735, have therefore established, as res judicata, that plaintiff and class plaintiffs at the time of the trial of the instant fraudulent conveyance action were, and now are, judgment creditors of appellant Knapp.

Appellant's second appellate contention is that the judgment here under appeal must be reversed for "lack of equity in claims of all plaintiffs other than Deas."

We observe a concession of appellant that "there is substantial evidence [i.e., found true by the trial court] to support the judgment [i.e., declaring the conveyance to have been made with intent to defraud creditors] ...." One who is so found to have had the intent to defraud creditors in an action to set aside a related conveyance, would seem to have scant reason for consideration under principles of equity.

Moreover, we are furnished with no evidentiary record of "the underlying class" action, or at least no record reference thereto is made (see rule 15(a), Cal.Rules of Court), tending to establish that "it would be inequitable to permit those plaintiffs to set the conveyances aside." A "reviewing court is not obligated to make an independent search of the record" when rule 15(a) is ignored. (Kanner v. Globe Bottling Co., 273 Cal.App.2d 559, 564, 78 Cal.Rptr. 25.)

Nor do we otherwise observe any reason for equitable intervention on behalf of appellant. The contention is meritless.

We advert now to appellant's remaining, and third, contention as to all plaintiffs, of "untimely and defective service" of process.

Since appellant in his briefs states only evidentiary facts favorable to himself, we find it proper at this point to reiterate the substantial evidence rule, as follows: " 'When a finding of fact is attacked on the ground that there is not any substantial evidence to sustain it, the power of an appellate court begins and ends with the determination as to whether there is any substantial evidence, contradicted or uncontradicted, which will support the finding of fact,' and 'When two or more inferences can reasonably be deduced from the facts, a reviewing court is without power to substitute its deductions for those of the trial court.' " (Brewer v. Simpson, supra, 53 Cal.2d 567, 583, 2 Cal.Rptr. 609, 349 P.2d 289.) The rule will apply to findings made upon affidavits or oral testimony, which are necessarily implied from an order such as was here made by the superior court. (Kulko v. Superior Court, 19 Cal.3d 514, 519, fn. 1, 138 Cal.Rptr. 586, 564 P.2d 353 [revd. on unrelated grounds Kulko v. California Superior Court, 436 U.S. 84, 98 S.Ct. 1690, 56 L.Ed.2d 132].) It is therefore of no consequence that the trial court, believing other evidence or drawing different inferences, might have reached a contrary conclusion.

The here claimed procedural shortcoming consists of the failure of plaintiff Deas to serve and return summons in the action within three years after its commencement, as provided by Code of Civil Procedure section 581a, subdivision (a). Appellant for that reason had moved, unsuccessfully, to quash service of the summons.

At the hearing on appellant's motion to quash, the following procedural and factual context was before, and presumably found true by, the superior court.

In an earlier superior court action it had been adjudicated that Charles H. Knapp, the instant appellant, was indebted to plaintiff and each of the class plaintiffs...