Meridian Financial etc. v. Phan

Filed 8/10/21
CERTIFIED FOR PUBLICATION
COURT OF APPEAL, FOURTH APPELLATE DISTRICT
DIVISION ONE
STATE OF CALIFORNIA
MERIDIAN FINANCIAL SERVICES, D078586, D078589
INC., et al.,
Plaintiffs and Appellants,
(Superior Court Case No. 2013-
v. 1-CV-254980)
LANANH PHAN et al.,
Defendants and Respondents.
APPEAL from judgments of the Superior Court of Santa Clara County,
Thomas E. Kuhnle, Judge. Affirmed.
Patton Sullivan Brodehl and Kevin R. Brodehl, for Plaintiffs and
Appellants.
Fidelity National Law Group, David B. Owen; Greines, Martin, Stein &
Richland and Robin Meadow for Defendant and Respondent Chicago Title
Company.
No appearances for Defendants and Respondents Jodie Nguyen, Diana
Tran, and Jeannie Vuong.
INTRODUCTION
Mark Yazdani, a Stanford-educated economist and licensed real estate
broker, is the president and sole owner of Meridian Financial Services, Inc.
(Meridian).1 Over the span of a year, Yazdani made a series of investments
totaling $5,079,000 in an international gold-trading scheme run by a loan
broker, Lananh Phan, who promised him “guaranteed” returns of 5 or 6
percent per month. He conducted no due diligence into the legality or
legitimacy of the investment. It turned out to be a Ponzi scheme and when it
collapsed, Yazdani lost most of his money.
In exchange for some of his investments, Yazdani demanded
“collateral” from Phan. For an initial investment of $500,000, Phan offered a
promissory note secured by a deed of trust in Meridian’s favor on her
personal residence. For a subsequent investment of $900,000, Phan offered
two more promissory notes of $650,000 and $250,000 to be secured by deeds
of trust in Meridian’s favor on the personal residences of unwitting third
parties ensnared in Phan’s fraudulent scheme (the Meridian deeds of trust).
All of the collateral on Yazdani’s investments were set up as “loans”
and facilitated through escrow at Chicago Title Company (Chicago Title) by
Diane Do, an escrow officer Yazdani met in an unrelated real estate
transaction and who invited Yazdani to invest with Phan. Yazdani signed
“Lenders Escrow Instructions” for these transactions, identifying Meridian as
“the lender” and the various third parties whose homes were encumbered as
“the borrowers” of the loan funds, although he admittedly had no expectation
these individuals would receive any money. Without communicating with
any of the purported borrowers, he caused loan documents to be prepared,
1 Because Yazdani was the only person acting on behalf of Meridian, we
generally do not distinguish between the two, unless necessary.
2
gave Phan’s personal address as the borrowers’ mailing addresses, and gave
his own personal email address as the borrowers’ email addresses for the loan
documents. Although the “lender,” Yazdani received all of the borrowers’
loan documents. The purported borrowers never knew of these transactions;
their signatures on the Meridian deeds of trusts were forged or obtained by
Phan under false pretenses. Yazdani had been made aware of “irregularities”
with the execution and notarization of the Meridian deeds of trust. After the
Ponzi scheme collapsed and unable to recover his investment, he moved to
foreclose on the purported borrowers.
From these events, two lawsuits arose. In the first lawsuit, two of the
purported borrowers sued Yazdani and Meridian (collectively, Appellants) to
prevent foreclosure of their home and to quiet title to their home. After a
bench trial, the trial judge cancelled the Meridian deeds of trust, finding that
they were “forged” and that Appellants had acted with unclean hands in
procuring them (the Orange County decision). However, the parties later
settled and, as a condition of settlement, obtained a stipulated order from a
different judge vacating most of the trial judge’s decision, including the part
that contained the finding of Appellants’ unclean hands.
The second lawsuit is this one. Appellants sued Chicago Title, among
others, alleging they were induced to invest with Phan because Chicago
Title’s involvement in the transactions reassured them that Phan’s
investment scheme was “legitimate, sound, approved and entered freely into
by all concerned parties.” They sought to recover almost $9,000,000—their
investment principal plus accrued guaranteed monthly interest—as well as
punitive damages. Appellants have also sued more than 50 individuals who
allegedly received payments from Phan, asserting that they are Phan’s
creditors and the transfers of money to the individuals should be set aside.
3
Chicago Title moved for summary judgment based on its defense of
unclean hands, arguing in part that Appellants were collaterally estopped
from relitigating the earlier finding of their unclean hands in the Orange
County decision. The trial court in this case agreed the prior decision was
issue-preclusive and concluded Appellants were barred from any recovery. It
granted summary judgment for Chicago Title on this ground without
reaching alternative bases for summary judgment or summary adjudication
raised in Chicago Title’s motion. The individual respondents’ virtually
identical summary judgment motion was also granted on the basis of their
unclean hands defense. After entry of judgment, the court awarded Chicago
Title attorney fees of $943,250.
Appellants appeal both judgments and the award of attorney fees.
They contend the trial court erred in giving preclusive effect to the Orange
County decision because, they argue, none of the elements of issue preclusion
were satisfied and that equitable concerns militate against applying issue
preclusion in this instance. They argue the award of attorney fees was
grossly excessive and an abuse of discretion. Finding no merit to these
contentions, we affirm the judgments and the fee award.
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FACTUAL AND PROCEDURAL BACKGROUND2
I.
The Parties
Yazdani, the president and sole owner of Meridian, holds a Ph.D. in
economics from Stanford University. He is the principal of FMY Associates, a
financial and regulatory consulting firm, and in that capacity conducts due
diligence for clients in the electric industry. He is also a licensed real estate
broker and has been an active real estate investor, buying and selling
properties in over 160 real estate transactions, since the late 1990s.
Chicago Title provides escrow services for real estate transactions. Its
corporate sibling, non-party Chicago Title Insurance Company (CTIC), writes
title insurance for real property transactions.
Do was a Chicago Title escrow officer from 2009 to 2013. Phan was a
loan broker and a friend of Do’s who was never employed by Chicago Title.
II.
The Ponzi Scheme
Yazdani first met Do in February 2012 during an unrelated real estate
transaction in which Chicago Title served as the escrow holder. In March
2012, Do invited Yazdani to invest with Phan. Phan told Yazdani the
investment involved “buying gold from a gold mine” at “wholesale” in one
country and selling it at “retail” in another country. She said the investment
2 Because this is an appeal from a grant of summary judgment in favor of
Chicago Title, we examine the evidence de novo and “our account of the facts
is presented in the light most favorable to the nonmoving party below, in this
case [Appellants], and assumes that, for purposes of our analysis,
[Appellants’] version of all disputed facts is the correct one.” (Birschtein v.
New United Motor Manufacturing, Inc. (2001) 92 Cal.App.4th 994, 999;
accord Miller v. Department of Corrections (2005) 36 Cal.4th 446, 470.)
5
paid her an average return of 12 to 15 percent per month, and that she was
“very happy” to give her investors 5 or 6 percent per month, a return she said
was “guaranteed.”
Phan and Do did not give Yazdani any other information about the
nature or mechanics of the investment, or explain how it was possible to pay
investors a guaranteed return of 5 to 6 percent each month. Phan told
Yazdani the investment “is like an invention that her and her group came up
with and it was very successful.” She said the mechanics of the investment
had to be kept secret because no one else knew how to conduct the
transactions, and if she gave Yazdani the details, he “could become a
competitor and do the same thing that they were doing.” Phan and Do did
not tell Yazdani the countries where the gold was being purchased or sold, or
how the gold was being transported in and out of the countries.
Between March and April 2012, Yazdani had several meetings with
Phan and Do at various restaurants, which were sometimes joined by other
participants in Phan’s investment. During these meetings, Phan, Do and the
other investors touted the benefits of Phan’s investment. Do bragged about
how she and “everyone around her got rich off of this” investment. The
women showed off “[a]ll the cars, the jewelry . . . [and] $12,000 [Birkin] bags”
they had purchased with their wealth.
Yazdani initially declined to invest with Phan. He “didn’t know enough
details” and “couldn’t really judge whether it was a good investment or not,
whether it was safe or not.” However, in April 2012, he agreed to invest
$500,000 with Phan provided that he receive “real collateral” to secure his
investment. “They said, fine, we’ll give you Phan’s house as collateral.” So
Phan offered, and Yazdani accepted, a $500,000 promissory note secured by a
6
deed of trust on her personal residence. Title to the property was held in the
name of Phan’s husband, Hai Nguyen (Hai).
Two weeks before making the first investment with Phan, on March 24,
2012, Yazdani instructed Do to delete all of his emails from her Chicago Title
email account and to use a private email address “for their future
communications relating to the investment.” He felt the correspondence “had
become personal, not work related, and it was not appropriate to send
personal emails through work related email addresses.” In the email,
Yazdani told Do: “I wish you would delete the old emails, why risk it. I will
email the other address from now on.” Yazdani also did not conduct any due
diligence to determine the legality or legitimacy of the investment, including
researching the “concept of buying at [a] gold mine and transacting it by
moving it to another country.” He also never received any documentation
about the investment from Phan or Do.
To facilitate the investment transaction, Do opened an escrow account
with Chicago Title. Initially, Phan and Do “didn’t want it to go through
escrow” but Yazdani insisted that it go through a title company. In order to
complete the transaction, Yazdani executed and submitted to Chicago Title
“Lender’s Escrow Instructions” that identified Meridian as the “lender” and
Hai as the “borrower” of $500,000. Because it was represented to be a loan,
CTIC issued a policy of title insurance on the transaction.
Between April and December 2012, Yazdani made approximately 15
additional investments with Phan totaling about $3 million. As security for
these investments, Phan and Do gave Yazdani unsecured promissory notes.
During the same period, he received approximately $300,000 in investment
returns from Phan but did not receive “any kind of accounting or statements”
from Phan, or Do.
7
In December 2012, Yazdani invested another $900,000, consisting of a
$650,000 investment followed by a second $250,000 investment. Yazdani
demanded Phan and Do provide him with additional security, but told them
he was “becoming uncomfortable with investing based on these straight
notes” and he wanted “a secure type of investment.” “So [they] went back
and forth about that” until Phan said, “[m]y partners are willing to put up
their properties now.”
Phan then offered to secure Yazdani’s two investments with five
separate deeds of trust covering multiple parcels of real property located in
Southern California owned by third parties (the cross-collateralized loans).
According to Yazdani, he was told these individuals “were friends, family and
investors who would benefit from an expansion in the business, and so they
were such good friends with Phan, that they were willing to put up their
properties so that Phan can expand her business and Phan was also a co-
owner in one of the properties.”
In connection with the cross-collateralized loans, Yazdani again
executed and submitted to Chicago Title “Lender’s Escrow Instructions” that
identified Meridian as the “lender,” and the individual third-party
homeowners as “borrowers” of loan funds to be secured by the various parcels
of real property. Because they were again represented to be loans, CTIC
issued title insurance policies on the transactions.
Yazdani hired non-party PLM Loan Management Services (PLM) to
prepare loan documents for the transactions. He provided Phan’s residential
address to PLM as the mailing address to be used for each of the purported
borrowers whose properties were being used as collateral. He knew the
borrowers’ properties were “[p]robably” in Southern California, whereas
Phan’s residential address was in Northern California.
8
Yazdani also gave PLM his own personal email address as the email
address PLM should use to send all borrower documents. Yazdani explained
that Do told him to send all borrower documents to her, “so [he] asked PLM
to send the documents to [him] so [he] can forward to [Do at] Chicago Title.”
He did not have borrower documents sent directly to Do because he “wanted
to review the documents once before . . . send[ing] them over” to Do. And he
did “[b]riefly” review all borrower documents sent by PLM.
Yazdani never contacted any of the individuals putting up their
property as collateral for his investments. None of the purported borrowers
completed loan applications; he never asked them to do so. Despite receiving
all borrower documents at his personal email, Yazdani never sent truth-in-
lending documents to any of the purported borrowers. None of the purported
borrowers received any loan funds, and Yazdani admitted he had “no
expectation of money going to the borrowers.”
The purported borrowers in the cross-collateralized loans⎯Vincent Le,
Huyen Nguyen, Dan Nguyen, Trang Nguyen, John Vo, Lethu Nguyen,
Michelle Bui, and Lee Bui⎯never knew about the loans and never authorized
Phan to use their properties as security for Yazdani’s investments. They
were all first-generation immigrants from Vietnam who came to the United
States as adults, and were friends and family members of Phan who “knew
and trusted” her. Phan had either forged their signatures on powers of
attorney or duped them into signing powers of attorney on the pretense that
she was looking into refinancing their homes. With the powers of attorney,
Phan executed two promissory notes in favor of Meridian to secure Yazdani’s
investments, one for $650,000 on December 18, 2012 and another for
$250,000 on January 31, 2013. She collateralized the notes with deeds of
trust encumbering the homes of these unwitting individuals in favor of
9
Meridian. In some instances, Phan did not bother with the powers of
attorneys and simply forged their signatures on the necessary instruments.3
III.
The Ponzi Scheme Exposed
On January 23, 2013, Chicago Title received a report from one of its
employees that Do was conducting outside business within Chicago Title’s
offices. Until then, quarterly random audits of Do’s escrow files had turned
up no improprieties. On January 30, Chicago Title audited Do’s escrow files.
It discovered that Do had handled five escrow transactions in December 2012
involving Phan, in which all of the purported borrowers’ funds went to Phan,
and deeds of trust were recorded before the disbursement of any funds. The
audit also revealed that Do had notarized several of the purported borrowers’
signatures without them being present.
During its investigation, Chicago Title also learned that Do had
approached several other Chicago Title employees to invest with Phan. For
example, in late 2011, while having lunch with Do, Sherri Sweeney noticed
Do was carrying a large amount of cash in her purse, approximately $2,000 to
$3,000, and asked Do where she got the money. Do said the cash was from
an investment she was making through “a Vietnamese investment group
with [her] friend Anh.” Several months later in the office, Do asked Sweeney
if she was interested in investing with her Vietnamese group. She told
Sweeney: “My friend Anh buys gold bars outside of the country, maybe
Vietnam. And then she resells them on the black market.” Sweeney declined
3 These facts are as alleged in the Verified Cross-Complaint filed by Dan
Nguyen, Trang Nguyen, John Vo, Lethu Nguyen, Michelle Bui, and Lee Bui,
whom Appellants sued along with Chicago Title in the instant action from
which this appeal arises; they sought cancellation of the forged instruments
and to quiet title to their homes.
