National Industries, Inc. v. Republic Nat. Life Ins. Co.

• Decision Date: 10 May 1982
• Docket Number: No. 79-3123,79-3123
• Citation: National Industries, Inc. v. Republic Nat. Life Ins. Co., 677 F.2d 1258 (9th Cir. 1982)
• Parties: NATIONAL INDUSTRIES, INC., a Kentucky corporation, Plaintiff-Appellee, v. REPUBLIC NATIONAL LIFE INSURANCE COMPANY, a Texas corporation, Defendant-Appellant.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 1258

677 F.2d 1258

NATIONAL INDUSTRIES, INC., a Kentucky corporation, Plaintiff-Appellee, v. REPUBLIC NATIONAL LIFE INSURANCE COMPANY, a Texas corporation, Defendant-Appellant.

No. 79-3123.

United States Court of Appeals Ninth Circuit.

Argued and Submitted Dec. 11, 1980.

Decided May 10, 1982.

Robert W. Holland, Carson, Messinger, Elliott, Laughlin & Ragan, Phoenix, Ariz., for defendant-appellant.

Douglas L. Irish, Phoenix, Ariz., argued, for plaintiff-appellee; Paul G. Ulrich, Lewis & Roca, Phoenix, Ariz., on brief.

Appeal from the United States District Court for the District of Arizona.

Before TRASK, WALLACE and ANDERSON, Circuit Judges.

J. BLAINE ANDERSON, Circuit Judge:

I. INTRODUCTION

This is a diversity case between the judgment creditors of successive record title holders to real property. In nearly every sense, the parties to this litigation, hereinafter referred to as "National" and "Republic," are contestants in a championship fight for the title to a 40-acre tract of improved land known as the 5-G Ranch located in Maricopa County in the State of Arizona. The parties claim title to the property through separate execution sales. Both were victorious in their preliminary bouts which were staged in different arenas. National proceeded in state court and secured a judgment quieting its title against other adverse claimants. Republic achieved similar results in federal court. Neither was a party nor privy to the other's suit and thus neither is bound by the other's judgment. The stage was set and the parties squared off in 1970 when National filed this quiet title action against Republic.

The elusive nature of the issues raised in this action is adequately demonstrated by the rather remarkable and abrupt turn of events experienced by the parties during the course of this litigation. Republic won the first round when the district court, sitting without a jury, granted its motion to dismiss at the close of National's case-in-chief pursuant to Fed.R.Civ.P. 41(b). The next round went in National's favor when this court reversed the dismissal on appeal and held that National had established a prima facie case of superior title. Round three began upon remand and ended when the district court granted National's motion for summary judgment. That judgment is now before us on appeal. We hold that in one respect the fight was stopped prematurely.

II. FACTUAL BACKGROUND

The title evidence in the record before us indicates that in 1965 the 5-G Ranch was deeded to Philip Goldberg and his wife, Ruth. The parties tell us that Philip Goldberg was a promoter who built an "insurance empire," at least in part through his ownership and control of the Financial Security Life Insurance Company (FSLIC).

In 1966, the Goldbergs conveyed the 5-G Ranch to FSLIC in exchange for a promissory note, the precise nature of which is disputed by the parties. On its face, the note generally provides that FSLIC agrees to pay the Goldbergs $350,000.00, payable on demand and subject to the following terms and conditions: (1) that interest will accrue at the rate of six per cent per annum; (2) that the principal and accrued interest shall be repaid only out of that part of the unassigned surplus of FSLIC which is in excess of $850,000.00; and (3) that the holders of the note may at any time require the reconveyance of the 5-G Ranch, and that such reconveyance shall constitute full satisfaction of the obligations under this note.

Thereafter, the Goldbergs transferred the ranch to various third persons. Those transfers were subsequently set aside as fraudulent conveyances by both National and Republic in their separate lawsuits, and they are of no consequence to this appeal.

The parties also tell us that Philip Goldberg's "insurance empire" collapsed under the scrutiny of investigations by, among others, the Arizona State Department of Insurance which assumed control of FSLIC, and that Philip Goldberg was eventually convicted of mail fraud. These events sent the creditors of Goldberg and FSLIC scrambling to find assets to proceed against in satisfaction of their claims.

National is a creditor of Philip Goldberg. It obtained a money judgment against Goldberg in a New York state court, which it later reduced to a judgment in an Arizona state court. By purchase at an execution sale, National received a sheriff's deed of Philip Goldberg's interest in the 5-G Ranch. National then secured a judgment setting aside, as a fraud upon it, the transfer from the Goldbergs to FSLIC and later from the Goldbergs to third persons, and quieting title to the ranch in itself.

