Vorse v. Sarasy

• Decision Date: 26 March 1997
• Docket Number: No. A070505,A070505
• Citation: Vorse v. Sarasy, 62 Cal.Rptr.2d 164, 53 Cal.App.4th 998 (Cal. App. 1997)
• Court: California Court of Appeals
• Parties: , 97 Daily Journal D.A.R. 4015 Scott VORSE, Plaintiff and Appellant, v. Lewis SARASY, Defendant and Appellant.

Page 164

62 Cal.Rptr.2d 164

53 Cal.App.4th 998, 97 Daily Journal D.A.R. 4015

Scott VORSE, Plaintiff and Appellant, v. Lewis SARASY, Defendant and Appellant.

No. A070505.

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

March 26, 1997.

Patrick M. Macias, San Rafael and Bruce W. Blakely, Mill Valley, for plaintiff and appellant.

Bien & Summers, Elliot L. Bien, San Francisco, for defendant and appellant.

Introduction

CORRIGAN, Associate Justice.

May a trial court strike a witness's live testimony under Evidence Code section 352 ¹ because the court concludes the witness is lying? No. Under all but the most limited circumstances, credibility of witnesses is a question of fact to be resolved by the jury. Here, the court invaded that province and exceeded the discretion granted under the code. Because the error was prejudicial, the judgment is reversed.

Background

I. The Dispute

This suit revolved around the acquisition of a business known as Dynatex. David Vorse ² sued Lewis Sarasy, alleging various causes of action in tort and in contract stemming from Sarasy's purchase of Dynatex. ³ The complaint alleged that Vorse, Sarasy, and nonparty Donald Schmidt formed a partnership for the purpose of engaging in various business enterprises. The three subsequently decided to acquire Dynatex, with each partner acquiring an ownership interest. When Sarasy alone acquired Dynatex, Vorse sued for damages flowing from Sarasy's failure to acquire Dynatex on behalf of the partnership.

Sarasy defended, arguing there was no agreement to jointly acquire Dynatex. Instead, Sarasy claimed the three men agreed only to broker Dynatex to a third party and to divide any resulting commissions. Sarasy presented evidence that they worked with a potential purchaser, Winfield Polytek, to raise funds for the acquisition. When the deal with Polytek failed, the three tried unsuccessfully to find other buyers. Ultimately, Sarasy purchased Dynatex with his own assets. The central issue at trial was whether Vorse, Sarasy, and Schmidt orally agreed to acquire and share in the equity of Dynatex.

On December 31, 1991, after Vorse had filed suit but before trial, Schmidt signed a declaration faxed to him by Vorse's attorneys. The declaration, filed in connection with a discovery dispute, supported Vorse's interpretation of the partnership agreement: "David Vorse, Lewis Sarasy and I formed an oral partnership ... in 1989 to engage in certain business ventures. One of these ventures was the acquisition of a high-tech company by the name of Dynatex Corporation ... by the partnership. The partnership planned to form a corporation ... in order to acquire the assets of Dynatex. Pursuant to our oral agreement, the partners were to be the shareholders in [the corporation]." According to the declaration, the law firm of Miller, Starr & Regalia was retained to complete the purchase on the partnership's behalf.

Schmidt was deposed in late 1994, three years after he had signed the declaration. In marked contrast to that document, Schmidt claimed there had been no partnership agreement to acquire the assets of Dynatex and that he never believed Miller, Starr & Regalia represented him with regard to any such acquisition. Schmidt failed to produce certain documents concerning the dispute. He asserted attorney-client privilege in response to questions about his alleged attempts to engage counsel to sue Sarasy independently or with Vorse. ⁴

At deposition, Schmidt acknowledged signing a declaration faxed to him by Vorse's attorneys in December 1991. However, he claimed he had just moved to Florida, "things were very chaotic," and "I don't recall reading it...." As to the body of the declaration, Schmidt claimed, "None of this verbiage is something I wrote or said. It's language more akin to what David Vorse would write or say."

More importantly, Schmidt claimed the substance of the declaration "is not fact" and "is totally contrary, not just what I think it is now versus what I thought it was then, but to the facts as they really happened." In a second declaration, signed the day after his deposition, Schmidt said: "Mr. Vorse suggested that I could prevent the [Sarasy/Dynatex] transaction from closing by claiming to be a Sarasy partner excluded from the deal, although the three of us had never had any agreement about our respective ownership interests, if any, in any acquiring entity."