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to invest, telling Do, “it doesn’t sound right. . . . it sounds like something out
of [the] Madoff series, like a Ponzi scheme.” The investment scheme
reminded Sweeney of “Bernie Madoff” and “all the people that he duped.”
But Do laughed and said she wasn’t doing anything illegal. Sweeney believed
Do’s investments were personal and were being done outside of Chicago Title,
and since Do assured her they were legal, she did not inquire further.
On February 7, 2013, Do was forced to resign from Chicago Title after
being informed of the company’s findings of “inappropriate escrow
process[es].” Chicago Title referred the matter to the Santa Clara County
District Attorney, the Internal Revenue Services, and the California
Secretary of State for further investigation.
Within several days of her termination, Do left Yazdani a message
telling him that “ ‘[she] resigned’ ” from Chicago Title. A few days later,
Yazdani met Do at a beauty salon in someone’s home; there was a group of
five or six people present. Although “half the conversation was in
Vietnamese,” in English, Do told Yazdani she resigned because “there were
some irregularities in the signatures that were provided in association with
these two transactions,” presumably the December 18, 2012 $650,000 note
and the January 31, 2013 $250,000 note. Do told Yazdani “that she was not
present when the documents were signed, and she notarized the documents
afterwards” and “that was the reason for her departure.”
After learning there were signature “irregularities,” Yazdani called
Chicago Title, spoke to supervisor Kevin Chiarello, and offered to “reconvey
the deeds of trust to allow Chicago Title . . . to obtain proper deeds of trust,
with proper notarization.” The offer was not accepted. During this
conversation, Chiarello did not “warn [Yazdani] away from further contact
with Ms. Do, . . . never informed [him] about the Ponzi scheme,” and “did
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nothing to raise the flag of alarm about the multiple questioned
transactions.”
From April 2, 2013 to June 26, 2013, Yazdani invested another
$800,000 with Phan. In the months that followed, Phan’s gold investment
was exposed as a Ponzi scheme and it collapsed. She failed to return
Yazdani’s investment principal of $5,079,000, or pay the promised returns.
Phan and Do were convicted of several felony criminal offenses as a result of
the Ponzi scheme.
IV.
The Orange County Action
A. The Complaint
In September 2013, when he found himself unable to recover his
money, Yazdani began foreclosure proceedings against the properties
securing his investments, or the cross-collateralized loans. In October 2013,
to prevent foreclosure on their home, Vincent C. Le (Vincent) and Huyen
Dinh Nguyen (Huyen) filed an action in Orange County Superior Court
against Phan and her husband, Hai, and Appellants (the Orange County
action).4
4 The trial court granted Chicago Title’s unopposed request for judicial
notice of the complaint filed by Vincent and Huyen in the Orange County
action. On summary judgment review, we consider any evidence to which no
objection (or an unsound objection) was made and therefore may properly
consider the complaint. (Schmidt v. Citibank, N.A. (2018) 28 Cal.App.5th
1109, 1118.) The complaint was captioned Vincent Chi Le, et al. v. Hai Dinh
Nguyen, et al., Orange County Superior Court, Case No. 30-2013-00681756-
CU-OR-CJC. In addition to Hai, Phan, and Appellants, named defendants in
the Orange County action included Chicago Title, PLM, and other
individuals.
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Vincent and Huyen requested, among other relief, an injunction to stop
Meridian from foreclosing on their home. They also sought to quiet title to
their property as against Phan, Hai, and Appellants and in this regard
requested “a specific judicial declaration that [the cross-collateralized loans]
were . . . null and void from their inception, having been obtained . . . through
a series of secret fraudulent actions that would never have occurred had
[Appellants] exercised due care, or even any care, in terms of a lender’s
responsibilities under the relevant circumstances.”
B. Statement of Decision and Judgment After Trial
In April 2017, Vincent and Huyen’s claims against Appellants were
tried in a bench trial before Judge David T. McEachen. On April 19, 2017,
Judge McEachen issued a 14-page “Statement of Decision and Judgment”
(the statement of decision). As this statement of decision is central to this
appeal, we describe it in detail.
Judge McEachen noted that both sides presented evidence, witnesses
and submitted proposed statements of decisions in lieu of final argument over
two days of trial, on April 4 and April 5, 2017.
In the first three pages of the statement of decision, Judge McEachen
evaluated Vincent and Huyen’s default prove-up on their quiet title claim
against Phan and Hai. He found that Vincent, a bus driver, and Huyen, an
employee for Hyundai, were immigrants from Vietnam. They bought their
first and only home in 1998. Hai is Huyen’s brother and Phan is Huyen’s
sister-in-law. Both Vincent and Huyen “looked up to Hai and Phan as the
wealthiest and most successful members” of their family. Phan helped them
buy the home and arranged two refinances of the property. Although Vincent
and Huyen bought their home in their own name, Hai and Phan “wound up
on title as joint tenants” twice, the first time in 1999 a year after the initial
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purchase and the second time during a 2003 refinance. “Vincent and Huyen
signed the deeds due to their trust in their wealthy and sophisticated sister-
in-law [Phan].” Judge McEachen concluded that “[d]espite the manner title
was held,” Vincent and Huyen were the sole owners of the property and
quieted title in their favor and removed Hai and Phan from title.
In the next 11 pages of the statement of decision, Judge McEachen
made factual findings as to the trial evidence relating to Vincent and Huyen’s
claims against Appellants. The evidence, as summarized by Judge
McEachen, related to Phan’s investment scheme (in which Huyen had also
participated) and the sequence of events by which Yazdani came to invest
and then participate in the securitization of his investments, including with
the promissory note and deed of trust recorded in Meridian’s favor on Vincent
and Huyen’s home. Judge McEachen found, among other facts, the following:
“Yazdani is a sophisticated real estate investor” with a Ph.D. in
economics from Stanford, who “has been working in real estate ‘flipping’
houses for years,” including approximately 140 houses between 2010 and
2014. “Despite this level of sophistication, Yazdani did very little due
diligence before choosing to invest with Phan.” Although “[n]either Phan nor
Do had any expertise in commodities,” “Yazdani appeared to have no interest
in vetting the investment and simply trusted that an escrow officer . . . and a
real estate broker . . . were operating a legitimate gold commodities trading
business.”
Yazdani “insisted that Phan provide him with a trust deed on her
home” to secure his initial $500,000 investment, which was accompanied by
“a promissory note which indicated that Yazdani would be paid 10% per
month on his investment. Thus, he disguised his investment as a ‘loan.’ ”
“Before accepting the trust deed, Yazdani did his due diligence on the
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property. Through Zillow, he determined the property’s approximate value.
He also determined the number of bedrooms and confirmed it was Phan’s
personal residence.”
Phan asked Yazdani to make an additional $650,000 investment in
December 2012. “Curiously, unlike the $2.5 million prior unsecured
investment he made (only $500,000 of the $3 million was secured by the trust
deed on Phan’s home) just few months earlier, Yazdani was now insisting on
security in the form of trust deeds recorded against real property.” “Yazdani
claims that Phan promised that friends and relatives in Southern California
would agree to put up their property as collateral for this additional
investment. Yazdani did nothing to verify this.”
“Yazdani contracted with PLM . . . to draft loan documents” and
“personally completed the application and transmitted it to PLM.” “The
application expressly included a box for where the borrower’s loan documents
should be sent. He instructed PLM that the loan documents should not be
sent to the borrowers, but should instead be sent to his own email address[.]”
“This assured that the purported borrowers would have no notice of the trust
deeds.”
“Yazdani did no due diligence on any of the borrowers. He never
contacted the borrowers. He incorrectly stated on the application that the
homes were not owner occupied (and did nothing to verify whether this was
true or not). He provided a mailing address for the borrowers of Phan’s
personal residence despite knowing that none of the borrowers lived there
(even Phan stated they lived in Southern California). None of the borrowers
completed a loan application. And, most tellingly, he failed to secure the
borrower’s signature and telephone number on the application he completed
with PLM.” “Yazdani admitted that none of the borrowers would be receiving
15
the loan funds and could establish no logical reason why these people should
be putting their properties at risk.”
Yazdani received loan documents from PLM, which included a note and
deed of trust, first payment letter with a first payment due January 18, 2013,
loan escrow addendum (with no source of repayment indicated), fire
insurance authorization, address and phone number certification (never
completed by the borrowers), a declaration of non-owner occupancy
(indicating Phan’s home as the principal residence for all 8 borrowers), and a
declaration of loan purpose and nature of the security (with no information
provided). Judge McEachen found that a “cursory examination of the
signatures on all the documents shows to a layman that they were all signed
by the same person − the handwriting is identical.”
“Yazdani purportedly invested another $250,000 with Phan on January
30, 2013. The actions he took with respect to the first note and deed of trust
(failure to do any due diligence, having loan documents sent to him, ignoring
. . . obviously forged signatures, listing Phan’s home as the borrower’s
personal residence[,] etc.) were repeated with this second ‘loan’ ” and “[t]he
only differences between the first and second loan are the loan amount and
the fact that only two properties were encumbered for this smaller dollar
loan.”
Vincent and “Huyen’s first notice of the [Meridian deeds of trust] was
when [Huyen] received a packet of materials from Chicago Title in mid to late
February 2013,” and “included information pertaining only to the $250,000
loan, not the December 2012 $650,000 loan.” On February 8, 2013, Phan flew
down to Orange County “with no notice” and “told Vincent and Huyen that
they had forgotten to sign the notary book for their 2010 refinance.” So,
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“Vincent and Huyen signed the book with no indication of what document
they were attesting to having signed.”
After making these factual findings, Judge McEachen proceeded to
decide 13 controverted issues. In the first seven issues, Judge McEachen
concluded the Meridian deeds of trust recorded against Vincent and Huyen’s
home were “forged,” and Vincent and Huyen did not authorize Phan, Hai, or
Do to sign their signatures on the Meridian deeds of trust and the related
loan documents. Judge McEachen also concluded that Vincent and Huyen
were not estopped or barred from challenging the Meridian deeds of trust by
the doctrine of unclean hands, finding that there was no evidence of any
misconduct on their part. In the tenth issue, Judge McEachen concluded the
Meridian deeds of trust should be cancelled pursuant to Civil Code section
3412 because the instruments were forgeries.5 In the twelfth issue, Judge
McEachen ruled that title to Vincent and Huyen’s home should be quieted in
their favor “by cancellation or otherwise invalidating the Meridian [deeds of
trust]” due to the forgeries.
In concluding title should be quieted in Vincent and Huyen’s favor,
Judge McEachen ruled that “Meridian/Yazdani’s unclean hands also mandate
this remedy.” Judge McEachen reasoned that: “Though unclean hands is an
affirmative defense, in this case the suit is seeking to bar the affirmative
claim of Meridian seeking to foreclose on [Vincent and Huyen’s] property.
Thus, though Plaintiffs initiated this suit and there is no cross-complaint, the
suit was precipitated by a notice of default seeking to foreclose on [their]
5 Civil Code section 3412 provides: “A written instrument, in respect to
which there is a reasonable apprehension that if left outstanding it may
cause serious injury to a person against whom it is void or voidable, may,
upon his application, be so adjudged, and ordered to be delivered up or
canceled.”
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property. Thus plaintiffs are in fact in the defensive posture. They can
assert unclean hands to bar the foreclosure initiated by Meridian. They seek
injunctive relief and the court enjoins Meridian from foreclosing on the . . .
property and quiet title by cancelling the trust deeds.”
Judge McEachen found: “Meridian/Yazdani’s unclean hands in
procuring the trust deed and other loan documents mandate that the trust
deed be cancelled. Meridian took affirmative steps to prevent Plaintiffs from
having notice of the purported loans/trust deeds. Rather than having the
loan documents sent to the borrowers, Meridian had the documents sent to
Yazdani. Yazdani had the mailing address and principal residence of the
Plaintiffs and the other purported borrowers listed as Phan’s home even
though he knew the house did not hold eight couples and with knowledge
from Phan that the purported borrowers lived in Southern California.”
Further, “Yazdani made no effort to have the loan documents completed, to
review the loan documents or determine [the] source of repayment. If he had
even looked at the loan documents he would have seen [the] missing
signatures and information. To the extent there were signatures, a layman
could see that the eight signatures of the purported borrowers were all in the
same handwriting. He did not look to the Plaintiffs as borrowers as he never
sent out a payment letter or attempted to foreclose when no payment was
received. Throughout this, he also knew that the loan proceeds were not
going to any of the purported borrowers. Yazdani allowed the Plaintiffs to be
defrauded by his willful ignorance.”
Judge McEachen concluded the statement of decision by ordering title
to Vincent and Huyen’s home quieted against Phan, Hai, and Appellants, and
cancelled the Meridian deeds of trust. Judge McEachen then signed the
statement of decision.
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C. Stipulated Order Vacating Portions of Statement of Decision and
Judgment
Shortly after Judge McEachen issued the statement of decision,
Appellants filed a “Motion to Vacate and Set Aside the Judgment under Code
of Civil Procedure section 663,” which was set for hearing on June 23, 2017
before Judge McEachen. However on June 7, 2017, Vincent, Huyen, and
Appellants settled their dispute and submitted a “Stipulation for Order
Vacating Portions of Statement of Decision and Judgment” (the stipulated
order for vacatur) to Judge William M. Monroe.
The parties stipulated “for an order vacating portions of the Court’s
April 19, 2017 Statement of Decision and Judgment,” and set forth the
following recitals:
“WHEREAS, Meridian and Yazdani have a pending motion to vacate
judgment set for hearing on June 23, 2017;
“WHEREAS, in recognition of the substantial expense and time
involved in litigation (including post-trial motion and appellate expenses),
and to conserve judicial resources, [the parties] have agreed to settle and
resolve finally and completely any and all issues and claims between them.
