Martin v. General Finance Co.

• Decision Date: 19 January 1966
• Citation: 48 Cal.Rptr. 773,239 Cal.App.2d 438
• Court: California Court of Appeals Court of Appeals
• Parties: William V. MARTIN, as Trustee for the Estate of Master Tool and Die, Inc., Bankrupt, Plaintiff and Appellant, v. GENERAL FINANCE COMPANY, a co-partnership composed of Nathan Fried and Evelyn Fried, Nathan Fried and Evelyn Fried individually, Defendants and Respondents. Civ. 28052.

Page 773

48 Cal.Rptr. 773

239 Cal.App.2d 438

William V. MARTIN, as Trustee for the Estate of Master Tool and Die, Inc., Bankrupt, Plaintiff and Appellant, v. GENERAL FINANCE COMPANY, a co-partnership composed of Nathan Fried and Evelyn Fried, Nathan Fried and Evelyn Fried individually, Defendants and Respondents.

Civ. 28052.

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

Jan. 19, 1966.

Rehearing Denied Feb. 16, 1966.

Hearing Denied March 16, 1966.

Flaxman & Coleman and Howard L. Rosoff, Los Angeles, for appellant.

Rosenfeld & Tucker and Manfred Rosenfeld, Los Angeles, for respondents.

FORD, Justice.

This is an appeal from a judgment entered pursuant to an order granting the motion of defendants Nathan Fried and Evelyn Fried, individually and doing business as General Finance Company, a co-partnership, for a summary judgment.

On March 1, 1963, William V. Martin, as trustee for the estate of Master Tool and Die, Inc., bankrupt, instituted the action. The first two causes of action of the complaint related to defendants other than the defendants Fried. In the third cause of action it was alleged in part as follows: 1. On or about April 12, 1962, an involuntary petition in bankruptcy was filed against Master Tool and Die, Inc., a corporation, (hereinafter designated as Master), and Master was thereafter adjudged a bankrupt. 2. On or about July 3, 1962, the plaintiff was appointed as trustee in bankruptcy and qualified as such trustee. 3. Prior to the filing of the petition in bankruptcy, Master was engaged in the business of operating a machine shop. 4. Prior to August 28, 1961, the defendant Bernard Theule was the sole stockholder and managing officer of Master. 5. At some time before the latter date, Theule entered into an agreement with the defendants Walter J. Trunick and Ronald Deacon, pursuant to the terms of which Theule sold and transferred to Trunick and Deacon all of his 'stockholdings' in Master and those transferees became the sole stockholders of Master. 6. Pursuant to the terms of the agreement, Trunick and Deacon 'purportedly pledged assets of the bankrupt corporation for the payment of their personal obligation to Bernard Theule.' 7. Theule induced Trunick and Deacon to cause that pledge to be made and further induced Trunick and Deacon 'to go to defendant General Finance Company to secure a loan of $10,003.00 and to pledge for said loan the assets' of Master 'for the sole and exclusive benefit of defendant Bernard Theule and that said defendant Bernard Theule did in effect receive the sum of $10,003.00 from General Finance Company.' 8. The chattel mortgage showed the mortgagors as being Trunick and Deacon, ¹ but the defendant General Finance Company 'did unlawfully and without right bring an action in foreclosure against Master Tool and Die, Inc. and did in said action take possession of and cause to be sold the assets of Master Tool and Die, Inc. satisfying an obligation owed to them by defendants Walter J. Trunick and Ronald Deacon.' 9. At the time the defendants Trunick and Deacon executed the chattel mortgage 'they did not have any corporate action taken on said matter nor did they present to defendant General Finance Company * * * any corporate resolution authorizing said action * * *, that at the time of the transactions involved herein, to wit, the 28th day of August, 1961, defendants Walter J. Trunick and Ronald Deacon were not members of the Board of Directors of Master Tool and Die, Inc. and had no authority to encumber, pledge, convey or transfer any of the assets of the corporation.' 10. At all times the defendant General Finance Company knew that the assets of which that partnership took possession were not the assets of Trunick and Deacon but were in fact the assets of Master, 'and did convert said assets for their own benefit and to pay the obligation of defendants Walter J. Trunick and Ronald Deacon.' 11. The assets were sold at public sale for the sum of $10,000, which sum was 'a reasonable value' thereof.