Regarding Dynatex itself, Schmidt claimed in his deposition, "Yes, we were going to try to acquire the assets of Dynatex but it wasn't necessarily the three of us...." Asked whether he expected any compensation after Sarasy acquired Dynatex by himself, Schmidt replied: "... I felt it would have been very nice had Sarasy reimbursed me at least my expenses, which at that point were quite substantial, and something for my time and effort during those months when I was endeavoring to raise financing and, in fact, did raise an offer, period."

Finally, in a third declaration signed November 9, 1994, Schmidt explained that since December 1991 he had come to realize that "... Mr. Vorse had made substantial misrepresentations with regard to his role in the Dynatex transaction, had lied to me repeatedly over the years, had been abusing my friendship and trust, and was manipulating me with respect to whether or not Mr. Sarasy had done anything to warrant a lawsuit.... In addition, Mr. Vorse has candidly acknowledged that he, Mr. Sarasy and I did not have a partnership with respect to the Dynatex matter, but that this 'could be worked out' with respect to a lawsuit."

II. The Referee's Report

On December 27, 1994, a week before the scheduled trial date, a discovery referee issued a lengthy report to the trial court. The report concerned plaintiff's motion to compel Schmidt to answer questions and produce documents being withheld on the ground of attorney-client privilege, and Schmidt's motion for a protective order to limit the length of his deposition. In the motion to compel, plaintiff put Schmidt's credibility at issue by arguing that the attorney-client privilege should not apply when "the perjury of a witness in a civil proceeding can only be revealed through the disclosure of an attorney-client communication." Although the referee rejected this argument, the report included a finding that Schmidt "has intentionally decided with conscious disregard for both his past statements to others besides David Vorse and for his 1991 declaration (filed with this Court in 1992) to now present a totally contradictory version of what occurred before and after this litigation was commenced. This has occurred in at least two forms; Schmidt's November 4, 1994, declaration and his recent deposition testimony. I do not know which of Mr. Schmidt's versions of the past is truthful, but I find, based on abundant evidence in the form of documentary evidence, as well as Schmidt's own words, deeds, and convenient lapses of memory, that Mr. Schmidt is not a trustworthy witness." ⁵

Relying primarily on the referee's condemnation of Schmidt, plaintiff moved to exclude Schmidt as a trial witness but, at the same time, to introduce Schmidt's 1991 declaration into evidence. The court denied the motion, expressly permitting Schmidt to testify.

III. The Trial Testimony

During plaintiff's case-in-chief, with no objection from Sarasy, Schmidt's 1991 declaration was admitted into evidence. The court instructed the jury: "A declaration under oath again is given under penalty of perjury. If it's introduced into evidence, it's as if the person testified to that." The jury was shown an enlarged copy of the declaration while counsel read the text aloud. In cross-examining Sarasy, counsel suggested Sarasy had subsequently "prevailed upon" Schmidt to change his 1991 testimony only because Vorse had since died and could no longer defend his own position.

Sarasy called Schmidt to testify for the defense. According to Schmidt, in April of 1989, he, Sarasy, and Vorse began to help Winfield Polytek raise funds to purchase Dynatex. The three men orally agreed that, if Polytek completed the purchase, they would take their commission in stock, divided equally among themselves. Polytek withdrew in the summer of 1989, and the three agreed to look for another buyer. While they discussed different ideas about compensation for these efforts, they did not reach any formalized understanding on that point.

In late 1989, after a deal with another potential purchaser failed, Sarasy, Schmidt, and Vorse discussed whether Sarasy himself would purchase Dynatex. The three discussed, but reached no agreement upon, their respective participation if Sarasy were to buy the company with his own assets. Schmidt understood he would not share in any commission if Sarasy made the purchase.

Schmidt testified Vorse called him in March 1990 to report that "Sarasy had gone into contract for the acquisition of Dynatex ... and that we needed to do something about it." The court sustained an objection to any further questions on direct examination about what Vorse and Schmidt may have discussed about suing Sarasy. ⁶

Sarasy's counsel turned to questioning Schmidt about the faxed 1991 declaration, exhibit 143. By December of 1991, Schmidt had "pretty much decided against" pursuing litigation against Sarasy, and his interest level in Vorse's suit was "close to zero." Nonetheless, when Vorse called in late December and said his attorney would be sending him a document to sign, Schmidt agreed. Schmidt admitted the handwriting and signature on the last page of the declaration were his, as was the fax strip at the top of the page. However, he did not recall whether he had received or seen the first two pages.

Schmidt was asked whether the substance of the declaration was "consistent with your recollection of the transactions in which you were involved with the Dynatex Corporation." The court sustained plaintiff's objection that the "document...