As a contingent condition of the settlement, the Parties request that the
Court vacate the portions [of] its Statement of Decision and Judgment
concerning Huyen and Vincent’s claims against Meridian and Yazdani.”
Specifically, the parties agreed the court enter an order vacating “Page
3, line 9 through page 14, line 10” while “[t]he remainder of the Statement of
Decision and Judgment shall remain in full force and effect.” The parties
stipulated the order would be “pursuant to [the court’s] powers, and for good
cause” but provided no further explanation of the good cause.
The parties provided a proposed order, which Judge Monroe signed on
June 7, 2017. The order stated in its entirety: “The foregoing stipulation
19
having been duly considered by the Court, and good cause showing
therefrom, [¶] GOOD CAUSE APPEARING, IT IS THEREFORE ORDERED:
“1. The following portions of the Court’s Statement of Decision and
Judgment, entered on April 19, 2017, are vacated: Page 3, line 9 through
page 14, line 10.
“2. The remainder of the Statement of Decision and Judgment shall
remain in full force and effect.”
Page 3, line 9 through page 14, line 10 of the statement of decision (i.e.,
the portions vacated by the stipulated order) comprised the entire 11-page
discussion in which Judge McEachen had set forth his factual findings and
decisions on the controverted issues relating to Vincent and Huyen’s claims
against Appellants, including his finding of their unclean hands. What
remained intact following the vacatur was the first three pages of the
decision, ending with the statement “[t]he sole parties presently on title are
Vincent and Huyen,” and Judge McEachen’s signature at the end of the
decision. Thus, the parties removed the rationale of Judge McEachen’s
decision but left intact the result—the quieting of Vincent and Huyen’s title
to their home.
V.
The Santa Clara Action
A. The Complaint
On October 22, 2013, Appellants filed the current action in Santa Clara
County Superior Court. The named defendants in their operative third
amended complaint (the complaint) include Chicago Title, Phan, Do, and over
50 other individual defendants. As to Chicago Title, Appellants asserted
causes of action for fraud, fraud in the inducement, negligent
misrepresentation, violation of the Unfair Business Practices Act, escrow
20
negligence, negligent supervision (of Do), breach of fiduciary duty, and breach
of written contract.
Appellants alleged they had invested the aggregate principle of
$5,079,000 with Phan, and with reinvested “profits” the total investment
amount was $9,140,417. However, Phan’s “gold investment vehicle” turned
out to be “nothing more than an illegitimate and illegal scheme . . . designed
to dupe investors.” Chicago Title was liable to Appellants, they alleged,
because Yazdani “was reassured by the involvement” of Chicago Title and its
escrow officer and notary, Do, and “that the investments he and M[eridian]
were entering into were legitimate, sound, approved and entered freely into
by all concerned parties, including the individuals who were providing
security for the investments.” “By virtue of C[hicago] T[itle’s] involvement,
and the security and assurances provided by its escrow officer and notary,
D[o], Plaintiffs not only were induced to make their initial investments with
P[han], but all of the follow-up investments ultimately made, including those
investments for which real property security and promissory notes were not
obtained.” Appellants sought, among other relief, compensatory damages of
“not less than $8,900,000” as well as punitive damages against Chicago Title.
The more than 50 individual defendants were named in a single cause
of action pursuant to the Uniform Fraudulent Transfer Act (UFTA), Civil
Code sections 3439, et seq. (now the Uniform Voidable Transactions Act).6
Appellants alleged they were creditors of Do and Phan, that the individuals
had received payments from Do and Phan that were made with the intent to
6 “[T]he Uniform Voidable Transactions Act (Civ. Code, § 3439 et seq.)
permits a defrauded creditor to reach property that has been fraudulently
transferred by a judgment debtor to a third party.” (Voris v. Lampert (2019)
7 Cal.5th 1141, 1160, fn. 14.)
21
defraud Appellants, and that these payments should therefore be set aside.
Three of these individuals, Jodie Nguyen, Diana Tran, and Jeannie Vuong
(the UFTA defendants) are respondents in this appeal.
Chicago Title and the UFTA defendants separately filed answers to the
complaint asserting, among other defenses, the affirmative defense of
unclean hands.
B. Summary Judgment Motions
On September 24, 2018, Chicago Title moved for summary judgment, or
alternatively, summary adjudication of all causes of action alleged against it
and the request for punitive damages. Chicago Title argued that unclean
hands was a complete defense to all causes of action and sought to establish
the defense on two independent grounds. First, it argued the court in the
Orange County action had already determined that Appellants acted with
unclean hands in connection with the transactions at issue and Appellants
were collaterally estopped from relitigating their unclean hands in this
action. Second, Chicago Title argued the undisputed material facts
separately established that Appellants acted with unclean hands.
Alternatively, Chicago Title sought summary adjudication that Do’s alleged
wrongful acts were outside the course and scope of her employment, that it
did not ratify any of Do’s alleged acts, and that there was no basis for
punitive damages.
In support of collateral estoppel, Chicago Title requested the Santa
Clara court take judicial notice of the complaint in the Orange County action,
as well as the statement of decision, the UFTA defendants’ cross-complaint,
and the stipulated order for vacatur.7 Chicago Title acknowledged that the
7 The trial court granted Chicago Title’s request for judicial notice of
these documents in the Orange County action.
22
part of the statement of decision that contained Judge McEachen’s finding of
Appellants’ unclean hands had been vacated by the stipulated order for
vacatur. However, it argued that issue preclusion can apply to a judgment
vacated pursuant to a settlement.
In opposing the motion, Appellants argued the Santa Clara court could
not give preclusive effect to Judge McEachen’s finding that Appellants acted
with unclean hands, for numerous reasons. First, it asserted that Judge
McEachen failed to comply with Code of Civil Procedure section 632 by first
issuing a “tentative” decision,8 and therefore, regardless of its name (“a
Statement of Decision and Judgment”), the statement of decision was not, as
a matter of law, a “final” judgment and therefore has no preclusive effect.
Rather, the statement of decision was “revised” and only became final when
the Orange County court entered the stipulated order for vacatur, striking all
of the findings related to Appellants’ unclean hands. Thus, Appellants
argued “[t]he revised Statement of Decision, with the adverse findings
stricken, is the only citable judgment, and it is immaterial to any issue here
except to prove that the falsified deeds of trust . . . were forged and
fraudulent.”
Second, Appellants argued the question of their unclean hands was
“not properly before the Orange County court” because “[u]nclean hands is a
defense, and may only be found against a plaintiff seeking relief in court,” not
8 Appellants, however, did not seek judicial notice of any records from
the Orange County action establishing the truth of this assertion. Indeed,
Appellants objected to Chicago Title’s supplemental request that the trial
court take judicial notice of the Register of Actions for the Orange County
action, which Chicago Title filed late with its reply brief in support of its
summary judgment motion. The trial court denied Chicago Title’s
supplemental request for judicial notice as “essentially an attempt to
introduce new evidence on reply.”
23
“against a defendant who is not voluntarily in court.” Appellants also argued
the finding of unclean hands was not a “ ‘necessarily decided’ ” issue because
the court already found the Meridian deeds of trust unenforceable based on
the forgeries.
Third, Appellants argued the unclean hands finding was “[i]rrelevant”
to any “unclean hands against [Chicago Title]” because they “relate[d] to
Meridian’s ‘procuring the trust deed and other loan documents,’ ” including
“the alleged failure to notify the borrowers of the loan and failure to send
them the loan documents.” They argued their wrongful conduct as described
in Judge McEachen’s findings did not cause Chicago Title to fail to follow a
provision in the escrow instructions requiring it to obtain bona fide
signatures on loan documents.
The UFTA defendants filed a similar summary judgment motion in
which they also sought judgment based on their unclean hands defense and,
like Chicago Title, they sought to establish the defense by way of collateral
estoppel, based on the decision in the Orange County action, and separately
as a matter of undisputed material fact.
C. Trial Court Order Granting Summary Judgment on Issue Preclusion
Grounds
On December 17, 2018, after a hearing, the trial court issued an order
granting summary judgment in favor of Chicago Title and the UFTA
defendants. The court found the decision in the Orange County action met
all of the elements of issue preclusion with regards to the application of the
unclean hands doctrine and concluded Appellant’s unclean hands barred any
recovery.
On the first requirement⎯that the issue sought to be precluded from
relitigation must be identical to that decided in the former proceeding⎯the
trial court found that: “Chicago Title presents evidence the Orange County
24
action concerned loans made as part of the overall investment scheme
perpetrated by Phan and Do. Yazdani began foreclosure proceedings against
the properties securing those loans, and two of the purported borrowers filed
suit against Yazdani and Meridian . . . to clear title to their property because
of forged deeds. The facts giving rise to the Orange County action are the
same facts underlying this case. . . . This is essentially undisputed by
Plaintiffs. Therefore, the identical issue requirement is met.” (Italics added.)
On the second requirement⎯that the issue must have been actually
litigated in the former proceeding⎯the trial court focused on whether
Appellants had an opportunity to litigate the unclean hands issue in the
Orange County action. It found that Appellants did. The court noted that
Appellants “do not dispute” that they “had the opportunity to litigate the
issues before the court,” rather they argued “the question of unclean hands
was not properly before the Orange County court because unclean hands is
an affirmative defense and therefore can only be used against a plaintiff.”
(Italics added.) The court agreed with Judge McEachen’s reasoning that the
Orange County plaintiffs were in a “defensive posture” because they sought
to bar Meridian’s affirmative attempt to foreclose on their home, and thus the
unclean hands doctrine could be asserted against Appellants. The trial court
also found “there has never been a finding of any defect in Judge McEachen’s
original Statement of Decision and Judgment,” since Appellants “sought to
eliminate harmful portions of the Judgment through a settlement” rather
than “wait[ ] for a ruling on their Motion to Set Aside the Judgment.”
As to the third requirement⎯that the issue must have been necessarily
decided in the former proceeding⎯the trial court found Judge McEachen
“specifically held unclean hands was a basis for the decision and that it
25
mandated the remedy of cancellation of the deeds of trust” and “[t]herefore, it
must be considered ‘necessary’ to the decision.”
As to the fourth requirement⎯the decision in the former proceeding
must be final and on the merits⎯the trial court noted this was the “most
hotly contested by [Appellants].” The court rejected Appellants’ argument
that Judge McEachen’s statement of decision was “a tentative decision.” It
ruled that the deleted portions of the decision could be considered “final”
notwithstanding the vacatur. It reasoned that under Stonewall Ins. Co. v.
City of Palos Verdes Estates (1996) 46 Cal.App.4th 1810 (Stonewall) and
Sandoval v. Superior Court (1983) 140 Cal.App.3d 932 (Sandoval),
“stipulating to remove language from an adverse judgment does not allow a
party to escape the collateral estoppel effect of the adverse ruling.” Further,
the parties’ stipulation that the decision would “ ‘remain in full force and
effect’ ” was an acknowledgement of the decision’s finality. It rejected
Appellants’ effort to attack the decision as procedurally or substantively
flawed, reasoning that there had “never been a finding of any defect in Judge
McEachen’s original Statement of Decision and Judgment” and that
Appellants had waived the right to attack its merits by eliminating parts of it
by settlement rather than await a ruling on their motion to vacate or pursue
appeal.
Finally, the trial court addressed, and rejected, Appellants’ argument
that Judge McEachen’s unclean hands finding was “[i]rrelevant” to Chicago
Title’s unclean hands defense because they only “relate[d] to Meridian’s
‘procuring the trust deed and other loan documents,’ ” including “the alleged
failure to notify the borrowers of the loan and failure to send them the loan
documents.” The court found “the conduct underlying the Orange County
court’s unclean hands finding relied on essentially the same evidence
26
presented in this case,” both actions “directly relate to the fraudulent scheme
perpetrated by Phan and Do” and both cases “relate directly to the same
transaction.” The court stated that “by its nature, a Ponzi scheme relies on a
pyramid of transactions that are necessarily connected. The transactions
analyzed in the Orange County action were integral to the Ponzi scheme, and
therefore involved the same subject matter as those raised in this action.”
Finding all the elements of issue preclusion had been met for
application of the unclean hands defense, the trial court ruled Appellants
were precluded from any recovery and granted summary judgment in favor of
Chicago Title and the UFTA defendants. It did not reach the merits of the
parties’ remaining arguments for summary judgment or summary
adjudication. On January 3, 2019, the court entered a judgment in favor of
Chicago Title and a judgment in favor of the UFTA defendants. Appellants
appealed both judgments. Thereafter, the court awarded Chicago Title
$943,250 in attorney fees based on a prevailing party fee provision in the
lender’s escrow instructions signed by Yazdani. Appellants also appealed
this order.
DISCUSSION
I.
Governing Legal Principles
A. Standard of Review
Summary judgment is appropriately granted when the moving party
establishes there is no triable issue of material fact and that it is entitled to
judgment as a matter of law. (Aguilar v. Atlantic Richfield Company (2001)
25 Cal.4th 826, 850 (Aguilar).) A triable issue of material fact exists only if
“the evidence would allow a reasonable trier of fact to find the underlying fact
27
in favor of the party opposing the motion in accordance with the applicable
standard of proof.” (Ibid.)
When a defendant moves for summary judgment, the defendant has the
initial burden of presenting evidence sufficient to establish either that the
plaintiffs cannot prove one or more elements of their causes of action, or that
there is a complete defense. (Code Civ. Proc., § 437c, subd. (p)(2); Aguilar,
supra, 25 Cal.4th at p. 853.) If the defendant does so, the burden then shifts
to the plaintiffs to produce admissible evidence demonstrating that there is a
triable issue of material fact as to the claim or defense. (Code Civ. Proc.,
§ 437c, subd. (p)(2); Aguilar, at p. 850.) Theories that are not supported by
evidence will not raise a triable issue. (Sangster v. Paetkau (1998) 68
Cal.App.4th 151, 163, 166 (Sangster) [“bare assertion” that the moving
parties “ ‘fabricated’ ” evidence insufficient to avoid summary judgment].)
