Krofcheck v. Ensign Co.

• Citation: 169 Cal.Rptr. 516,112 Cal.App.3d 558
• Parties: Joseph L. KROFCHECK, Plaintiff and Appellant, v. ENSIGN COMPANY, a limited partnership, Robert W. Ensign, General Partner, Defendants and Respondents. Civ. 57618.
• Decision Date: 25 November 1980
• Court: California Court of Appeals

Page 516

169 Cal.Rptr. 516

112 Cal.App.3d 558

Joseph L. KROFCHECK, Plaintiff and Appellant, v. ENSIGN COMPANY, a limited partnership, Robert W. Ensign, General Partner, Defendants and Respondents.

Civ. 57618.

Court of Appeal, Second District, Division 3, California.

Nov. 25, 1980.

Grueskin & Bunnage, and M. Alan Bunnage, Beverly Hills, for plaintiff and appellant.

Good, Wildman, Hegness & Walley, and Joseph E. DuBois, Newport Beach, for defendants and respondents.

POTTER, Acting Presiding Justice.

Plaintiff Joseph L. Krofcheck, assignee of Park City Utah Corporation, appeals from an order of the Superior Court in sister state judgment proceedings relating to a Utah judgment.

The order appealed from vacated the sister state judgment insofar as it was against defendant Robert W. Ensign. The application for entry of judgment on the sister state judgment was filed September 14, 1976. It named as defendants Ensign Company, a limited partnership, and Robert W. Ensign, general partner, and sought the entry of a California judgment against them in the sum of $73,653.53, based upon an attached "Judgment on Stipulation" and implementing orders in Civil Action No. 4143 in the District Court of Summit County, Utah. The parties named in the Utah proceeding as shown by the stipulated judgment were: Ensign Company, a limited partnership; Ski Park City West, Inc., a corporation; and Aspen Grove, Inc., a corporation. ¹

The application for sister state judgment was on the official form specified in Code of Civil Procedure section 1710.15. On September 20, 1976, judgment was entered by the clerk in favor of plaintiff and against defendants Ensign Company and Robert W. Ensign in the sum of $73,653.53.

Proceedings to vacate this judgment, pursuant to Code of Civil Procedure section 1710.40, were promptly initiated by both defendants. Numerous grounds were specified, including lack of finality of the Utah proceedings. The hearing of the motions to vacate was continued from time to time from November 9, 1976, to January 9, 1979, when the ruling which is the subject of this appeal was rendered. In the interim, extensive further proceedings occurred in the Utah litigation. One of the results of these Utah proceedings was that the amount of the Utah judgment was by order of September 6, 1977, increased to $98,000, and judgment in that sum was awarded "against defendants Ensign Company, Ski Park City West, Inc., and Aspen Grove, Inc. (Name changed to National Property Managment, Inc.)." An appeal from this modified judgment was taken to the Supreme Court of Utah which, on October 23, 1978, filed its opinion affirming such judgement as a valid interpretation and implementation of the original judgment on stipulation. While this appeal was pending, the Utah District Court also granted plaintiff's motion for an order that "Robert W. Ensign, general partner of the defendant Ensign Company, shall personally appear in the above-entitled court to answer concerning his and Ensign Company's property...." Further, on October 14, 1977, the court issued its contempt citation against Robert W. Ensign for failing to appear for such examination.

Vacation of the sister state judgment on behalf of Ensign Company was sought on various bases, including an attack upon the Utah judgment on the grounds that it was obtained by extrinsic fraud. These grounds were effectively negated by the Utah Supreme Court's opinion affirming the modified judgment against the partnership. ²

Robert W. Ensign's motion to vacate the judgment was based upon his contention that the Utah judgment was not a judgment against him personally and, therefore, could not be made a California judgment against him personally. In support of his contention, Ensign filed his declaration stating that he had never been personally served in the Utah proceedings and had never personally appeared therein. The record of the Utah proceeding revealed that he was not a named party. The court's attention was drawn to Utah statutory and case authority that a judgment in an action brought against a partnership sued in the partnership name is enforceable only against the partnership property. Anticipating that plaintiff would attempt to claim that the Utah judgment was binding upon him by virtue of his personal participation in the conduct of the Utah litigation, Ensign's declaration explained that by the time such litigation was commenced, Ensign Company had transferred its interest in the land development venture which was the subject of the litigation to a publicly held corporation (Ski Park City West, Inc.) which had assumed the partnership obligations in return for stock in such corporation. Shortly thereafter, Ensign Company had dissolved, distributing to the partners the corporate stock which constituted the partnership assets. Consequently, Ensign allegedly left the entire matter of the defense of the action to the attorneys employed to defend the corporation. Ensign claimed that he personally was ignorant of the proceedings whereby the stipulated judgment was entered.

