Gonzales v. Gem Properties, Inc.

• Decision Date: 18 March 1974
• Court: California Court of Appeals Court of Appeals
• Parties: Joseph GONZALES, Plaintiff and Respondent, v. GEM PROPERTIES, INC., and Max D. Kessler, Defendants and Appellants. Civ. 42065.

Page 884

112 Cal.Rptr. 884

37 Cal.App.3d 1029

Joseph GONZALES, Plaintiff and Respondent, v. GEM PROPERTIES, INC., and Max D. Kessler, Defendants and Appellants.

Civ. 42065.

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

March 18, 1974.

Rehearing Denied April 2, 1974.

Hearing Denied May 16, 1974.

Levinson, Marcus & Bratter, Burton S. Levinson and Lawrence R. Lieberman, Beverly Hills, for defendant and appellant Gem Properties, Inc.

Fields, Fehn & Feinstein and N. Mitchell Feinstein, Encino, for defendant and appellant Max D. Kessler.

Ron Sievers, San Pedro, Terry J. Hatter, Jr., Los Angeles, and Peter L. Wallin, Hollywood, for plaintiff and respondent Joseph Gonzales.

JEFFERSON, Acting Presiding Justice.

Plaintiff Joseph Gonzales filed an amended complaint seeking to cancel a trustee's deed and redeem property sold at a trustee's sale. He also sought punitive damages from the defendants, Gem Properties, Inc., and Max D. Kessler. After a trial by the court, judgment was entered for the plaintiff; the trustee's sale was declared void and the deed of the trustee invalid. Defendants were assessed $5,000 in punitive damages. They have appealed the judgment.

The case is before us on a partial clerk's transcript which includes the judgment roll (Rules 5, 52, Calif.Rules of Court; Code Civ.Proc. § 670). ¹ Thus, the sufficiency of the evidence to support the trial court's findings of fact is not in issue. (Part I, 6 Witkin, California Procedure, 2d Ed., p. 4233, 'Appeal,' § 240; 5 Cal.Jur.3d p. 149, 'Appellate Review,' § 496.)

The court's findings disclose that, in 1962, plaintiff Gonzales was the owner of a residence in Lakewood. On December 28, 1962, Gonzales had borrowed $3,100, executing a promissory note and second deed on the property. The loan was payable in monthly installments to the Aames Mortgage Company, which was acting as collection agent.

Plaintiff made payments into 1967, at which time the principal balance had been reduced to $691.88. Early in that year, a dispute arose between plaintiff and Aames concerning payments on the note, the details of which are not clear; Aames 'refused plaintiff's tender of payments and instituted foreclosure proceedings . . . on April 20, 1967, by recording a Notice of Default and election to sell' the property. Plaintiff received notice of this on May 17, 1967. The findings show he was told that he had 90 days from the receipt of the notice to pay up arrearages on the loan. He thought he had until mid-August to take care of this matter.

On June 29, 1967, defendant Gem Properties, Inc. purchased plaintiff's delinquent note and the second trust deed. Gem Properties, Inc. was wholly owner by the Kesslers, George, Edna and their son, Max D. Kessler. It was a corporation partly engaged in the business of purchasing obligations in default which were secured by real property and obtaining title to the real property by holding a trustee's sale at which the corporation is the successful bidder. Plaintiff had no immediate knowledge that Gem had acquired his obligation. After purchasing it, Gem Properties substituted Max D. Kessler in place of the named trustee on the second trust deed.

When plaintiff discovered the transfer and the identity of the defendants before the trustee's sale he attempted to make tender of the money owed. The defendants evaded hih. The defendants attempted to discourage competitive bidding at the sale. The defendants were widely known in their trade as persons willing to employ tricks and devices to acquire property for amounts below its actual value.

On August 11, 1967, Max D. Kessler, acting as trustee, sold plaintiff's property to Gem Properties, Inc. for $691.88, plus the costs of foreclosure. He then executed a trustee's deed of sale in favor of Gem. The sale price was greatly disproportionate to the value of the property.

The clerk's record shows that, on August 31, 1967, Gem Properties filed an action for unlawful detainer against Gonzales in Los Cerritos Municipal Court in order to obtain possession. (See Code Civ.Proc. § 89.) Plaintiff herein obtained counsel and filed an answer and a cross-complaint in the unlawful detainer proceeding, alleging that plaintiff's default on the note had been waived by Gem Properties' predecessor in interest and that plaintiff had not received notice of the sale. Plaintiff herein also filed a complaint in the superior court seeking to invalidate the trustee's sale.