Republic is a creditor of FSLIC. It obtained a money judgment against FSLIC in the Arizona federal district court, and later received a marshal's deed of FSLIC's interest in the 5-G Ranch. Republic then secured a judgment setting aside the conveyance from FSLIC to the Goldbergs as a fraud on it, and quieting its title to the ranch against the Goldbergs and their grantees.

III. PRIOR PROCEEDINGS

In 1970, National initiated this quiet title action against Republic. At the close of National's case-in-chief, the district court granted Republic's motion to dismiss pursuant to Fed.R.Civ.P. 41(b). On appeal, this court reversed in an unpublished memorandum decision which held that National had established a prima facie case for quiet title relief. National Industries, Inc. v. Republic National Life Insurance Co., 534 F.2d 333 (table) (9th Cir. 1976). Of key importance to that decision was this court's determination of the proper evidentiary effect to be given a judgment in a subsequent suit between strangers. Drawing from section 639 of the California Evidence Code, this court concluded that a judgment is presumed to correctly set forth the rights of the parties, but there is no presumption that the facts essential to the judgment have been correctly determined.

Therefore, it was held that National made out a prima facie case for quiet title relief against Republic by way of the following analysis:

"National met this burden by introducing the deeds from FSLIC to the Goldbergs and then to others, the Arizona money judgment against Philip Goldberg, the sheriff's deed to National of Philip Goldberg's interest in the property and the judgment quieting National's title as against the Goldbergs and their grantees. The judgment is not evidence that the conveyances from the Goldbergs are void as frauds on their creditors or that Ruth Goldberg's interest is void as a fraud on Philip Goldberg's creditors. Admission of the judgment in evidence does, however, raise a presumption that as between National on the one hand, and Philip and Ruth Goldberg and their grantees on the other, National has title to the property. This is sufficient to establish a prima facie title in National. (citation omitted).

"National also established a prima facie case of superior title. Republic has a marshal's deed of FSLIC's interest in the property. The pleadings and title evidence, however, do not demonstrate that at the time of Republic's levy or sale, FSLIC had any interest in the property. Republic has a judgment setting aside the conveyance from FSLIC to the Goldbergs as a fraud on it, as one of FSLIC's creditors, and quieting Republic's title to the property against the Goldbergs and their grantees. The suit was filed after National acquired Goldberg's interest in the property and National was not a party. Thus National is not bound by that judgment. Nor is the judgment admissible against National to prove that the FSLIC-to-Goldbergs conveyance was fraudulent. The only effect of the judgment in this suit is to raise a presumption that as between Republic on the one hand, and the Goldbergs and their grantees on the other, Republic has title. This presumption has no effect on National's title."

Consequently, the case was remanded and this court noted that Republic could rebut National's prima facie case by, for example, showing that Ruth Goldberg had a valid community property interest in the property which could not be reached by National as a creditor of Philip Goldberg only, or that the FSLIC-to-Goldbergs conveyance was fraudulent.

National wasted no time in taking advantage of this favorable ruling and moved for summary judgment immediately upon remand. It had established a prima facie case for quiet title relief and took the initiative to preempt the two avenues of rebuttal suggested by this court in its memorandum disposition. National contended that there were no material factual questions concerning the community property and fraudulent conveyance issues, and that it was entitled to a judgment as a matter of law. The district court agreed and entered judgment. Republic seeks review of the summary judgment.

IV. JURISDICTION

Before proceeding to the merits, we must address a jurisdictional issue. National has raised a challenge to this court's jurisdiction to review the merits of the summary judgment by questioning the timeliness of Republic's notice of appeal therefrom. Although two members of this court previously denied National's motion to dismiss that portion of the appeal, we do not consider the denial of the motion to have foreclosed our ultimate reconsideration and disposition of the issue. United States v. Humphries, 636 F.2d 1172, 1174 n. 2 (9th Cir. 1980), cert. denied, 451 U.S. 988, 101 S.Ct. 2324, 68 L.Ed.2d 846 (1981).

After a hearing on July 31, 1978, the district court granted National's motion for summary judgment and signed a stipulated form of final judgment on November 30, 1978. That judgment was entered by the clerk on December 7, 1978. Before entering the judgment, however, the clerk notified National's counsel that the form of judgment technically did not comply with Fed.R.Civ.P. 54(a), in that it contained various recitals of the prior proceedings. National's counsel informed the clerk that arrangements would be made with Republic's counsel for submitting a...