Martin v. K & K Properties, Inc.

• Decision Date: 30 January 1987
• Court: California Court of Appeals Court of Appeals
• Parties: William W. MARTIN, Richard L. Noble, Robert E. Mosher, and the Legal Action Committee for Marlin Investments, Cross-Complainants and Appellants, v. K & K PROPERTIES, INC., William Everett Kane and Barbara Kelly, Cross- Defendants and Respondents. Civ. B 009 841.

Page 161

234 Cal.Rptr. 161

188 Cal.App.3d 1559

William W. MARTIN, Richard L. Noble, Robert E. Mosher, and the Legal Action Committee for Marlin Investments, Cross-Complainants and Appellants, v. K & K PROPERTIES, INC., William Everett Kane and Barbara Kelly, Cross- Defendants and Respondents.

Civ. B 009 841.

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

Jan. 30, 1987.

Review Denied April 22, 1987.

Noble, Campbell & Uhler and Richard L. Noble and Stephen W. Holohan, Los Angeles, for cross-complainants and appellants

Hill, Wynne, Troop & Meisinger and Louis M. Meisinger and Michael L. Thornburg, Los Angeles, for cross-defendant and respondent Barbara Kelly.

Hochman, Salkin and DeRoy and George DeRoy, Beverly Hills, for cross-defendant and respondent, K & K Properties, Inc.

Breidenbach, Swainston, Yokaitis & Crispo, Los Angeles, for cross-defendant and respondent William Everett Kane.

KENNARD, Associate Justice. ^*

Respondents in this matter are William Kane, Barbara Kelly, and K & K Properties, Inc. They are the original plaintiffs and cross-defendants. Appellants are William Martin, Richard Noble, Robert Mosher, and the Legal Action Committee for Marlin Investments. The committee represents some 400 hundred creditors in an underlying bankruptcy action filed in the federal court in 1976. The committee was formed to protect the creditors' interests and to pursue legal actions against respondents. Appellants are the original defendants and cross-complainants.

Appellants appeal from a dismissal of their cross-complaint under subdivisions (a) and (b) of former section 583 of the Code of Civil Procedure (hereafter §§ 583(a) and (b)). These orders of dismissal are directly appealable (Salas v. Sears, Roebuck & Co. (1986) 42 Cal.3d 342, 345, 228 Cal.Rptr. 504, 721 P.2d 590; Manor Drug Stores v. Blue Chip Stamps (1977) 71 Cal.App.3d 423, 424, 139 Cal.Rptr. 483), and we affirm them.

BACKGROUND

This case comes to us on a voluminous clerk's transcript of 4717 pages. To understand the complex background out of which this matter arose requires a brief discussion of the various lawsuits leading to the present action.

From 1969 to 1975, Barry Marlin sold interests in limited partnerships and joint ventures. In December 1975, respondents William Kane and Barbara Kelly formed K & K Properties, Inc. They entered into an agreement with Marlin, whereby the latter would receive 80 percent of outstanding shares in return for a transfer of the assets and liabilities of 18 of Marlin's limited partnerships and joint ventures (hereafter referred to as A & C Properties). In August 1976, A & C Properties filed for bankruptcy in the federal court. In December 1977, with the approval of the bankruptcy court, appellants and respondents entered into a settlement agreement.

In March 1979, appellants brought an adversary proceeding against respondents in the underlying bankruptcy matter, alleging, among other things, violations of the federal securities law. Claiming the lawsuit to be in violation of the settlement agreement entered between the parties in the bankruptcy matter in December 1977, plaintiffs sued appellants in the superior court in April 1979. The suit alleged causes of action for breach of contract, declaratory relief, breach of covenant of good faith, fraud, and abuse of process.

Following the dismissal of their March 1979 lawsuit in the federal court, appellants on August 20, 1979 filed another lawsuit against respondents in the underlying bankruptcy matter, alleging fraud. On that date, appellants also filed a cross-complaint against respondents in the superior court for fraud, declaratory relief, and abuse of process. After dismissal of their second lawsuit in the underlying bankruptcy matter, appellants in August 1981 filed a third action against respondents in federal court, independent of the bankruptcy proceeding. Except for a cause of action for abuse of process, the third federal suit alleged causes of actions virtually identical to those asserted in the cross-complaint As to appellants' cross-complaint in the superior court, the dismissal of which led to this appeal, appellants did not serve it on respondents until just two days before expiration of the statutory three-year period for service under former Code of Civil Procedure section 581a. On November 2, 1982, appellants granted respondents an open-ended extension to respond to the cross-complaint, subject to 30 days notice of withdrawal. The written grant expressly provided that the extension was "not intended to operate as a stipulation to extend the five year rule with respect to the Cross-complaint."

filed in superior court. The third federal action too resulted in a dismissal, and was being appealed to the Ninth Circuit at the time of the section 583 dismissals in the superior court in this case.