A trial court’s decision to grant summary judgment is reviewed de novo.
(Yanowitz v. L’Oreal USA, Inc. (2005) 36 Cal.4th 1028, 1037.) “We liberally
construe the evidence in support of the party opposing summary judgment
and resolve doubts concerning the evidence in favor of that party.” (Ibid.)
Appellate review of a trial court’s application of the doctrine of issue
preclusion (the preferred term for collateral estoppel) is also de novo. (Union
Pacific Railroad Co. v. Santa Fe Pacific Pipelines, Inc. (2014) 231 Cal.App.4th
134, 156.)
“ ‘[A]lthough we use a de novo standard of review here, we do not
transform into a trial court.’ ” (Dinslage v. City and County of San Francisco
(2016) 5 Cal.App.5th 368, 379 (Dinslage).) We approach a summary
judgment appeal, as with any appeal, with the presumption the appealed
judgment is correct. (Denham v. Superior Court (1970) 2 Cal.3d 557, 564.)
Therefore, “ ‘ “[o]n review of a summary judgment, the appellant has the
28
burden of showing error, even if he did not bear the burden in the trial
court.” ’ ” (Dinslage, supra, 5 Cal.App.5th at p. 379.)
“ ‘Generally, the rules relating to the scope of appellate review apply to
appellate review of summary judgments.’ ” (DiCola v. White Brothers
Performance Products, Inc. (2008) 158 Cal.App.4th 666, 676 (DiCola).)
Because it is the Appellants’ burden to affirmatively demonstrate error, they
must provide citations to the appellate record directing the court to the
evidence supporting each factual assertion. (Cal. Rules of Court, rule
8.204(a)(1)(C); Bernard v. Hartford Fire Ins. Co. (1991) 226 Cal.App.3d 1203,
1205 [“It is the duty of a party to support the arguments in its briefs by
appropriate reference to the record, which includes providing exact page
citations.”].) The parties to an appeal may not refer to matters outside the
record on appeal. (Cal. Rules of Court, rule 8.204(a)(2)(C); Banning v.
Newdow (2004) 119 Cal.App.4th 438, 453, fn. 6.) The reviewing court is not
required to develop the parties’ arguments or search the record for supporting
evidence and may instead treat arguments that are not developed or
supported by adequate citations to the record as waived. (ComputerXpress,
Inc. v. Jackson (2001) 93 Cal.App.4th 993, 1011.) “ ‘ “ ‘In other words, review
is limited to issues which have been adequately raised and briefed.’ ” ’ ”
(Dinslage, supra, 5 Cal.App.5th at p. 379.)
B. The Doctrine of Unclean Hands
“The defense of unclean hands arises from the maxim, ‘ “ ‘He who
comes into Equity must come with clean hands.’ ” ’ [Citation.] The doctrine
demands that a plaintiff act fairly in the matter for which he seeks a remedy.
He must come into court with clean hands, and keep them clean, or he will be
denied relief, regardless of the merits of his claim.” (Kendall-Jackson Winery,
Ltd. v. Superior Court (1999) 76 Cal.App.4th 970, 978 (Kendall-Jackson).)
29
“The defense is available in legal as well as equitable actions.”
(Kendall-Jackson, supra, 76 Cal.App.4th at p. 978.) However, “the unclean
hands doctrine is not a legal or technical defense to be used as a shield
against a particular element of a cause of action. Rather, it is an equitable
rationale for refusing a plaintiff relief where principles of fairness dictate
that the plaintiff should not recover, regardless of the merits of his claim. It
is available to protect the court from having its powers used to bring about an
inequitable result in the litigation before it.” (Id. at p. 985.) “The doctrine
promotes justice by making a plaintiff answer for his own misconduct in the
action. It prevents ‘a wrongdoer from enjoying the fruits of his
transgression.’ ” (Id. at p. 978.)
“Not every wrongful act constitutes unclean hands. But, the
misconduct need not be a crime or an actionable tort. Any conduct that
violates conscience, or good faith, or other equitable standards of conduct is
sufficient cause to invoke the doctrine.” (Kendall-Jackson, supra, 76
Cal.App.4th at p. 979; see Degarmo v. Goldman (1942) 19 Cal.2d 755, 764
[“Any unconscientious conduct upon his part which is connected with the
controversy will repel him from the forum whose very foundation is good
conscience. [Citation.] Nor will equity aid him who is guilty of breach of
contract connected with the transaction concerning which he asks for a
decree in his favor.”].)
The misconduct must also “ ‘ “ ‘prejudicially affect . . . the rights of the
person against whom the relief is sought so that it would be inequitable to
grant such relief.’ ” ’ ” (Kendall-Jackson, supra, 76 Cal.App.4th at p. 979.)
“The misconduct which brings the clean hands doctrine into operation must
relate directly to the transaction concerning which the complaint is made,
i.e., it must pertain to the very subject matter involved and affect the
30
equitable relations between the litigants.” (Fibreboard Paper Prods. Corp. v.
East Bay Union of Machinists (1964) 227 Cal.App.2d 675, 728.)
The determination of whether the unclean hands defense applies
“cannot be distorted into a proceeding to try the general morals of the
parties.” (Kendall-Jackson, supra, 76 Cal.App.4th at p. 979.) “The issue is
not that the plaintiff’s hands are dirty, but rather ‘ “ ‘that the manner of
dirtying renders inequitable the assertion of such rights against the
defendant.’ ” ’ ” (Mattco Forge, Inc. v. Arthur Young & Co. (1997) 52
Cal.App.4th 820, 846.) Under the doctrine of unclean hands, “any evidence of
a plaintiff’s unclean hands in relation to the transaction before the court or
which affects the equitable relations between the litigants in the matter
before the court should be available to enable the court to effect a fair result
in the litigation.” (Kendall-Jackson, at p. 985.)
C. The Law of Issue Preclusion
“The law of preclusion helps to ensure that a dispute resolved in one
case is not relitigated in a later case. Although the doctrine has ancient roots
[citation], its contours and associated terminology have evolved over time.
We now refer to ‘claim preclusion’ rather than ‘res judicata’ [citation], and use
‘issue preclusion’ in place of ‘direct or collateral estoppel’ [citations].”
(Samara v. Matar (2018) 5 Cal.5th 322, 326 (Samara).)
“Claim and issue preclusion have different requirements and effects.”
(Samara, supra, 5 Cal.5th at p. 326.) “Claim preclusion ‘prevents relitigation
of the same cause of action in a second suit between the same parties or
parties in privity with them.’ ” (DKN Holdings LLC v. Faerber (2015) 61
Cal.4th 813, 824 (DKN Holdings).) “Claim preclusion arises if a second suit
involves (1) the same cause of action (2) between the same parties (3) after a
final judgment on the merits in the first suit.” (Ibid.)
31
“Issue preclusion prohibits the relitigation of issues argued and decided
in a previous case, even if the second suit raises different causes of action.
[Citation.] Under issue preclusion, the prior judgment conclusively resolves
an issue actually litigated and determined in the first action.” (DKN
Holdings, supra, 61 Cal.4th at p. 824.) “[I]ssue preclusion applies (1) after
final adjudication (2) of an identical issue (3) actually litigated and
necessarily decided in the first suit and (4) asserted against one who was a
party in the first suit or one in privity with that party.” (Id. at p. 825.)
Even if these threshold requirements are satisfied, courts may consider
the public policies underlying issue preclusion in determining whether the
doctrine should be applied. (Murray v. Alaska Airlines (2010) 50 Cal.4th 860,
879 (Murray).) These policies include “conserving judicial resources and
promoting judicial economy by minimizing repetitive litigation, preventing
inconsistent judgments which undermine the integrity of the judicial system,
and avoiding the harassment of parties through repeated litigation.” (Ibid.)
On appeal, Appellants raise challenges to the first three elements for
application of issue preclusion⎯finality, identical issue, necessarily
decided⎯and assert that public policy does not support giving Judge
McEachen’s unclean hands finding preclusive effect in this case. We address
each of Appellants’ contentions in turn and conclude none has merit.9
9 On April 1, 2020, Chicago Title filed an unopposed motion seeking
judicial notice of (1) the April 19, 2017 statement of decision and (2) the June
7, 2017 stipulated order for vacatur, entered in the Orange County action.
The trial court took judicial notice of these court records when it ruled on the
summary judgment motions. (Evid. Code, §§ 452, subd. (d)(1) [providing that
a court may in its discretion take judicial notice of records of any court of this
state], 459, subd. (a)(2) [providing that a reviewing court may take judicial
notice of any matter the trial court has properly judicially noticed or should
have judicially noticed].) Accordingly, this motion for judicial notice is
granted.
32
II.
Trial Court Did Not Err in Giving Preclusive Effect to the Unclean Hands
Finding and Granting Summary Judgment
A. Finality
Appellants’ first challenge is to the requirement of finality. Appellants
argue the trial court erred in giving preclusive effect to Judge McEachen’s
statement of decision and judgment because it was not a final decision having
been partly vacated as a condition of settlement. However, they do not cite
legal authority demonstrating that finality in this context is lacking.
Instead, they argue that cases relied on by the trial court in its order
granting summary judgment (Sandoval, supra, 140 Cal.App.3d 932 and
Stonewall, supra, 46 Cal.App.4th 1810) and cases additionally relied on by
Chicago Title in its motion for summary judgment (City of Laguna Beach v.
Mead Reinsurance Corp. (1990) 226 Cal.App.3d 822 (City of Laguna Beach)
and Norman I. Krug Real Estate Investments, Inc. v. Praszker (1994) 22
Cal.App.4th 1814 (Norman I. Krug)) are distinguishable from the
circumstances present here. They also contend that the decision in the
Orange County action lacked finality because it was never appealed. We
reject Appellants’ contentions and conclude that the decision satisfied the
requirement of finality for purposes of issue preclusion.10
10 In their opening brief on appeal, Appellants assert that Judge
McEachen failed to issue a tentative decision or tentative statement of
decision before issuing the statement of decision, but they fail to cite
anything in the record demonstrating that this assertion is true. They also
assert that Judge Monroe entered the stipulated order based on a finding
that Judge McEachen’s decision was erroneous, another assertion that lacks
record support (and Appellants’ counsel conceded at oral argument that the
record does not bear out this contention). Because these points are
unsupported by the record on appeal, we need not and do not consider them.
(Kim v. Sumitomo Bank (1993) 17 Cal.App.4th 974, 979.) On August 18,
33
California follows section 13 of the second Restatement of Judgments,
which addresses the finality requirement as it pertains to issue preclusion.
(See Sandoval, supra, 140 Cal.App.3d at p. 936.) Section 13 states that “[t]he
2020, the same date they filed their reply brief on appeal, Appellants filed a
motion with this court seeking judicial notice pursuant to Evidence Code
sections 452 and 459 of (1) a request for statement of decision filed on April 4,
2017 on behalf of Yazdani and Meridian in the Orange County action; (2) a
motion to vacate statement of decision and judgment filed on May 4, 2017 on
behalf of Yazdani and Meridian in the Orange County action; and (3) a
minute order entered on June 7, 2017 relating to an “Ex-Parte Application for
an Order Vacating Portions of the Statement of Decision and Judgment”
reciting that the court (Judge Monroe) had “fully considered the arguments of
all parties” and ruling that the “Ex-Parte Application for an Order Vacating
Portions of the Statement of Decision and Judgment” was “granted as
requested.” Chicago Title has opposed the request. We deny the motion
insofar as it seeks judicial notice of the foregoing documents. “An appellate
court may properly decline to take judicial notice under Evidence Code
sections 452 and 459 of a matter which should have been presented to the
trial court for its consideration in the first instance.” (Brosterhous v. State
Bar (1995) 12 Cal.4th 315, 325–326 .) Moreover, an appellate court “may
decline to take judicial notice of matters not relevant to dispositive issues on
appeal.” (Guarantee Forklift, Inc. v. Capacity of Texas, Inc. (2017) 11
Cal.App.5th 1066, 1075 (Guarantee Forklift).) Appellants did not present
these records to the trial court in connection with their opposition to the
summary judgment motion and have offered no explanation for their failure
to do so. They delayed seeking judicial notice until the time their reply brief
was due, depriving Chicago Title of the opportunity to address the new
matters in its respondent’s brief on appeal. Additionally, we have reviewed
these documents and conclude they do not establish that Judge McEachen
failed to issue a tentative decision (the parties’ dispute over this assertion
being the apparent impetus for Appellants’ decision to seek judicial notice of
the first record) or that Judge Monroe accepted and executed the stipulated
order based on a determination of the merits of the pending motion to vacate
(the apparent purpose for which judicial notice of the second and third
records was requested). Accordingly, we deny Appellants’ motion on the
grounds that it is late and seeks judicial notice of matters that were not
before the trial court when it decided the summary judgment motion and that
are irrelevant to the disposition of this appeal.
34
rules of res judicata are applicable only when a final judgment is rendered.
However, for purposes of issue preclusion (as distinguished from merger and
bar [i.e., claim preclusion]), ‘final judgment’ includes any prior adjudication of
an issue in another action that is determined to be sufficiently firm to be
accorded conclusive effect.” (Rest. 2d Judgments (1982) § 13, italics added;
see Sandoval, at p. 936.)
The Restatement cautions that in considering whether a particular
judgment is “sufficiently firm to be accorded conclusive effect,” courts should
“determine that the decision to be carried over was adequately deliberated
and firm, even if not final in the sense of forming a basis for a judgment
already entered. Thus preclusion should be refused if the decision was
avowedly tentative. On the other hand, that the parties were fully heard,
that the court supported its decision with a reasoned opinion, that the
decision was subject to appeal or was in fact reviewed on appeal, are factors
supporting the conclusion that the decision is final for the purpose of
preclusion.” (Rest. 2d Judgments, supra, § 13, com. g; see Sandoval, supra,
140 Cal.App.3d at p. 936.) “ ‘ “Finality” in the context here relevant may
mean little more than that the litigation of a particular issue has reached
such a stage that a court sees no really good reason for permitting it to be
litigated again.’ ” (Rest. 2d Judgments, supra, § 13, Reporter’s Note to com.
g, quoting Lummus Co. v. Commonwealth Oil Ref. Co. (2d Cir. 1961) 297 F.2d
80, 89.)