In the fourth case of action, the theory of the pleader was that the transaction was not in compliance with the provisions of section 3440 of the Civil Code. The fifth cause of action was one for damages because of the sale of the assets. In the sixth cause of action it was alleged that the defendants 'fraudulently and willfully conspired to deprive plaintiffs' predecessor and its creditors of its assets for their own private and personal benefit.'

The motion for summary judgment was made on the ground that the judgment entered in the superior court in the prior action entitled General Finance Company v. Master Tool & Die, Inc., precluded recovery as against the moving parties in the present case under the doctrine of res judicata.

The declaration of Manfred Rosenfeld, one of the attorneys for the moving parties, which was filed in support of the motion, stated that the complaint in the prior action was filed on March 26, 1962, and that the relief therein sought was 'the specific return of personal property and to foreclose chattel mortgage'; that on or about March 29, 1962, 'a claim & delivery levy' was made with respect to the property; and that on May 1, 1962, the court rendered a default judgment against Master, which judgment was entered on June 20, 1962.

A declaration of Thomas Levay was also filed in support of the motion. Therein the declarant stated that on May 1, 1962, as the manager and agent of General Finance Company he took possession of the personal property of Master from the Marshal of the County of Los Angeles and 'thereafter sold same as provided under the chattel mortgage.'

The declaration of Manfred Rosenfeld contained the name of the prior case, the number it bore in the files of the superior court, the fact of the rendition of the default judgment and the date of entry of that judgment, together with a specification of the book and page of the entry. While a certified copy of the judgment was attached to that declaration, the facts set forth in the declaration itself were sufficient to enable the trial court to take judicial notice of the pleadings ² and of the judgment in the prior action. (Stafford v. Ware, 187 Cal.App.2d 227, 9 Cal.Rptr. 706; Goldstein v. Hoffman, 213 Cal.App.2d 803, 814, 29 Cal.Rptr. 334.) The power of this court to take judicial notice is the same as that of the trial court. (Ahlgren v. Carr, 209 Cal.App.2d 248, 257, 25 Cal.Rptr. 887; Witkin, California Evidence, § 42, p. 56.)

In the complaint in the prior action it was alleged that on or about August 28, 1961, 'defendants made, executed, and delivered to plaintiff a promissory note and chattel mortgage, in writing, for the sum of $10,003.00, for value received.' A copy of the document embodying the note and chattel mortgage was attached to the complaint and incorporated therein by reference. A default in payment was alleged. It was further alleged that the note provided that in the event of such a default, the plaintiff was entitled to the immediate possession of the property and that the plaintiff elected to take such possession. The prayer was for the recovery of the possession of the property, or of the reasonable value thereof in the event that recovery could not be made; that the defendants be foreclosed of all interest in the property; that the property be sold and the proceeds applied to the payment of the costs and expenses of the action and the amount due on the obligation; and that 'defendants be adjudged to pay any deficiency that may remain after applying all said money as aforesaid.'

The judgment in the prior action was in part as follows: 'The defendants, Master Tool & Die, Inc., a corporation, and Geo. R. Deacon * * * also known as Ronald Deacon, having been regularly served with process, having failed to appear and answer the plaintiff's complaint filed herein, and the default of said defendants having been duly entered; and evidence having been introduced in open session of this Court:

'It is therefore ordered, adjudged and decreed that plaintiff recover of and from defendants the possession of the following described property: * * *'

The applicability of the doctrine of res judicata with respect to a default judgment is succinctly stated in Fitzgerald v. Herzer, 78 Cal.App.2d 127, at pages 131-132, 177 P.2d 364, at page 366: 'By permitting his default to be entered he [the defendant] confessed the truth of all the material allegations in the complaint [citations] * * *. A judgment by default is as conclusive as to the issues tendered by the complaint as if it had been rendered after answer filed and trial had on allegations denied by the answer. [Citations.] Such a judgment is res judicata as to all issues aptly pleaded in the complaint and defendant is estopped from denying in a subsequent action any allegations contained in the former complaint. [Citations.]'

Except as to the fourth cause of action, the trustee in bankruptcy was seeking to recover the value of property which, he alleged, belonged to Master and had been the subject of conversion by reason of the wrongful acts of the defendants Trunick, Deacon and General Finance Company. He alleged that the assets of Master had been fraudulently mortgaged so as to obtain funds by which...