Macmanus v. A. E. Realty Partners, G003232

• Citation: 195 Cal.App.3d 1106,241 Cal.Rptr. 315
• Decision Date: 29 October 1987
• Docket Number: No. G003232,G003232
• Court: California Court of Appeals
• Parties: , 1987-2 Trade Cases P 67,837 Frederick O. MACMANUS, et al., Plaintiffs and Appellants, v. A.E. REALTY PARTNERS, et al., Defendants and Respondents.

Page 315

241 Cal.Rptr. 315

195 Cal.App.3d 1106, 1987-2 Trade Cases P 67,837

Frederick O. MACMANUS, et al., Plaintiffs and Appellants, v. A.E. REALTY PARTNERS, et al., Defendants and Respondents.

No. G003232.

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

Oct. 29, 1987.

As Modified Nov. 25, 1987.

Review Denied Feb. 4, 1988.

[195 Cal.App.3d 1108] Frederick O. MacManus, San Diego, in pro. per.

A. Thomas Golden, and Cheri L. Hubka-Sparhawk, San Diego, for plaintiffs and appellants.

John K. Van de Kamp, Atty. Gen., Sanford N. Gruskin, Asst. Atty. Gen., and Thomas P. Dove and Gary Garfinkle, Deputy Attys. Gen., as amici curiae on behalf of plaintiffs and appellants.

Gibson, Dunn & Crutcher, John J. Swenson, Mary Laura Davis, D. Neil Radey and Daniel G. Swanson, Los Angeles, for defendants and respondents.

OPINION

SONENSHINE, Acting Presiding Justice.

Frederick O. MacManus and Barbara-Helene Smith appeal orders (1) denying their application to allow a class action, (2) granting summary judgment against them on their cause of action under the Cartwright Act, (3) granting judgment on the pleadings to and dismissal of Realty Escrow, Inc., and (4) denying them leave to amend their complaint.

I

In 1979, MacManus and Smith purchased a home from A.E. Realty Partners (AERP). The sales agreement required their signatures on escrow instructions to be provided by AERP. ¹ The forms were received bearing the name of Realty Escrow, Inc. (REI), a wholly-owned subsidiary of AERP. MacManus and Smith had been informed of the relationship between the entities through the Real Estate Commissioner's Public Report, but signed an escrow instruction stating "the services of any of the foregoing companies [including REI] may be used in connection with this transaction, that such use has not been made a condition of this sale by any party." Escrow closed July 18, 1979, with fees paid in the amount of $319.00, allegedly in excess of the standard charge.

In July 1980, MacManus filed a class action on behalf of all AERP home buyers who similarly were required, from the time Civil Code section 2995 was enacted, to accept REI for escrow purposes as a "condition" to purchase of their homes. ² The first cause of action alleged a violation of Civil Code section 2995; the second cause of action was grounded on a violation of California's antitrust statute, the Cartwright Act. (Bus. & Prof. Code, § 16720 et seq.) AERP and REI successfully demurred to the third amended complaint and a judgment of dismissal was entered against MacManus.

MacManus appealed to this court and we reversed, "holding the complaint states a cause of action for violations of Civil Code section 2995 and the Cartwright Act." (MacManus v. A.E. Realty Partners (1983) 146 Cal.App.3d 275, 280, 194 Cal.Rptr. 567.) "The elements constituting a claim under section 2995 appear on [the complaint's] face." (Id., at p. 284, 194 Cal.Rptr. 567.) "Whether a condition precedent existed as pleaded and whether the escrow instructions negated its existence are questions of fact to be resolved at trial." (Ibid.) With regard to the Cartwright Act allegations, we noted certain actions to "prevent market competition or to restrain trade" (id., at p. 285, 194 Cal.Rptr 567), are presumed unreasonable or illegal.

In September 1984, AERP and REI moved for summary judgment on the antitrust cause of action based on a United States Supreme Court case, Copperweld Corp. v. Independence Tube Corp. (1984) 467 U.S. 752, 104 S.Ct. 2731, 81 L.Ed.2d 628. The motion was granted, the court adopting the Copperweld proposition that a parent and its wholly-owned subsidiary are incapable of forming a conspiracy.

In April 1985, MacManus sought certification of the class. This, too, was denied, in August. In September, REI was granted summary judgment under the first cause of action because Civil Code section 2995 proscribes certain conduct only of a "real estate developer." REI was effectively dismissed from the case. MacManus timely appealed.

II

Does Copperweld Corp. v. Independence Tube Corp., supra, 467 U.S. 752, 104 S.Ct. 2731 negate the possibility of a cause of action against AERP and its wholly-owned subsidiary? For two reasons, we conclude it does not. First, our holding in MacManus v. A.E. Realty Partners, supra, 146 Cal.App.3d 275, 194 Cal.Rptr. 567, recognizing a stated cause of action under the Cartwright Act, is the law of the case. Second, Copperweld, rather than prohibiting a claim for violation of the antitrust statutes under these particular circumstances, sanctions it.