In early June 1983, almost four years after the filing of the cross-complaint, appellants filed and served an amended cross-complaint, adding a cause of action for violations of the state securities laws. Appellants granted respondents the same open-ended extension as had been granted with respect to the original cross-complaint. On November 2, 1983, the parties stipulated to extend the complaint's trial date to August 20, 1984, the date on which the statutory five-year period on the cross-complaint was to expire. Also on November 2, 1983, the parties agreed to have the trial-setting conference scheduled for that date taken off calendar and to have the matter taken off the civil active list.

On May 30, 1984, four years and nine months after the filing of the cross-complaint, appellants withdrew their "open extension" grant and demanded a response to their first amended cross-complaint. On June 5, 1984, appellants filed an ex parte motion to shorten the time to respond to less than 30 days. The court denied the motion. In July 1984, appellants moved for an order granting relief from certain class action procedures. On August 9, 11 days before expiration of the five-year period, appellants filed an "At Issue Memorandum" and a motion to specifically set the case for trial. As to the latter motion, appellants applied ex parte to have it heard on August 13, 1984, one week before the five-year deadline. In granting the ex parte motion, the trial court set August 15 rather than August 13 as the hearing date.

On August 10, 1984, respondents filed their opposition to appellants' motion to obtain relief from the class action requirements. On August 15, the trial court set a trial-setting conference for November 16, 1984. On August 20, the five-year statute expired, and on September 20, 1984, the trial court granted respondents' motions to dismiss the cross-complaint for failure to prosecute under section 583(a), and failure to bring the action to trial within five years under section 583(b). ¹ Judgment thereon was entered on October 5, 1984. This appeal followed.

ISSUES

We are asked to determine the propriety of the trial court's dismissal of appellants' cross-complaint under both subdivisions (a) and (b) of section 583.

DISCUSSION

1. Dismissal Under Section 583(a)

When respondents moved for dismissal under former section 583(a), the section provided in pertinent part: "The court, in its discretion, may dismiss an action for want of prosecution ... if it is not brought to trial within two years after it is filed." The trial court's ruling will not be disturbed unless there has been a clear abuse of discretion. (Blank v. Kirwan (1985) 39 Cal.3d 311, 331, 216 Cal.Rptr. 718, 703 P.2d 58; Denham v. Superior Court (1970) 2 Cal.3d 557, 566, 86 Cal.Rptr. 65, 468 P.2d 193.) The purpose underlying section 583(a) is to compel reasonable diligence in the prosecution of lawsuits. (Jensen v. Western Pac. R.R. Co. (1961) 189 Cal.App.2d 593, 596-597, 11 Cal.Rptr. 444.)

                The rationale supporting the need for reasonable diligence is that it will " 'promote the trial of cases before evidence is lost, destroyed, or the memory of witnesses becomes dimmed' " (Hurtado v. Statewide Home Loan Co.  (1985) 167 Cal.App.3d 1019, 1028, 213 Cal.Rptr. 712), and will expedite the administration of justice " 'by compelling every person who files an action to prosecute it with promptness and diligence' " (Blank v. Kirwan, supra, 39 Cal.3d at p. 332, 216 Cal.Rptr. 718, 703 P.2d 58).   Prejudice to a defendant is inherent when actions are dilatorily prosecuted.  (Ibid.;  Dunsmuir Masonic Temple v. Superior Court (1970) 12 Cal.App.3d 17, 23, 90 Cal.Rptr. 405.)
                

In ruling on a motion for dismissal under section 583(a), the trial court must consider certain factors set forth in rule 373(e) of the California Rules of Court. Among those factors are the availability of the moving party for service of process, the diligence of the parties in pursuing discovery or other pretrial proceedings, the nature and complexity of the case, "the pendency of other litigation under a common set of facts or determinative of the legal or factual issues in the case," the condition of the court's calendar, and whether the interests of justice are best served by dismissal or trial of the case.

Here, in granting the dismissal under section 583(a), the trial court specifically mentioned it had considered all of the factors set forth in rule 373(e). Appellants' failure to serve respondents for a period of almost three years after the filing of the cross-complaint was prima facie a sufficient basis for dismissal. (Lopez v. Larson (1979) 91 Cal.App.3d 383, 404, 153 Cal.Rptr. 912.) It also appears that appellants initiated no discovery until more than four years had elapsed and the matter had been taken off the civil active list. Additionally, they did not file an at-issue memorandum until more than four and one-half years after the filing of their cross-complaint. Under these circumstances, dismissal under section 583(a) was proper. (Corlett v. Gordon (1980) 106 Cal.App.3d 1005, 1013-1014, 165...