In response to Ensign's showing, plaintiff showed that: (1) Ensign was the chief executive officer of the corporate defendant, (2) corporate counsel sought a continuance in order to confer with him to obtain the facts for an answer, and (3) despite his tender of resignation before the date of the stipulated judgment, deeds executed after the stipulated judgment to carry out the division of property thereby contemplated were executed by Ensign. Plaintiff further showed that after the commencement of the sister judgment proceedings, Ensign actively participated in the Utah proceedings by which both Ensign Company and the corporate defendant sought to vacate the Utah judgment. On the basis of this showing, plaintiff contended that Ensign was bound by the Utah judgment under the rule embodied in Restatement of Judgments (1942) section 84, page 390, which states:

"A person who is not a party but who controls an action, individually or in co-operation with others, is bound by the adjudications of litigated matters as if he were a party if he has a proprietary or financial interest in the judgment or in the determination of a question of fact or of a question of law with reference to the same subject matter or transaction; ..."

Plaintiff also contended that as general partner, Ensign was in privity with the partnership and thereby bound by the judgment against it.

The ruling on defendant Ensign's motion to vacate the judgment was stated as follows: ".... Court determines he has not personal liability under sister state judgment and enjoins plaintiff from executing upon his personal assets as opposed to assets of Ensign Company."

The court did not specify the basis for the ruling. However, since it denied the motion as to the defendant Ensign Company (the limited partnership), it obviously rejected the arguments attacking the validity of the Utah judgment as a determination of the liability of such partnership. The court did not, however, state whether the ruling with respect to Ensign personally was based upon a factual determination that he did not control the Utah action or upon the legal proposition that in any event the Utah judgment against Ensign Company could not be the basis of a sister state judgment against him personally.

After the ruling in the court below, the District Court of Utah by order of dismissal of Robert W. Ensign, dated May 9, 1979, declared and "determined that it lacks jurisdiction over the person of Robert W. Ensign in this matter," and on July 2, 1979, said court denied a motion to vacate said order; however, by order dated September 2, 1980, said court added Robert W. Ensign as a party defendant, based upon personal service on June 5, 1979, and granted him 30 days "to answer the summons served on him on June 5, 1979." ³

Contentions

Plaintiff contends that: (1) Utah law must be applied to determine the effect of the Utah judgment; (2) under Utah law, Ensign is bound by the Utah judgment as a person in privity with Ensign Company; and (3) sister state judgment proceedings are a proper way to recognize Ensign as a party.

Defendant does not controvert the applicability of Utah law. He contends, however that: (1) under both Utah and California law his assets are not liable to pay the Utah judgment, since he was not a party to the Utah proceeding nor in privity with a party, and (2) in any event, the Utah judgment was rendered without jurisdiction over him (as the Utah court has recognized).

Discussion

Summary

The effect of the Utah judgment is governed by Utah law. However, there is no Utah law making a judgment against a partnership effective as a judgment against a partner not named or served as a party. Nor can this result be reached on the basis of the partner controlling the litigation against the partnership. The sister state judgment proceedings cannot, therefore, make Ensign a party to the original judgment and thereby subject his assets thereto.

Utah Law Controls

"It is well settled that both the validity and the effect of a judgment are governed by the laws of the state where it is rendered." (Gilmer v. Spitalny (1948) 84 Cal.App.2d 39, 44, 189 P.2d 744.) Further, as noted in Restatement Second of Conflict of Laws (1971) section 94, comment b, page 279:

".... What persons are in privity with a party to the judgment or are otherwise affected by the judgment on account of a special relationship to a party or a privy is determined by the local law of the State where the judgment was rendered provided that this law meets the requirements of due process."

Under Utah Law the Judgment Against Ensign Company Was Not Enforceable Against Ensign Personally

The uncontradicted facts show that, prior to the rendition of the Utah judgment, Ensign was never named as a defendant in the Utah proceedings, was never personally served with any of the pleadings and never personally appeared in...