Sandoval and other cases decided in its wake support the conclusion
that a judgment entered after trial and later vacated or subsumed by a
dismissal as a condition of settlement remains “sufficiently firm” and thus
final for purposes of issue preclusion. In the prior litigation at issue in
Sandoval, a jury found by special verdict that the design of a machine was
35
defective. (Sandoval, supra, 140 Cal.App.3d at p. 935.) The court entered
judgment for plaintiffs and the defendant manufacturer appealed. (Ibid.)
While the appeal was pending, the parties reached a settlement, and the
plaintiffs signed a full release stating the manufacturer did not admit
liability and agreed to dismiss their action with prejudice. (Ibid.) In a
separate action, another plaintiff sued the same manufacturer for injuries
caused by the same machine. (Ibid.) That plaintiff sought to rely on the
finding of design defect from the prior action under the doctrine of collateral
estoppel. (Ibid.) The trial court ruled the doctrine did not apply because the
first action was never final. (Ibid.)
The Court of Appeal disagreed, holding that “once the appeal is settled
favorably to the plaintiff and thereafter dismissed, the Restatement analysis
and reason itself dictate that the trial court judgment reemerges with
sufficient finality to permit the application of collateral estoppel.” (Sandoval,
supra, 140 Cal.App.3d at p. 937.) The Sandoval court saw “nothing in the
dismissal with prejudice concept that forecloses a finding of finality sufficient
to preclude relitigation of the issues decided against the defendant. This is
particularly true when the agreement to dismiss with prejudice is part of a
substantial settlement in plaintiff’s favor after a final judgment in the trial
court. Such a settlement and dismissal of the lawsuit can fairly be construed
as a judgment favoring plaintiff on the merits. To hold otherwise would exalt
form over substance.” (Id. at p. 939, fn. omitted.)
Our Supreme Court has agreed with Sandoval and has followed its
reasoning. (See Producers Dairy Delivery Co. v. Sentry Ins. Co. (1986) 41
Cal.3d 903, 911 (Producers Dairy) [following Sandoval, holding that a
settlement reached after affirmance on appeal but before the time to petition
for review expired did not disturb the finality of the judgment, and explaining
36
that “settlement of a prior adjudication during the pendency of an appeal
may render the judgment sufficiently final to support the doctrine of
collateral estoppel, provided other factors of certainty and finality are
satisfied”].)
And while Sandoval involved a post-judgment settlement and
dismissal, courts have also given preclusive effect to judgments vacated as a
condition of settlement. Stonewall was such a case. There, a jury returned a
special verdict in favor of a homeowner and against the City of Palos Verdes
Estates on theories of negligence, nuisance, and inverse condemnation.
(Stonewall, supra, 46 Cal.App.4th at p. 1823.) Pending appeal, the parties
settled the action in exchange for payment of an amount less than the
judgment, “together with a stipulation (confirmed in an order of court)
vacating the judgment ‘for all purposes.’ ” (Ibid.) In a subsequent
contribution action, some of the city’s insurance carriers denied coverage
based on inverse condemnation exclusion clauses in the city’s policies. (Id. at
pp. 1823−1824.) The trial court found the prior judgment could not be relied
on to show the funds paid in settlement were in satisfaction of a judgment for
inverse condemnation. (Id. at p. 1840.)
In the ensuing appeal, the city argued that “the court order based on
the stipulation settling the [homeowner’s] case pending its appeal vacated the
. . . judgment for all purposes and that the judgment and the jury verdict on
which it was based are nullities.” (Stonewall, supra, 46 Cal.App.4th at p.
1840.) The Court of Appeal disagreed. Relying on section 13 of the
Restatement Second of Judgments and Sandoval, the appellate court held
that “[w]here an underlying action against a governmental entity proceeds
upon the theory of inverse condemnation, a judgment is entered against the
entity, and pending appeal the case is settled with a stipulation that the
37
judgment be vacated and the appeal is thereupon abandoned, collateral
estoppel precludes the entity’s denial that its liability was in inverse
condemnation.” (Stonewall, at p. 1840.)
The Stonewall court also relied on City of Laguna Beach, supra, 226
Cal.App.3d 822, another case that involved a settlement and vacatur of a
judgment entered after a jury trial. There, a jury returned a special verdict
finding the City of Laguna Beach liable to homeowners for inverse
condemnation. Pending appeal, the parties settled. As a condition of
settlement, they “stipulated that the judgment . . . would be vacated and set
aside, which stipulation was ordered into effect by the trial court.” (Id. at p.
828.) The city’s insurance carrier denied coverage based on inverse
condemnation exclusion clauses in the city’s policies. (Ibid.) In the
indemnification action that followed, the trial court ruled, among other
things, that the city could introduce evidence of its own negligence at trial to
show that inverse condemnation was not the basis of recovery in the prior
action. (Ibid.)
On appeal, the city argued that “the basis of its liability to the
[homeowners] is still unsettled” and “there is no final judgment fixing legal
liability extant in the [homeowners’] case.” (City of Laguna Beach, supra, 226
Cal.App.3d at pp. 831−832.) The Court of Appeal disagreed. It reasoned
“there was both a trial (fully and vigorously testing the allegations of inverse
condemnation) and a judgment -- a judgment entered on a jury verdict firmly
fixing the city’s liability . . . under a theory of inverse condemnation[.]” (Id.
at p. 831.) It also rejected the city’s contention that the order vacating the
judgment had restored the case to its previous status “ ‘as though the order or
judgment had never been made’ ” (id. at pp. 831−832), reasoning that “the
vacating of the judgment . . . left intact the jury verdict finding the city liable
38
under a theory of inverse condemnation” (id. at p. 832). It also noted that the
state of affairs in which the city found itself “is solely attributable to the
peculiar settlement agreement entered into by the city” and that “the only
possible explanation for this settlement agreement that suggests itself to [the
court] is a desire on the part of the city to first create and then impose an
indemnification obligation on [its insurer] that would not otherwise have
arisen under the facts surrounding this entire episode.” (Id. at p. 832, fn. 4.)
Sandoval, Stonewall, and City of Laguna Beach, if not directly on point,
are persuasive and provide a guide for determining whether Judge
McEachen’s decision in this action remained final for purposes of issue
preclusion even after it was vacated pursuant to the parties’ settlement. We
conclude that it did. We begin our analysis by observing that at the time it
was issued, the decision bore the hallmarks of certainty and finality.
(Producers Dairy, supra, 41 Cal.3d at p. 911.) It was a statement of decision
and judgment issued after a bench trial and was not “avowedly tentative.”
(Rest. 2d Judgments, § 13, com. g.) The statement of decision reflects a full
opportunity to present evidence and witnesses and thoughtful and detailed
consideration of this evidence by Judge McEachen. The decision was
“adequately deliberated and firm.” (Ibid.) Judge McEachen devoted several
pages of the decision to the issue of Appellants’ unclean hands and evaluated
the merits of this issue in a thorough and “reasoned opinion.” (Ibid.)
The sequence of events that followed Judge McEachen’s issuance of the
decision is analogous to the sequence of events that followed the judgments
given preclusive effect in Sandoval, Stonewall, and City of Laguna Beach,
and supports the conclusion that the later settlement and stipulated vacatur
did not undermine its finality for purposes of issue preclusion. A statement
of decision issued after a bench trial explains the factual and legal bases for
39
the trial court’s decision (Code Civ. Proc., § 632) and in that respect is the
functional equivalent of the special jury verdicts entered in the foregoing
cases. Appellants challenged the decision by motion to vacate and reached a
settlement with the plaintiffs while that challenge was pending. Much as in
Stonewall and City of Laguna Beach, the parties agreed to vacate the
judgment as a condition of settlement. Under their agreement, Vincent and
Huyen retained the relief they were awarded at trial (quiet title in their
home), making their settlement at least as favorable to them as the post-
appeal settlements by which the prior actions at issue in Sandoval,
Stonewall, and City of Laguna Beach were resolved. In Sandoval, Stonewall,
and City of Laguna Beach, the dismissal or vacaturs entered as a condition of
settlement were held not to disturb the finality of the preceding judgment.
The similarity in the sequence of events that led to the stipulated vacatur in
this case suggests the same result should obtain, and that Judge McEachen’s
decision remained final for purposes of issue preclusion notwithstanding the
vacatur.
Appellants argue that Sandoval, Stonewall, and City of Laguna Beach
are distinguishable because in those cases the decisions accorded preclusive
effect were settled pending appeal, whereas here, there was no appeal. We
disagree that this difference is a sufficient basis for declining to follow these
courts’ reasoning. The absence of an appeal does not compel the conclusion
that a judgment is not final for purposes of issue preclusion. Under section
13 of the second Restatement of Judgments, whether “the decision was
subject to appeal or was in fact reviewed on appeal” is a factor to consider in
evaluating the decision’s finality, not an element that must be present to
accord the decision preclusive effect. (Rest. 2d Judgments, § 13, com. g;
accord Murray, supra, 50 Cal.4th at pp. 875−876.)
40
Moreover, courts have given issue-preclusive effect to decisions that
were never reduced to judgment or appealed. (See, e.g., Murray, supra, 50
Cal.4th at pp. 866−879 [agency finding adverse to employee could be given
issue-preclusive effect in a later lawsuit by the employee even though the
finding was never subject to judicial review]; Border Business Park, Inc. v.
City of San Diego (2006) 142 Cal.App.4th 1538, 1561−1566 [court ruling in
minute order sustaining demurrer was “ ‘sufficiently firm’ ” to be final for
purposes of issue preclusion although no judgment was ever entered]; Rymer
v. Hagler (1989) 211 Cal.App.3d 1171, 1175−1176, 1179 (Rymer)
[determination of coverage in an order issued by a Workers’ Compensation
Appeals Board judge was a final order for purposes of collateral estoppel even
though the proceeding was subsequently dismissed by the employee]; see also
Bryan v. State Farm Mut. Auto. Ins. Co. (2012 Md. Ct. Spec. App.) 205 Md.
App. 587, 939−947 (Bryan) [collecting cases, including Sandoval, and holding,
under Maryland law as informed by section 13 of the Restatement Second of
Judgments and other authorities, that a jury verdict entered after the
liability phase of a bifurcated trial had preclusive effect although it was never
reduced to judgment because the parties settled before the damages phase of
trial commenced].)
Appellants argue that rulings vacated on appeal are a “ ‘nullity.’ ”
However, the cases Appellants cite for this proposition (Regents of University
of California v. Public Employment Relations Bd. (1990) 220 Cal.App.3d 346,
356 and Grain Dealers Mutual Ins. Co. v. Marino (1988) 200 Cal.App.3d
1083, 1088−1089) involved reversal on the merits. These cases do not
address the circumstance where the vacatur is entered pursuant to a
settlement. Moreover, Appellants ignore that this very argument—that a
vacated judgment is a legal nullity—was rejected in Stonewall and City of
41
Laguna Beach as a basis for avoiding the preclusive effect of the decision on
which the judgment was based.
Appellants assert the stipulated order for vacatur placed the unclean
hands finding “beyond appellate review.” This argument borders on specious.
As the trial court in this case noted, if Appellants wanted judicial review,
they could have obtained it—they need only have awaited a ruling on their
motion to vacate, and if that result was unsuccessful they could have filed an
appeal. Appellants do not argue, in other words, that the decision itself was
not appealable; they contend that by vacating it, they no longer had a reason
to appeal. Under Murray, supra, 50 Cal.4th at page 872, Appellants’
voluntary decision to forego judicial review is not a circumstance that defeats
issue preclusion.
In Murray, an employee’s administrative complaint was resolved
adversely to him in a letter decision. (Murray, supra, 50 Cal.4th at pp.
865−866.) The employee was notified that he had the right to object and seek
a hearing before an administrative law judge in a process that, had the
employee pursued it, allowed for review by the Court of Appeals for the Ninth
Circuit. (Id. at pp. 867−868.) He did not object, and the agency’s findings
became final. (Id. at pp. 868−869.) Our Supreme Court held the adverse
findings could be given preclusive effect in a subsequent lawsuit filed by the
employee against his employer, explaining the employee’s failure to exercise
his right to judicial review supported this conclusion. (Id. at p. 877.) “ ‘It is
the opportunity to litigate that is important in these cases, not whether the
litigant availed himself or herself of the opportunity.’ ” (Id. at p. 872, quoting
Rymer, supra, 211 Cal.App.3d at p. 1179.) Here, Appellants do not claim
Judge McEachen’s decision was unappealable as a matter of law. Rather,
42
Appellants eliminated the possibility of judicial review by virtue of their
stipulation.
Appellants contend that Sandoval, Stonewall, City of Laguna Beach,
and Bryan are distinguishable because the prior decisions deemed preclusive
in those cases resolved issues of liability, or because the later actions (at
least, Stonewall and City of Laguna Beach) involved claims of
indemnification arising from the earlier actions. While these differences do
exist, Appellants fail to articulate a persuasive reason why the differences
matter and should lead us to reject these courts’ reasoning. Accordingly, we
decline to do so. Appellants also contend the outcome of Stonewall and City
of Laguna Beach was informed by a desire to prevent the city from avoiding
the “obvious basis of liability reflected in the jury’s special verdict.” Although
they appear to regard this as another distinguishing fact, if anything, the
same circumstance is present here: Appellants inform us in their appellate
briefs that their motive for seeking a stipulated vacatur was to remove the
adverse unclean hands finding from Judge McEachen’s decision.
What does make this case different from the foregoing cases is that
here, it was the decision itself that was vacated (at least in part), whereas in
Stonewall and City of Laguna Beach, the judgments were vacated, leaving
the underlying special jury verdicts intact. However, the process by which
the vacatur was accomplished in this case leads us to conclude that it did not
disturb the decision’s finality for purposes of issue preclusion.
