Baum v. Milks CA2/6 ( 2021 )

Filed 4/20/21 Baum v. Milks CA2/6
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions
not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion
has not been certified for publication or ordered published for purposes of rule 8.1115.
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION SIX
DWIGHT J. BAUM et al., 2d Civ. No. B298410
(Super. Ct. No. 17CV00153)
Plaintiffs and Respondents, (Santa Barbara County)
v.
WILLIAM MILKS,
Defendant and Appellant.
William Milks appeals from an order denying his
motion to vacate entry of a sister-state (Nevada) judgment. He
contends the Santa Barbara County Superior Court erred when it
denied his motion because the Nevada judgment is void. We
affirm.
FACTUAL AND PROCEDURAL HISTORY
Arbitration and Nevada Court Proceedings
Milks, Steven White, and Joel Quaid (collectively,
“Defendants”) are managers of Affirmed Technologies, LLC
(Affirmed). Dwight Baum and other plaintiffs (collectively,
“Plaintiffs”) are shareholders of Affirmed.
Plaintiffs brought a shareholders’ action against
Defendants in Nevada district court. They alleged 11 causes of
action, claiming that Defendants misused Affirmed’s funds.
Plaintiffs sued White “individually, and in his capacity as
member and manager of Affirmed” and sued Milks and Quaid in
their “capacity as manager[s] of Affirmed.” The parties proceeded
to arbitration.1
In June 2015, the arbitrator found in favor of
Plaintiffs on two derivative claims brought on behalf of Affirmed
against White and awarded damages to Affirmed. The arbitrator
also found that Quaid and Milks mismanaged Affirmed’s assets
in violation of Affirmed’s Operating Agreement. The arbitrator
awarded Plaintiffs $409,656 in attorney fees and $26,951 in costs
“to be recovered from Respondents.” The arbitrator also ordered
the arbitration fees to be divided equally between the parties.
Plaintiffs moved to confirm the arbitration award in
the Nevada district court, and Defendants moved to vacate it.
The district court upheld the substantive ruling of the arbitrator.
The district court noted that “Respondents” in the arbitration
action included not only White, Quaid, and Milks, but also
Affirmed as a “nominal respondent.” The court remanded the
case to the arbitrator to clarify which “Respondents” were
responsible for the attorney fees, costs, and expenses.
On remand, the arbitrator clarified that the attorney
fees, costs, and expenses were intended to “be awarded jointly
and severally against White, Quaid and Milks as the true
1 The parties stipulated to dismiss the district court action
when arbitration was commenced. The same complaint was used
as the basis for arbitration.
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Respondents to the proceeding.” The arbitrator stated that
Affirmed “should be allocated none of these costs.”
The district court granted Plaintiffs’ motion to
confirm the arbitration award. The judgment stated: “Plaintiffs
shall recover” $409,656 in attorney fees and $26,951 in costs and
expenses “from Defendants White, Quaid and Milks, who shall be
jointly and severally responsible therefor.” The judgment also
awarded Plaintiffs $7,301.66 in arbitration fees from each of the
Defendants.
Defendants appealed the judgment to the Nevada
Supreme Court. In their appeal, Defendants argued “the
arbitrator exceeded his authority, for example, by awarding
attorney fees against the non-Member Manager Milks
individually. Milks and Quaid were neither individual
Respondents nor individual counterclaimants in the arbitration.”
They argued that the arbitrator and the district court erred in
holding Milks and Quaid personally liable. The Nevada Supreme
Court affirmed the judgment in September 2018.
Santa Barbara Superior Court Proceedings
Meanwhile, in January 2017, Plaintiffs filed an
“Application for Entry of Judgment on Sister-State Judgment” in
Santa Barbara County Superior Court. The court clerk entered
the “Clerk’s Judgment on Nevada Sister-State Judgment”
(“Clerk’s Judgment”), which stated that “Plaintiffs shall recover”
a total of $452,838.69 (the remaining unpaid principal on the
sister-state judgment, interest, and the filing fee for the
application) “from Defendants Steven C. White, Joel Quaid and
William Milks, who shall be jointly and severally responsible
therefor.” The Clerk’s Judgment also included the identical case
caption as the Nevada judgment.
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Milks moved to vacate the entry of the Nevada
judgment. He argued that entry of the Nevada judgment, which
was against him “‘as an individual judgment debtor[,]’ would be a
violation of his right to due process” because the Nevada
judgment was against him in his “‘capacity as manager,’” and not
against him “‘individually.’”
In April 2019, the superior court denied Milks’s
motion. The court reasoned that the plain language of the final
judgment and the arbitrator’s award do not state that Milks was
responsible for the fees, costs, and expenses “‘as manager of
Affirmed Technologies’ rather than against him individually.”