The unlawful detainer action was tried in the municipal court on November 7, 1967. Plaintiff herein asserts in his respondent's brief that the municipal court judge refused to transfer the case to the superior court, struck his cross-complaint and then proceeded to take some evidence concerning the circumstances of the sale; the record before us does not establish what actually occurred because it does not include a transcript of the municipal court proceedings. ² The municipal court entered judgment for Gem Properties, Inc. in January 1968. Detailed findings of fact and conclusions of law were made by the municipal court which appear to have covered issues not raised by the defensive pleading in the action. The municipal court declared that the sale had been regular and proper, that the trustee's deed was valid, and that Gonzales' claims of waiver (of payments on the note) and valid tender were untrue.

An appeal was taken from that judgment to the appellate department of the superior court, and the judgment was affirmed without written opinion. Plaintiff was dispossessed of the property in August 1968 (and has remained out of possession since that date.)

After trial in the superior court on an amended complaint, which sought redemption of the property, together with punitive damages on the ground that defendants had fraudulently conspired to deprive plaintiff of his property interest, the superior court made findings of fact and conclusions of law which differed substantially from those previously made in the municipal court. It found that the defendants here had acted 'collusively, deliberately and oppressively' to obtain plaintiff's property at a minimal price for their own gain. It concluded that the defendants' conduct was fraudulent, deliberate, reckless and malicious.

Defendants contend on this appeal, as they did in the trial court, that the doctrine of res judicata should have been applied to bar plaintiff's suit for equitable relief in the superior court, as the matter had already been litigated in the unlawful detainer proceedings in the municipal court.

A general statement of the doctrine of res judicata is 'that an existing final judgment rendered upon the merits, with out fraud or collusion, by a court of competent jurisdiction, is conclusive of causes of action and of facts or issues thereby litigated, as to the parties and their privies, in all other actions in the same or any other judicial tribunal of concurrent jurisdiction.' (46 Am.Jur.2d, 'Judgments,' § 394, p. 558.) Thus, when applied, it does bar a second action between the same parties on the same subject matter involved in the prior action. (46 Am.Jur.2d, 'Judgments,' § 407, p. 575.) The doctrine (in civil cases) 'rests upon the sound policy of limiting litigation by preventing a party who has had one fair adversary hearing on an issue from again drawing it into controversy and subjecting the other party to further expense in its re-examination.' (In re Crow, 4 Cal.3d 613, 622, 94 Cal.Rptr. 254, 261, 483 P.2d 1206, 1213.)

The crucial issue in the case before us is whether plaintiff did have a 'fair adversary hearing' in the municipal court, one that resulted in a judgment on the merits of his case, precluding his subsequent suit.

A brief discussion of the history and purpose of the action of unlawful detainer is necessary. (Code Civ.Proc. § v. West Virginia Oil Company, 174 Cal. a summary method, created by statute, for litigating the right to possession of real property between landlords and tenants. Title to property was not in issue. (Francis West Virginia Oil Company, 174 Cal. 168, 162 P. 394.) It is still the rule that, generally, neither cross-complaints nor counterclaims raising any issue extrinsic to the right of immediate possession are allowed in unlawful detainer proceedings, as their introduction would defeat the basic statutory purpose of unlawful detainer, I.e., a speedy determination of the right to possession, as distinguished from broader issues of title. (Knowles v. Robinson, 60 Cal.2d 620, 36 Cal.Rptr. 33, 387 P.2d 833.)

The United States Supreme Court has recently considered the constitutionality of the Oregon unlawful detainer statute which provides a summary method, similar to that of California, for determining the right to possession of real property. The court held that Oregon could constitutionally enact and apply legislation which segregated an action for possession of real property from the issue of title. (Lindsey v. Normet, 405 U.S. 56, 92 S.Ct. 862, 31 L.Ed.2d 36 (1971).) One basic assumption made by the court in arriving at the result is pertinent to our discussion here: the assumption that other remedies would remain available to defendants in unlawful detainer actions to obtain affirmative relief if such were warranted, with respect to rights involving the same property. (See Lindsey, 405 U.S. 66, 92 S.Ct. 862.)

In 1929, the California Legislature added Code of Civil Procedure section 1161a to its unlawful detainer statutes (added Stats.1929 ch. 393 § 1), providing that the summary procedures would henceforth be available not only to landlords but to persons who had obtained title to real property under certain specifically enumerated circumstances, including, Inter alia, '3. Where the property has been duly sold in accordance with Section 2924 of the Civil Code, under a power of sale contained in a deed of trust executed by him, or a person under whom he claims, and the title under the sale has been duly...