First, as we have explained, courts have overlooked orders of vacatur
entered as a condition of settlement. (City of Laguna Beach, supra, 226
Cal.App.3d at p. 832; Stonewall, supra, 46 Cal.App.4th at p. 1840; see also
Bates v. Union Oil Co. (9th Cir. 1991) 944 F.2d 647, 650−652 (Bates)
[applying federal law and holding that a district court order vacating a
43
judgment to effectuate the parties’ settlement did not disturb the judgment’s
preclusive effect because the district court had failed to balance “ ‘the
competing values of finality of judgment and right to relitigation of
unreviewed disputes’ ” before vacating the judgment].)
Second, nothing in the stipulation and proposed order by which the
decision was partially vacated indicated the decision itself lacked certainty or
finality. (Sandoval, 140 Cal.App.3d at p. 936.) The partial vacatur left the
results of the trial intact while purporting to gut the court’s rationale for its
decision, for no stated reason other than that the parties had agreed to this
as a condition of settlement. Although Appellants assert the stipulation
should be taken as a concession by Vincent and Huyen of the merits of their
motion to vacate, nothing in the stipulation (or anything else in the record)
reveals this to be true. (See footnote 10, ante.) To the contrary, the
stipulation was as limited as can be: the recital—the section of the
stipulation that informs the court why the parties entered into their
agreement—took up just ten lines of text and said nothing more than that
Appellants had a motion to vacate pending, and that “in recognition of the
substantial expense and time involved in litigation (including post-trial
motion and appellate expenses), and to conserve judicial resources” the
parties “have agreed to settle.” Absent from the stipulation was any
indication that Vincent and Huyen had conceded the motion to vacate had
merit.
The proposed order submitted with the stipulation was even less
informative. Its only rationale for invoking the court’s authority was a
perfunctory and thinly supported finding of good cause: “[t]he foregoing
stipulation having been duly considered by the Court, and good cause
showing therefrom, [¶] GOOD CAUSE APPEARING, IT IS THEREFORE
44
ORDERED . . . .” Nothing about this generic recitation of good cause
conveyed that Judge Monroe determined Judge McEachen’s decision was
legally or procedurally flawed, or that Judge Monroe entered the stipulated
order vacating the decision for any reason other than to effectuate the
parties’ settlement.
Third, we do not ignore that the judge who entered the stipulated order
for vacatur was not the judge who presided over the trial. Ordinarily, one
trial judge cannot overturn the order of another trial judge. (Paul Blanco’s
Good Car Co. Auto Group v. Superior Court (2020) 56 Cal.App.5th 86,
99−100.) “A narrow exception to this venerable rule applies when the record
shows that the original judge is no longer ‘available.’ ” (Id. at p. 100.) Here,
we have been offered no explanation why the stipulation was not presented to
the trial judge, and the record fails to answer this question. Even if we were
to assume Judge McEachen was unavailable, it is self-evident that a judge
who presides over a trial, wrestles with the parties’ contentions, and produces
a statement of decision resolving their disputes, is more likely to weigh the
consequences of deleting his own work product.
Fourth, the stipulation and proposed order submitted to Judge Monroe
failed to convey that he was informed about the parties’ claims, the trial
proceedings that led to the decision he was being asked to partly vacate, or,
perhaps most importantly, the potential collateral consequences of vacating
the decision’s adverse findings against Appellants. Bates, supra, 944 F.2d
647, is instructive in this regard. In Bates, the district court granted a
motion to vacate a judgment entered after a jury trial, the vacatur being a
condition of a settlement reached while the case was pending appeal. (Id. at
pp. 648−649.) The court granted the parties’ motion “ ‘so that the parties
would settle the case’ ” (id. at p. 649) without considering “ ‘the competing
45
values of finality of judgment and right to relitigation of unreviewed
disputes’ ” (id. at p. 650). In the Ninth Circuit, district courts are authorized
to deny stipulated requests to vacate judgments based on these competing
values, known as Ringsby factors, “because, otherwise, ‘any litigant
dissatisfied with a trial court’s findings would be able to have them wiped
from the books.’ ” (Ibid., quoting Ringsby Truck Lines, Inc. v. Western
Conference of Teamsters (9th Cir. 1982) 686 F.2d 720, 721.) When the
vacated judgment was submitted to the same judge in a different case for its
issue-preclusive effect, the judge recognized he had granted the motion to
vacate to effectuate a settlement and had not considered the potential
consequences of vacatur. (Bates, at p. 649.) The judge gave the judgment
issue-preclusive effect notwithstanding the vacatur, stating: “ ‘My order of
vacatur says nothing about the preclusive effect of the . . . judgment, nor does
it indicate my opinion on it. I vacated the . . . judgment so that the parties
would settle the case.’ ” (Ibid.)
The Ninth Circuit affirmed, holding “that the [prior] judgment did not
lose preclusive effect simply because it was vacated, and that the Ringsby
factors, although not considered at the time the [prior] judgment was
vacated, were properly considered by the district court when, in this case, it
confronted the question of the preclusive effect of the vacated judgment.”
(Bates, supra, 944 F.2d at p. 650.) Here, much like the district court in Bates,
the record gives no indication Judge Monroe entered the stipulated order for
any reason other than to effectuate the parties’ settlement. The record fails
to indicate that Judge Monroe considered whether the vacatur could or
should undermine the preclusive effect of Judge McEachen’s findings. Under
the reasoning of Bates, which we find persuasive, this circumstance weighs in
46
favor of the conclusion that Judge McEachen’s decision “did not lose
preclusive effect simply because it was vacated.” (Ibid.)
Fifth, public policy considerations support a finding of finality. “ ‘The
critical question is whether the [collateral estoppel] doctrine applies to those
issues of a . . . trial that are fully litigated whether resolved by a final
judgment or by a retraxit [i.e., a dismissal entered as a condition of
settlement] after verdict or decision of the court. If collateral estoppel is not
applicable, the . . . trial becomes a vehicle by which a defendant can . . .
litigate identical liability issues a number of times in multiple actions arising
from the same transaction.’ ” (Sandoval, supra, 140 Cal.App.3d at p. 938.)
Norman I. Krug, supra, 22 Cal.App.4th 1814, discussed the public
policies implicated here, albeit in a different procedural context. In Norman
I. Krug, the Court of Appeal was presented with a joint application for
stipulated reversal filed in connection with a settlement reached on appeal.
In the underlying action, a real estate broker was found to have breached his
duty of care by failing to disclose information to parties to a real estate
transaction. (Id. at p. 1820.) The Court of Appeal declined to reverse this
determination, noting the “dangerous public policy implications” of “a
settlement-generated reversal in a case such as this.” (Id. at p. 1823.)
“Permitting a licensee to ‘buy his way out’ from under a judgment which
might form the basis for disciplinary action by settling at the appellate level
would not only reduce incentives for wealthier licensees to conform their
conduct to the standards imposed by their profession but also render it less
likely that they will settle cases prior to judgment, since a licensee-defendant
is more apt to gamble on taking his case to trial if the disciplinary
consequences of an unfavorable judgment may ultimately be avoided by
settling the case in the Court of Appeal.” (Ibid.)
47
Similar concerns pertain here. Although we have not been informed
that Judge McEachen’s finding had possible disciplinary consequences for
Yazdani or Meridian (which was presented as a lender in the transactions at
issue), it is still the case that the finding of Appellants’ unclean hands had
ramifications beyond the Orange County action. Moreover, Appellants’
defense in the Orange County action was, so they inform us, funded through
their title policy, giving them the ability to litigate without personal cost and
to use the threat of continued litigation as a bargaining chip. Vincent and
Huyen, by contrast, were fighting to quiet title to their home. Appellants’
ability to threaten continued litigation gave them a significant advantage; it
was a strategy that cost them little but put their opponents at tremendous
personal risk. The parties’ settlement of the Orange County action did not
change its outcome; Vincent and Huyen still prevailed in quieting title to
their home. The only difference that resulted from the settlement was that
Appellants succeeded in deleting unfavorable findings from a judicial
decision. Judicial integrity would be undermined if we were to conclude the
stipulated order that resulted from this scenario deprived Judge McEachen’s
decision of its finality. (See Neary v. Regents of University of California
(1992) 3 Cal.4th 273, 288 (Neary) (dis. opn. of Kennard, J.) [“To casually
discard a presumptively correct trial court judgment, without any showing of
legal error, cannot help but demoralize trial judges and jurors.”].)11
11 In 1999, the Legislature amended Code of Civil Procedure section 128,
subdivision (a)(8), to reverse the rule and presumption in favor of stipulated
motions for reversal established by the Neary majority. (See Hardisty v.
Hinton & Alfert (2004) 124 Cal.App.4th 999, 1005 [discussing this history].)
This development makes the views expressed in Justice Kennard’s dissent all
the more persuasive.
48
For all these reasons, we conclude that Judge McEachen’s decision was
sufficiently firm, and therefore final for purposes of issue preclusion,
notwithstanding Judge Monroe’s stipulated order partly vacating it.12
B. Identical Issues
Next, Appellants argue the unclean hands finding in the Orange
County decision does not satisfy the “ ‘identical issue’ ” or “ ‘necessarily
decided’ ” elements of issue preclusion. Although Appellants address both
issues together under a single heading in their opening brief on appeal, these
requirements are distinct (see, e.g., Lucido v. Superior Court (1990) 51 Cal.3d
335, 341–342 (Lucido) [listing “ ‘identical issue’ ” and “ ‘necessarily decided’ ”
as separate elements of collateral estoppel]), so we analyze them separately.
We consider Appellants’ challenge to the identical issue requirement
first. Their arguments are somewhat disorganized, making it difficult to
determine which of their points relate to which requirement. So far as we
can determine, Appellants’ argument is that unclean hands is an equitable
defense, and “[t]he equitable issues are alarmingly different between the two
actions.” Appellants assert that in the Orange County action, their
opponents were not “Chicago Title or a defendant in a position similar to
Chicago Title” but rather victims of the Ponzi scheme perpetrated by
“Chicago Title’s Do.” They also appear to argue that their role as party
12 In its respondents’ brief on appeal, Chicago Title argued that under
Southern Cal. White Trucks v. Teresinski (1987) 190 Cal.App.3d 1393, 1407,
trial courts are not statutorily authorized to vacate a judgment for the
purpose of effectuating a settlement. Chicago Title did not raise this
argument in the trial court and thereby forfeited it. Moreover, because we
resolve Appellants’ challenge to the decision’s finality on other grounds, it is
not necessary for us to reach this issue.
49
defendants in one case but plaintiffs in another makes the two actions
insufficiently identical.
Chicago Title responds that Appellants did not challenge the identical
issue requirement in their opposition to summary judgment. It notes that
the trial court specifically found the issue undisputed. Chicago Title also
argues that to the extent Appellants’ argument has not been forfeited, it
lacks merit because the Orange County action concerned Appellants’
misconduct in connection with the same transactions and subject matter
involved in this case, which it asserts is all that the unclean hands defense
requires.
We have reviewed the record and conclude Appellants have forfeited
this challenge. Appellants’ summary judgment opposition brief raised no
dispute regarding the identity of the unclean hands issues. “ ‘Generally, the
rules relating to the scope of appellate review apply to appellate review of
summary judgments.’ ” (DiCola, supra, 158 Cal.App.4th at p. 676.) “Though
this court is bound to determine whether defendants met their threshold
summary judgment burden independently from the moving and opposing
papers, we are not obliged to consider arguments or theories, including
assertions as to deficiencies in defendants’ evidence, that were not advanced
by plaintiffs in the trial court.” (Ibid.) “Ordinarily the failure to preserve a
point below constitutes a [forfeiture] of the point. [Citation.] This rule is
rooted in the fundamental nature of our adversarial system: The parties
must call the court’s attention to issues they deem relevant. ‘ “In the hurry of
the trial many things may be, and are, overlooked which could readily have
been rectified had attention been called to them. The law casts upon the
party the duty of looking after his legal rights and of calling the judge’s
attention to any infringement of them.” ’ ” (North Coast Business Park v.
50
Nielsen Construction Co. (1993) 17 Cal.App.4th 22, 28–29 (North Coast).)
“Indeed, if this were permitted procedure, parties opposing and losing
summary judgment motions could attempt to embed grounds for reversal on
appeal into every case by their silence.” (Saville v. Sierra College (2005) 133
Cal.App.4th 857, 873 (Saville).)
In their reply brief on appeal, Appellants claim they did raise their
current arguments in their summary judgment opposition brief. However,
they base this claim on two nonconsecutive sentences that appear in different
sections of their 25-page summary judgment opposition brief (“The issue of
Meridian or Yazdani’s unclean hands was not before the Orange County
court” and “The issue before the Orange County Court was whether the deeds
of trust were enforceable”), neither of which can fairly be construed as a
challenge to the “identical issue” element of issue preclusion.
Appellants also assert in conclusory fashion that they have not forfeited
their challenge to the identical issue requirement because it does not qualify
as a “ ‘new theory of liability, defense, or damages’ ” and therefore it can be
raised for the first time on appeal. In support of their assertion, they cite a
series of sections from a litigation guide discussing forfeiture based on the
prohibition against raising new theories on appeal, none of which offers
specific support for Appellants’ position. We find Appellants’ argument too
undeveloped and unsupported to be persuasive. (See Los Angeles Unified
School Dist. v. Torres Construction Corp. (2020) 57 Cal.App.5th 480, 498
[“ ‘We may and do “disregard conclusory arguments that are not supported by
pertinent legal authority or fail to disclose the reasoning by which the
appellant reached the conclusions he wants us to adopt.” ’ ”].)
Moreover, Appellants overlook the general rule of forfeiture that
applies where a party fails to assert error in the trial court. (See North
51
Coast, supra, 17 Cal.App.4th at p. 28 [discussing the “general principles of
‘waiver’ and ‘theory of the trial’ ”].) The rule of forfeiture through inaction
applies to summary judgment appeals. (See id. at p. 29; DiCola, supra, 158
Cal.App.4th at p. 676 [“ ‘An argument or theory will . . . not be considered if it
is raised for the first time on appeal.’ ”]; Saville, supra, 133 Cal.App.4th at p.