The court also denied the motion because Milks raised the same
argument before the Nevada Supreme Court, which “rejected this
argument and affirmed the judgment in all respects. . . . Thus,
Milks’[s] assertion that there is only a judgment against him in
his representative capacity as a manager of Affirmed finds no
support in the orders and judgments of the Nevada proceedings.”
Postjudgment Proceedings in Nevada Courts
Based on the Nevada judgment, Plaintiffs initiated
postjudgment discovery in Nevada. They requested Milks’s
personal financial information. When Milks refused, the Nevada
district court compelled Milks to respond to the postjudgment
discovery.
Milks petitioned the Nevada Supreme Court for a
writ of prohibition. He argued that the district court exceeded its
jurisdiction when it (1) held him personally liable for the attorney
fees and costs, and (2) compelled him to produce his personal
financial information.
In July 2020, the Nevada Supreme Court granted his
petition. It determined that the Nevada district court “lacked
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jurisdiction to hold him individually liable for attorney fees and
costs because he is a nonparty to the underlying proceedings in
his individual capacity.” It determined that the “district court
lacked jurisdiction to compel discovery into Milks’[s] personal
assets.”
DISCUSSION
Milks contends the superior court erred when it
denied his motion to vacate because the Nevada judgment
against him is void. He argues that entry of the Nevada
judgment violated due process because it “lack[ed] personal
jurisdiction” to hold him individually liable. We disagree.
Under the full faith and credit clause of the United
States Constitution (U.S. Const., Art. IV, § 1), a “‘final judgment
in one State, if rendered by a court with adjudicatory authority
over the subject matter and persons governed by the judgment,
qualifies for recognition throughout the land.’” (Bank of America
v. Jennett (1999) 77 Cal.App.4th 104, 113.) However, “‘before a
court is bound by the judgment rendered in another State, it may
inquire into the jurisdictional basis of the foreign court’s decree.
If that court did not have jurisdiction over the subject matter or
the relevant parties, full faith and credit need not be given.’
[Citation.]” (Ibid.)
The entry of a sister-state judgment “may be vacated
on any ground which would be a defense to an action in this state
on the sister state judgment.” (Code of Civ. Proc., § 1710.40.) We
review the trial court’s ruling on a motion to vacate a judgment
for abuse of discretion. (Tsakos Shipping & Trading, S.A. v.
Juniper Garden Town Homes, Ltd. (1993) 12 Cal.App.4th 74, 88-
89.) We will not reverse unless the trial court’s ruling is
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arbitrary, capricious, or outside the bounds of reason. (Denham
v. Superior Court (1970) 2 Cal.3d 557, 566.)
Here, the superior court did not abuse its discretion.
The Clerk’s Judgment adopted the same words and phrases as
the Nevada judgment (i.e., the superior court’s judgment states:
“Plaintiffs shall recover . . . from Defendants Steven C. White,
Joel Quaid and William Milks, who shall be jointly and severally
responsible therefor” and the Nevada judgment states:
“Plaintiffs shall recover . . . from Defendants White, Quaid and
Milks, who shall be jointly and severally responsible therefor
. . .”). There is no dispute the Nevada judgment is valid, at least
as against Milks in his capacity as manager. Milks concedes as
much.
Milks argues the Nevada judgment is void against
him in his individual capacity, but his argument concerns the
interpretation of the judgment rather than its validity. An issue
regarding the effect of the judgment is one for the Nevada courts
to decide. (Gilmer v. Spitalny (1948) 84 Cal.App.2d 39, 44.) We
are not aware of any Nevada order which has changed the
wording of the underlying judgment. To the extent Milks argues
the July 2020 Nevada Supreme Court’s order granting his writ
petition changes the underlying judgment, we are not persuaded.
That order vacated the district court’s order compelling discovery,
but it did not change the judgment or its wording.
There was no abuse of discretion in denying vacation
of a judgment that adopts and incorporates the wording of the
Nevada judgment.
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DISPOSITION
The order denying the motion to vacate is affirmed.
Plaintiffs shall recover their costs on appeal.
NOT TO BE PUBLISHED.
TANGEMAN, J.
We concur:
GILBERT, P. J.
YEGAN, J.
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Thomas P. Anderle, Judge
Superior Court County of Santa Barbara
______________________________
The Lunsford Law Firm and Loren L. Lunsford for
Defendant and Appellant.
Fennemore Craig, Wade Beavers; Howell Moore &
Gough, Brian G. Gough and James P. Griffith for Plaintiffs and
Respondents.