" '[W]here, upon an appeal, the supreme court, in deciding the appeal, states in its opinion a principle or rule of law necessary to the decision, that principle or rule becomes the law of the case and must be adhered to throughout its subsequent progress, both in the lower court and upon subsequent appeal, and, as here assumed, in any subsequent suit for the same cause of action, and this although in its subsequent consideration this court may be clearly of the opinion that the former decision is erroneous in that particular.' " (Clemente v. State of California (1985) 40 Cal.3d 202, 211, 219 Cal.Rptr. 445, 707 P.2d 818, quoting from People v. Shuey (1975) 13 Cal.3d 835, 841, 120 Cal.Rptr. 83, 533 P.2d 211.)

The principle applies equally to intermediate appellate decisions. (Ibid.) An exception to the doctrine may arise where there "is an intervening or contemporaneous change in the law." (Id., at p. 212, 219 Cal.Rptr. 445, 707 P.2d 818.) In the first MacManus appeal, we held a cause of action was stated under the Cartwright Act "whether or not AERP and REI operate as a single entity" (MacManus v. A.E. Realty Partners, supra, 146 Cal.App.3d 275, 287, 194 Cal.Rptr. 567) because "there is ample authority the required combination can exist as between the defendants and the plaintiff/victim." (Id., at p. 288, 194 Cal.Rptr. 567.) Copperweld does not "change" the law upon which we based our decision.

In Copperweld, a parent company and its subsidiary followed a path of conduct intended to thwart operations of a newly-formed competitor. The Seventh Circuit affirmed a jury award to the competitor on its antitrust claim pursuant to the first section of the Sherman Act (15 U.S.C. § 1), finding "liability was appropriate 'when there is enough separation between the two entities to make treating them as two independent actors sensible.' " (Copperweld Corp. v. Independence Tube Corp., supra, 467 U.S. 752, 759, 104 S.Ct. 2731, 2735, 81 L.Ed.2d 628.) In reversing, the United States Supreme Court found "Section 1 of the Sherman Act ... reaches unreasonable restraints of trade effected by a 'contract, combination ... or conspiracy' between separate entities. It does not reach conduct that is 'wholly unilateral.' " (Id., at p. 768, 104 S.Ct. at p. 2740.)

The Copperweld court overruled many of its own decisions, including Perma Life Mufflers, Inc. v. International Parts Corp. (1968) 392 U.S. 134, 88 S.Ct. 1981, 20 L.Ed.2d 982, relied upon by this court in MacManus' first appeal. In Perma Life, the court found common ownership would not shield the defendants from the obligations imposed on separate entities. That primary holding was discredited. But, said the Copperweld court, the Perma Life majority recognized "that '[i]n any event' each plaintiff could 'clearly' charge a combination between itself and the defendants or between the defendants and other franchise dealers." (Copperweld v. Independence Tube Corp., supra, 467 U.S. 752, 766, 104 S.Ct. 2731, 2739.) The Perma Life decision could be upheld, even under Copperweld, on such an alternative basis. This was precisely the ground for our ruling in MacManus v. A.E. Realty Partners, supra, 146 Cal.App.3d 275, 194 Cal.Rptr. 567. ³

REI cites McGee v. First Federal Sav. & Loan Ass'n (11th Cir.1985) 761 F.2d 647 for the proposition that an illegal tying arrangement allegation is subject to summary judgment under Copperweld. Its reliance is misplaced. In McGee, the plaintiff applied for a real estate loan, the appraisal for which was referred to the lending institution's wholly owned subsidiary. First, the plaintiff was not denied the right to shop among competitive marketers. Second, "[t]here are not two distinct products involved in the alleged situation. An appraisal is performed for the benefit of the lending institution. It is the 'consumer' of the appraisal product. There is no legitimate consumer demand by a borrower to purchase loan-related appraisal services separate from the purchase of the loan itself. Federal regulation requires the lending institution to commission the appraisal." (Id., at p. 648.)

In order to implement the AERP/REI scheme, the acquiescence of a third party was necessary, namely the home buyer. No interference with other escrow companies' access to the general home buying public was implicated until MacManus sought to purchase an AERP home, allegedly conditioned upon his use of REI's services. It is the purchase agreement between AERP/REI and MacManus, or between AERP/REI and other coerced buyers, and the required arrangement between MacManus and REI that creates the illegal "combination" proscribed by the Cartwright Act.

For these reasons, we find Copperweld does not, under the circumstances here present, preclude a cause of action under California's antitrust statutes. ⁴ The court erred in granting summary judgment on the second cause of action.

III

MacManus defined the class as consisting of those who "received title to an [AERP] home on or after August 25, 1978 [The operative date of Civil Code section 2995] and before January 1, 1982," using the AERP "offer to purchase form containing terms that may have the legal effect of requiring the purchaser to procure escrow services from REI" and the buyer did in fact procure "escrow services from REI."

The court, after accepting affidavits, evidentiary documentation, and argument pursuant to...