872.) Holding Appellants to the preservation requirement is particularly
appropriate where, as here (as Appellants acknowledge) the application of the
unclean hands doctrine was the “centerpiece” of the summary judgment
motion.
Appellants claim we can consider their belated challenge because it
presents an issue of law on undisputed facts. Appellate courts do have the
“discretion to address questions not raised in the trial court when the theory
presented for the first time on appeal involves only a legal question
determinable from facts that are (1) uncontroverted in the record and (2)
could not have been altered by the presentation of additional evidence.”
(Esparza v. KS Industries, L.P. (2017) 13 Cal.App.5th 1228, 1237−1238.)
However, “[m]erely because an issue is one of law, does not give a party
license to raise it for the first time on appeal. . . . Whether an appellate court
will entertain a belatedly raised legal issue always rests within the court’s
discretion.” (Farrar v. Direct Commerce, Inc. (2017) 9 Cal.App.5th 1257,
1275, fn. 3; see Wittenberg v. Bornstein (2020) 51 Cal.App.5th 556, 567
(Wittenberg) [“While . . . authorities recognize an appellate court’s discretion
to consider forfeited arguments that raise pure questions of law, none
imposes a mandatory duty to do so.”].) While courts are more inclined to
exercise this discretion and consider new legal issues where the public
interest or public policy is involved, this case involves “a private dispute and
does not implicate matters of public interest or policy.” (Wittenberg, at p.
52
567.) Moreover, Appellants’ challenge to the identical issue requirement, as
they have framed it, requires a comparison of the relative moral
blameworthiness of their opponents in each of the two cases. It is difficult to
characterize such a determination as one that could not be altered without
further factual development.
Appellants failed to present their current arguments in the trial court,
and the court resolved the motion with the understanding that the identical
issue requirement “is essentially undisputed by Plaintiffs.” We “are loath to
reverse a judgment on grounds that the opposing party did not have an
opportunity to argue and the trial court did not have an opportunity to
consider.”13 (JRS Products, Inc. v. Matsushita Electric Corp. of America
(2004) 115 Cal.App.4th 168, 178.) Accordingly, we deem Appellants’
challenge to this issue forfeited.14
13 Moreover, under Code of Civil Procedure section 437c, subdivision
(f)(2), “[a] party shall not move for summary judgment based on issues
asserted in a prior motion for summary adjudication and denied by the court
unless that party establishes, to the satisfaction of the court, newly
discovered facts or circumstances or a change of law supporting the issues
reasserted in the summary judgment motion.” This prohibition can be
overcome, but only in the exercise of judicial discretion. (Marshall v. County
of San Diego (2015) 238 Cal.App.4th 1095, 1106.) Had Appellants raised this
issue below, Chicago Title might have been able to present evidence
addressing their contention about relative equities, affording both it and the
trial court the opportunity to address the issue on a developed record.
Reversing the judgment based on Appellants’ belated and underdeveloped
assertion is not only inefficient and unfair to the trial court and Chicago
Title, it also results in potentially expending Chicago Title’s only opportunity
to pursue summary judgment.
14 In the motion for judicial notice that Appellants filed on the same date
they filed their reply brief on appeal, Appellants requested judicial notice of a
statement of decision issued in an action filed by Hai Nguyen in Santa Clara
County Superior Court. Appellants contend the statement of decision shows
53
C. Necessarily Decided
As we have noted, in the same section of their opening brief in which
Appellants assert their challenge to the element of identity, they also dispute
whether the issue of their unclean hands was “ ‘necessarily decided’ ” in the
Orange County action. “Courts have understood the ‘ “necessarily decided” ’
prong to ‘require[ ] only that the issue not have been “entirely unnecessary”
to the judgment in the initial proceeding[.]’ ” (Samara, supra, 5 Cal.5th at p.
327, quoting Lucido, supra, 51 Cal.3d at p. 342.)
Appellants argue the unclean hands finding in Judge McEachen’s
decision was not “necessarily decided” because unclean hands is an
affirmative defense that cannot be asserted against a defendant. They
acknowledge that Judge McEachen reasoned the doctrine was used
defensively as he applied it since the plaintiffs brought their suit to defend
themselves against Appellants’ foreclosure, but they argue this reasoning
was erroneous because the underlying foreclosure was a nonjudicial
proceeding.15
that different factfinders can reach different conclusions on the issue of
whether Appellants acted with unclean hands. We deny the request. An
appellate court “may decline to take judicial notice of matters not relevant to
dispositive issues on appeal.” (Guarantee Forklift, supra, 11 Cal.App.5th at
p. 1075.) There is no indication in the statement of decision that the superior
court considered or decided the issue of Appellants’ unclean hands.
Accordingly, the decision is not relevant to the issues before us.
15 Appellants’ argument on the issue of the foreclosure being nonjudicial
is difficult to understand. In their opening brief on appeal, they assert there
was no “ ‘affirmative claim’ for judicial foreclosure.” They then state that the
nonjudicial foreclosure that precipitated plaintiffs’ suit was not an “ ‘action’ ”
under California law. They cite Garfinkle v. Superior Court (1978) 21 Cal.3d
268, 272−282 for the proposition that nonjudicial foreclosure proceedings do
not come within the scope of the California due process clause, and Security
Pacific National Bank v. Wozab (1990) 51 Cal.3d 991, 998−999, where our
54
Appellants’ arguments amount to assertions that Judge McEachen’s
decision was wrongly decided. Their arguments are misplaced, however,
because a prior judgment is preclusive even when there are doubts about its
correctness. “[R]egardless of the propriety of the summary judgment, it is
nonetheless binding since ‘for purposes of application of the doctrine of [issue
preclusion], an erroneous judgment is as conclusive as a correct one.’ ” (White
Motor Corp. v. Teresinski (1989) 214 Cal.App.3d 754, 762−763; accord
Esparza v. County of Los Angeles (2014) 224 Cal.App.4th 452, 467 (Esparza)
[rejecting argument that a prior court’s interpretation of a statute was “ ‘not
necessary’ ” to its decision as “merely an argument that the . . . court’s
decision was wrongly decided”]; Lumpkin v. Jordan (1996) 49 Cal.App.4th
1223, 1232 [“The federal court order is entitled to collateral estoppel effect
regardless of our agreement or disagreement with the decision itself.”]; see
Lamb v. Wahlenmaier (1904) 144 Cal. 91, 95 [“The judgment is none the less
a bar for the reason that it was erroneous.”].) In Esparza, the parties seeking
to avoid the preclusive effect of a prior court ruling argued the ruling
conflicted with settled state law and was therefore “ ‘not necessary’ ” to the
earlier court decision. (Esparza, supra, 224 Cal.App.4th at p. 467.) The
high court explained that a bank setoff is not an “action” within the meaning
of Code of Civil Procedure section 22. Appellants do not explain what
conclusion we should derive from these assertions. Their failure to
adequately develop their point with meaningful legal analysis forfeits the
argument. (Singh v. Lipworth (2014) 227 Cal.App.4th 813, 817; see Cahill v.
San Diego Gas & Electric Co. (2011) 194 Cal.App.4th 939, 956 [“ ‘We are not
bound to develop appellants’ arguments for them.’ ”].) In their reply brief,
Appellants cite Gomes v. Countrywide Home Loans, Inc. (2011) 192
Cal.App.4th 1149, 1154 (Gomes) for the first time, but they fail to explain
why. Whatever argument they intended to make in reliance on Gomes, it is
forfeited for lack of adequate development and for failure to assert it in their
opening brief. (Golden Door Properties, LLC v. County of San Diego (2020) 50
Cal.App.5th 467, 518 [points raised for first time in reply brief are waived].)
55
Court of Appeal rejected this contention as “merely an argument that the
district court’s decision was wrongly decided,” reasoning that “ ‘ “ ‘an
erroneous judgment is as conclusive as a correct one.’ ” ’ ” (Ibid., quoting
Lumpkin, supra, 49 Cal.App.4th at p. 1232.) Likewise, here, Appellants’
disputes with the soundness of Judge McEachen’s reasoning are not a basis
for concluding his findings were “unnecessary” or not issue-preclusive.
Additionally, “[i]t is the general rule that a final judgment or order is
res judicata even though contrary to statute where the court has jurisdiction
in the fundamental sense, i.e., of the subject matter and the parties.” (Pacific
Mut. Life Ins. Co. v. McConnell (1955) 44 Cal.2d 715, 725.) “Errors which are
merely in excess of jurisdiction should be challenged directly, for example by
motion to vacate the judgment, or on appeal, and are generally not subject to
collateral attack once the judgment is final[.]” (People v. American
Contractors Indemnity Co. (2004) 33 Cal.4th 653, 661.) Appellants do not
argue that issues of subject matter jurisdiction or personal jurisdiction
tainted the decision. Rather, they quarrel with Judge McEachen’s reasoning.
Appellants had the opportunity to raise their concerns by directly challenging
the decision, which, as the trial court in this case noted, would have occurred
if they had waited for a decision on their motion to vacate or filed an appeal.
(See, e.g., ibid. [“[e]rrors which are merely in excess of jurisdiction should be
challenged directly, for example by motion to vacate the judgment, or on
appeal”].) Appellants elected not to pursue this course and cannot now
collaterally attack Judge McEachen’s reasoning.
Next, citing Branson v. Sun-Diamond Growers (1994) 24 Cal.App.4th
327 (Branson), Appellants argue that “any statement by the Orange county
court regarding [their] ‘unclean hands’ was dicta.” We disagree. “[D]ictum
consists of general observations of law which go beyond the facts and issues
56
of the case.” (People ex rel. Dept. of Transportation v. Yuki (1995) 31
Cal.App.4th 1754, 1773 (Yuki).) In Branson, the Court of Appeal considered
the issue-preclusive effects of conclusions in an earlier appellate opinion. In
the prior appeal, the appellate court had been tasked with reviewing a trial
court order issued in response to a motion for indemnification brought
pursuant to Corporations Code section 317. (Branson, supra, 24 Cal.App.4th
at p. 335.) After determining that the trial court erred in granting statutory
indemnification, the appellate court went on to conclude that the parties also
could not establish a basis for indemnification on grounds independent of the
statute. (Id. at p. 337.) The Branson court held the latter statements were
dicta and not necessary to the decision, since matters apart from the parties’
statutory right to indemnity were not before the court. (Id. at p. 348.)
Here, Judge McEachen’s unclean hands finding was not dicta. The
evidence of Appellants’ misconduct and the determination that Appellants
acted with unclean hands were a substantial focus of the decision and not
mere commentary on extraneous issues of fact or law. (Yuki, supra, 31
Cal.App.4th at p. 1773.) Judge McEachen made the unclean hands finding in
resolution of the controverted issue “[w]hether title to [the property] should
be quieted in favor of [Vincent and Huyen] by cancellation or otherwise
invalidating the Meridian [deeds of trust].” Resolution of this issue required
the judge “to declare the rights of the parties in realty” because “ ‘ “ ‘[t]he
object of the [quiet title] action is to finally settle and determine, as between
the parties, all conflicting claims to the property in controversy, and to decree
to each such interest or estate therein as he may be entitled to.’ ” ’ ” (Robin v.
Crowell (2020) 55 Cal.App.5th 727, 740, italics added.) “The purpose of a
quiet title action is to determine any adverse claim to the property that the
defendant may assert, and to declare and define any interest held by the
57
defendant, ‘ “so that the plaintiff may have a decree finally adjudicating the
extent of his own interest in the property in controversy.” ’ ” (Ibid.; see also
Ridgway v. Ridgway (1949) 95 Cal.App.2d 46, 50 [holding that “[i]n an action
to quiet title, even though defendant does not file a cross-complaint or ask for
any affirmative relief, a decree declaring that defendant has title, and
enjoining plaintiff from further setting up a claim thereto, is a proper form of
judgment”].) Judge McEachen’s unclean hands finding served as one of the
grounds on which he resolved Appellants’ claim on Vincent and Huyen’s
property. The finding was plainly intended to be dispositive of the question
before the court and it was not extraneous or unnecessary to the resolution of
the issues presented. Accordingly, the unclean hands finding cannot
reasonably be characterized as dicta.
D. Public Policy Considerations
Finally, Appellants argue that even if the threshold requirements of
issue preclusion are met, the doctrine should not be applied in this case on
grounds of public policy. The public policies underlying the doctrine of issue
preclusion include “conserving judicial resources and promoting judicial
economy by minimizing repetitive litigation, preventing inconsistent
judgments which undermine the integrity of the judicial system, and avoiding
the harassment of parties through repeated litigation.” (Murray, supra, 50
Cal.4th at p. 879.) Here, Appellants contend that “equitable considerations”
and “ ‘fundamental principles of fairness’ ” counsel against giving Judge
McEachen’s decision preclusive effect in this case.
Appellants’ “equitable considerations” argument repeats and elaborates
on their earlier contention that the “relative equities between the parties” in
the Orange County action and this action differ, making it unfair to hold
them to the prior unclean hands finding in this case. They assert that
58
Chicago Title was the more blameworthy actor, including because it did not
“bother[ ] to tell Yazdani and Meridian” about defects in the deeds of trust
discovered during the audit of Do and because it “allow[ed] them instead to
initiate a trustee’s sale . . . [that] Chicago Title knew was doomed to fail.”
(Italics omitted.) Appellants assert that Chicago Title also acted wrongfully
(through Do) by failing to “obtain legitimate signatures on the loan
documents” as required by the lender’s escrow instructions, and that this
“failure to follow the instructions” “directly caused Yazdani and Meridian’s
loss in the Orange County action.”
Chicago Title responds that Appellants have forfeited this argument
and the forfeiture cannot be excused because the argument relies on a factual
record that Appellants have failed to develop. In reply, Appellants contend
they did assert the argument in the trial court and cite pages of their
summary judgment opposition brief and opposition separate statement of
facts where they claim the argument or supporting facts can be found.
We have reviewed Appellants’ record citations and conclude they did
not present their “equitable considerations” argument in the trial court. No
such argument appears in their summary judgment opposition brief. Their
opposition separate statement does not set forth all of the facts on which they
base their current argument (e.g., that Chicago Title “allow[ed] [Appellants]
. . . to initiate a trustee’s sale process that [it] knew was doomed to fail”; that
Chicago Title’s failure to follow escrow instructions “directly caused Yazdani
and Meridian’s loss in the Orange County action”). Because Appellants’
“equitable considerations” argument was not raised or factually developed in
the trial court, we decline to consider it now. (DiCola, supra, 158 Cal.App.4th
at p. 676 [“ ‘possible theories that were not fully developed or factually
presented to the trial court cannot create a “triable issue” on appeal’ ”];
59
NBCUniversal Media, LLC v. Superior Court (2014) 225 Cal.App.4th 1222,
1236−1237 [argument not raised in opposition to summary judgment forfeited
where it required application of equitable principles to a factual record the
party failed to develop]; City of San Diego v. Rider (1996) 47 Cal.App.4th
1473, 1493 [“A party waives a new theory on appeal when he fails to include
the underlying facts in his separate statement of facts in opposing summary
judgment.”].)
Appellants’ next argument raises a dispute with a statement from the
trial court’s order granting summary judgment. Appellants complain that in
its order granting summary judgment, the trial court stated that if
Appellants “believed there was some deficiency in the [Orange County SOD
(statement of decision)], procedural or otherwise, Plaintiffs could have waited
for a ruling on the Motion to Vacate the Judgment or sought appellate
review.” Appellants contend the trial court’s reasoning “utterly defeats
judicial economy . . . [a] policy objective underlying issue preclusion.” They
essentially contend they should not be penalized for stipulating to vacate the
judgment, since Vincent and Huyen purportedly conceded the merits of their
motion to vacate and it would have been a “waste” of court resources to seek a
court ruling on the motion.
Appellants do not make a persuasive case for reversal. To begin with,
their argument ignores that we review the trial court’s ruling, not its
reasoning (Fieldstone Co. v. Briggs Plumbing Products, Inc. (1997) 54
Cal.App.4th 357, 372) and relies on assertions that are not supported by the
record (such as “[w]hen the opposing party does not contest, and in fact
concedes, the merits of the motion”—the record reflects no concession by
Vincent and Huyen to the merits of Appellants’ motion to vacate) and which
we therefore ignore.
60
More to the point, there was nothing wrong with the trial court’s
comment. The court was responding to Appellants’ claims that Judge
McEachen’s decision was procedurally or legally deficient, a position
Appellants struggled to demonstrate for the very reason the trial court
identified—they decided to forego judicial review. And while Appellants
complain it would have been inefficient to seek a court ruling on their motion
to vacate, the judicial economy that issue preclusion seeks to promote is the
avoidance of repetitive litigation, not litigation in the first instance. (See
Murray, supra, 50 Cal.4th at p. 878.) Under Murray, a party that fails to
exercise its rights of judicial review can properly be bound by the
unchallenged decision in a later action. (Id. at pp. 877−878.) Moreover, if, as
Appellants repeatedly complain, there were flaws in the decision and the
parties were in agreement on this point, they could have said so in the
stipulation with little loss of efficiency. (See City of Laguna Beach, supra,
226 Cal.App.3d at pp. 831, 832, fn. 4 [the state of affairs in which the city
found itself was “solely attributable to the peculiar settlement agreement
entered into by the city and the (plaintiffs)”].)
Appellants also claim the trial court was wrong to say they could have
sought appellate review. Appellants claim this would have been
“impermissible under the rules of appellate procedure” because once the
stipulated order vacating portions of the decision was entered, they were no
longer “ ‘aggrieved’ ” and had no reason to appeal. Obviously, this overlooks
the trial court’s point, which was that Appellants could have appealed the
original decision instead of stipulating to vacate parts of it.
Next, Appellants assert that it is “worth noting” that an appeal would
have been “futile” because the appellate court “would have simply affirmed
the judgment without consideration of the unclean hands issue, as there was
61
a factual finding [that Vincent and Huyen] had not ratified the deed[s] of
trust and it was undisputed their signatures were forged[.]” They contend
that “[u]nder California law as it existed then” such an affirmance would
have “cemented” the unclean hands finding. However, the latter statement
does not correctly describe the state of California law when Judge
McEachen’s decision was issued in April 2017.
It is true that in Samara, supra, 5 Cal.5th 322, a 2018 decision, the
California Supreme Court overturned longstanding precedent (People v.
Skidmore (1865) 27 Cal. 287 (Skidmore)) and held that “a ground reached by
the trial court and properly challenged on appeal, but not embraced by the
appellate court’s decision” has no preclusive effect. (Samara, supra, 5 Cal.5th
at p. 334.) However, even before Samara, California appellate courts had
declined to follow Skidmore in cases presenting questions of issue preclusion.
(See, e.g., Zevnik v. Superior Court (2008) 159 Cal.App.4th 76, 86−88
(Zevnik); Newport Beach Country Club, Inc. v. Founding Members of Newport
Beach Country Club (2006) 140 Cal.App.4th 1120, 1130−1132 (Newport Beach
Country Club).) These courts held that a trial court judgment reached on
alternative grounds and affirmed on appeal on only one ground loses its
issue-preclusive effect as to the unreviewed ground. (See Zevnik, supra, 159
Cal.App.4th at pp. 86−88; Newport Beach Country Club, supra, 140
Cal.App.4th at pp. 1130−1132; see also Butcher v. Truck Ins. Exchange (2000)
77 Cal.App.4th 1442, 1460 [“We hold that if a court of first instance makes its
judgment on alternative grounds and the reviewing court affirms on only one
of those grounds, declining to consider the other, the second ground is no
longer conclusively established.”]; accord People ex rel. Brown v. Tri-Union
62
Seafoods, LLC (2009) 171 Cal.App.4th 1549, 1574.) Thus, an appeal would
not have been “futile” in the sense Appellants contend.16
Next, Appellants repeat their unsupported assertion that Judge
McEachen issued the statement of decision without first issuing a tentative
decision, which they argue violated their right to due process of law. As this
argument relies on an unsupported assertion (see footnote 10, ante), we
decline to address it. (Sangster, supra, 68 Cal.App.4th at p. 166 [“bare
assertion” that the moving parties “ ‘fabricated’ ” evidence insufficient to
avoid summary judgment]; Protect Our Water v. County of Merced (2003) 110
Cal.App.4th 362, 364 [“if it is not in the record, it did not happen”]; WFG
National Title Ins. Co. v. Wells Fargo Bank, N.A. (2020) 51 Cal.App.5th 881,
894 (WFG) [“Rather than scour the record unguided, we may decide that the
appellant has forfeited a point urged on appeal when it is not supported by
16 Appellants have not argued that Judge McEachen’s decision was itself
not preclusive for the reason that it relied on alternative grounds. The first
Restatement of Judgments provided that a trial court decision that rests on
independently sufficient alternative grounds is preclusive as to each ground.
(See Zevnik, 159 Cal.App.4th at p. 83, discussing Rest., Judgments (1942) §
68, com. n, pp. 307−308.) “California opinions of that era followed the
Restatement rule.” (Ibid. [citing authorities].) In the second Restatement of
Judgments issued in 1982, the American Law Institute reversed course and
expressed the view that a trial court judgment based on independently
sufficient alternative grounds is preclusive as to neither ground. (See Zevnik,
supra, 159 Cal.App.4th at p. 83, citing Rest.2d Judgments (1982) § 27, com. i,
pp. 259−260.) In Zevnik, at page 83, the Court of Appeal stated that it had
found no California opinion on point dated after the Restatement Second;
neither have we. When it decided Samara, the California Supreme Court
expressly refrained from taking a position on “the significance of an
independently sufficient alternative ground reached by the trial court and not
challenged on appeal.” (Samara, supra, 5 Cal.5th at p. 337.) Because
Appellants have not raised this issue nor have they invoked the second
Restatement, this case does not require us to decide whether to follow section
27 of the second Restatement.
63
accurate citations to the record.”]; Del Real v. City of Riverside (2002) 95
Cal.App.4th 761, 768 [point raised that lacks citation to record may be
deemed forfeited].)
In their reply brief, Appellants claim for the first time that Judge
McEachen also failed to issue a proposed judgment. This contention is
doubly forfeited, because in addition to being belated, it is yet another
assertion made without record support. (American Indian Model Schools v.
Oakland Unified School Dist. (2014) 227 Cal.App.4th 258, 275–276 [“Fairness
militates against allowing an appellant to raise an issue for the first time in a
reply brief because consideration of the issue deprives the respondent of the
opportunity to counter the appellant by raising opposing arguments about
the new issue.”].)
Finally, Appellants contend the fact that they were represented in the
Orange County action by “panel counsel” of a Chicago Title affiliate indicates
the proceedings were tainted by unfairness. As they cite no legal authority
demonstrating that this circumstance creates a public policy concern (nor do
we independently perceive that it does), we reject the claim. (WFG, supra, 51
Cal.App.5th at p. 894 [“[W]e may disregard conclusory arguments that are
not supported by pertinent legal authority.”].)
E. Conclusion
Because we reject Appellants’ challenges to the trial court’s
determination that the unclean hands finding from the Orange County
decision was entitled to preclusive effect, we affirm summary judgment as to
Chicago Title. We therefore need not, and do not, address the parties’
remaining arguments relating to the merits of Chicago Title’s motion for
summary judgment or summary adjudication.
III.
64
Appellants Fail to Establish Summary Judgment in Favor of the UFTA
Defendants Should Be Reversed
Appellants appealed the trial court’s grant of summary judgment not
only as to Chicago Title but as to the UFTA defendants as well. However, the
UFTA defendants did not file a respondents’ brief. But on appeal, the trial
court’s judgment is presumed correct, and the burden is on the Appellants to
demonstrate reversible error. (Jameson v. Desta (2018) 5 Cal.5th 594, 609.)
This is true even on de novo review (Reyes v. Kosha (1998) 65 Cal.App.4th
451, 466, fn. 6), and even if there is no respondents’ brief (Kriegler v. Eichler
Homes, Inc. (1969) 269 Cal.App.2d 224, 226−227).
Here, although Appellants’ opening brief seeks reversal as to all of the
respondents, Appellants did not include any arguments specific to the UFTA
defendants on the issue of the trial court’s application of the doctrine of issue
preclusion. Accordingly, the same analysis that supports affirming the
judgment as to Chicago Title supports affirming the judgment as to the
UFTA defendants.
IV.
The Trial Court Did Not Abuse Its Discretion in Awarding Attorney Fees to
Chicago Title
Appellants challenge the trial court’s award of attorney fees to Chicago
Title. Chicago Title requested attorney fees of $1,851,575 based on 3,366.5
total hours that its in-house counsel spent litigating the case and sought a
blended hourly rate of $550 an hour. Appellants opposed the motion,
arguing, among other things, that the fee request was grossly inflated and on
this basis should be denied in its entirety. The trial court granted the motion
in part and awarded reduced fees of $943,250, after recalculating the lodestar
by reducing certain attorneys’ hours and adjusting their rates based on the
tasks performed. Appellants claim the trial court abused its discretion and,
65
under Serrano v. Unruh (1982) 32 Cal.3d 621 (Serrano), the court should
have awarded no fees at all. We disagree.
A trial court’s award of attorney fees is reviewed for an abuse of
discretion. (Chavez v. City of Los Angeles (2010) 47 Cal.4th 970, 989.) “ ‘The
scope of discretion always resides in the particular law being applied, i.e., in
the “legal principles governing the subject of [the] action[.]” Action that
transgresses the confines of the applicable principles of law is outside the
scope of discretion and we call such action an “abuse” of discretion.’ ”
(Horsford v. Board of Trustees of California State Univ. (2005) 132
Cal.App.4th 359, 393.)
Under Serrano, “[a] fee request that appears unreasonably inflated is a
special circumstance permitting the trial court to reduce the award or deny
one altogether.” (Serrano, supra, 32 Cal.3d at p. 635.) Although Appellants
argued in their opposition to Chicago Title’s motion that the attorney fee
request was grossly inflated, we have reviewed the court’s eight-page order
evaluating the motion and granting fees and see no indication the court
agreed with Appellants’ characterization or found that the special
circumstance in Serrano existed. Even assuming the court had reached this
conclusion (and we do not perceive that it did), under Serrano, it had the
option to respond by reducing or denying the award; it was not required to
deny it. (Ibid.) Thus, even if we were to agree with Appellants that the fee
request here was unreasonably inflated, the trial court’s award is one of the
responses contemplated by Serrano; there was no abuse of discretion.
Moreover, courts of review recognize that “[t]he ‘experienced trial judge
is the best judge of the value of professional services rendered in his [or her]
court[.]’ ” (Serrano v. Priest (1977) 20 Cal.3d 25, 49.) Thus, while a trial
court’s “ ‘judgment is of course subject to review, it will not be disturbed
66
unless the appellate court is convinced that it is clearly wrong.’ ” (Ibid.)
Accordingly, “[t]he only proper basis of reversal of the amount of an attorney
fees award is if the amount awarded is so large or small that it shocks the
conscience and suggests that passion and prejudice influenced the
determination.” (Akins v. Enterprise Rent-A-Car Co. (2000) 79 Cal.App.4th
1127, 1134.) In addition, the Appellants have the burden on appeal to
demonstrate the trial court abused its discretion in awarding fees. (Gonzalez
v. Santa Clara County Dept. of Social Services (2017) 9 Cal.App.5th 162, 169.)
Here, Appellants do not challenge the trial court’s calculation of the lodestar
or offer any basis upon which we might conclude that the fee award was
excessive in comparison with the work actually performed. Appellants have
therefore failed to carry their burden of demonstrating that the trial court’s
fee award should be reversed.
Accordingly, we affirm the trial court’s order awarding attorney fees to
Chicago Title.
DISPOSITION
The judgment in favor of Chicago Title, the award of attorney fees to
Chicago Title, and the judgment in favor of the UFTA defendants are
affirmed. Chicago Title is entitled to its costs on appeal.
67
DO, J.
WE CONCUR:
McCONNELL, P. J.
IRION, J.
68