TALLEY v. VALUATION COUNSELORS GROUP, INC








Filed 12/22/10

CERTIFIED FOR PUBLICATION


COURT OF APPEAL, FOURTH APPELLATE DISTRICT

DIVISION ONE

STATE OF CALIFORNIA

BRUCE R. TALLEY, Plaintiff, Respondent and Appellant, v. VALUATION COUNSELORS GROUP, INC. et al., Defendants and Appellants, JOHN M. CLAREY et al., Defendants and Respondents.

D055894 (Super. Ct. No. GIC836807)

STORY CONTINUE FROM PART I….

The court separately addressed the issues concerning the Clarey Respondents, as follows: "It is undisputed that the demurrer brought by the Clarey [Respondents] was sustained on the ground of res judicata/primary rights. It was not sustained on grounds relating to the bar orders. It is further undisputed that the appeal to the order sustaining the demurrer of the Clarey [Respondents] was dismissed because the appeal was not timely. Although the Court of Appeal reversed the ruling on the demurrers brought by Valuation and U.S. Trust on the ground of res judicata/primary rights, the ruling on behalf of the Clarey [Respondents] was not reversed. [¶] In light of the fact that the ruling on the demurrers as to the Clarey [Respondents] was not based on the bar orders, there is no basis to set aside the final judgments entered in their favor."
In conclusion, the court granted Talley leave to file his SAC against each of the Group of Five Appellants, with any pleadings challenges to be handled later by demurrer.
C. Appeal, Motion to Dismiss the Appeal, Denial Order
The Group of Five Appellants each promptly filed their notices of appeal from the order granting the motion to set aside the judgments/orders of dismissal previously entered in this action.
Also, Talley filed his cross-appeal, challenging the trial court's denial of his motion as against the Clarey Respondents.
Next, Talley filed a motion requesting that this court dismiss the appeals, claiming they had been taken from nonappealable orders.
The Group of Five Appellants opposed the motion to dismiss, successfully arguing the special orders made after judgment were appealable under section 904.1, subdivision (a)(2). In our order, we granted judicial notice requests by Talley and one of the Group of Five Appellants, Valuation, regarding orders in connection with the federal court proceedings and appeal, including the modified Bar orders and other history. We then issued an order denying the motion, and now reach the merits.
III
PRINCIPLES FOR REVIEW
A. Statutory and Inherent Powers of Court
We first limit the scope of the issues before us. We agree with the reasoning of the trial court, insofar as it concluded that the dismissal orders were neither void nor voidable, under section 473, subdivision (d). The court went on, however, to attempt to justify vacating the dismissals on other grounds, based on Restatement analysis. (Grain Dealers, supra, 200 Cal.App.3d at pp. 1088-1089.)
Whatever the basis for the ruling, our standard of review for examining the validity of the trial court's procedural analysis is clearly de novo. Even though "[t]he inclusion of the word 'may' in the language of section 473, subdivision (d) makes it clear that a trial court retains discretion to grant or deny a motion to set aside a void judgment," the foundational question remains on whether the dismissals were in some other respect void or voidable. (Cruz v. Fagor America, Inc. (2007) 146 Cal.App.4th 488, 495-496.) "A trial court has no statutory power under section 473, subdivision (d) to set aside a judgment that is not void: Once six months have elapsed since the entry of a judgment, 'a trial court may grant a motion to set aside that judgment as void only if the judgment is void on its face.' [Citation.] We review de novo a trial court's determination that a judgment is void." (Cruz, supra, at pp. 495-496; Ghirardo v. Antonioli (1994) 8 Cal.4th 791, 799.)
We therefore reject Talley's claim that a pure abuse of discretion standard somehow applies, under which the trial court was free to interpret our prior opinion, or evaluate the effect of the federal appellate proceedings, without regard to the current procedural posture of the case as of the time of the ruling. Rather, to the extent that Talley seeks equitable relief from judgment, such a basis for vacating a dismissal is more restrictive than the statutory grounds of section 473. In Carroll v. Abbott Laboratories, Inc. (1982) 32 Cal.3d 892, 901, footnote 8 (Carroll), the Supreme Court relied on Weitz v. Yankosky (1966) 63 Cal.2d 849, 857, to say, " 'To the extent that the court's equity power to grant relief differs from its power under section 473, the equity power must be considered narrower, not wider.' " For example, a stronger showing of the excusable nature of neglect is required to obtain relief under a court's equity power, than would be necessary for relief under section 473. (Carroll, supra, at p. 901, fn. 8.)
B. Comparable Problems; Preliminary Analysis
At this juncture, we seek to avoid unnecessary distraction by distinguishing various inapplicable legal rules that are argued by the parties. First, this is not a matter in which law of the case principles are useful, because our prior opinion was issued strictly in the context of analyzing pleadings issues.^[1] Talley has never proved any of his allegations, and our prior opinion only addressed whether he should be given leave to further refine his allegations against the corporate defendants. Once the corporate defendants asserted coverage by the preclusive Bar orders, which were still in force at that time, dismissals were appropriately granted upon demurrers in February 2008.
On a procedural note, in our prior opinion, we observed that Talley earlier declined an opportunity to amend his then-operative theories, which included fraud, and aiding and abetting breach of fiduciary duty. Talley now argues that we therefore somehow indicated he did not have to pursue his underlying case at later stages, such as by appealing the later dismissals. He is incorrect, because the first set of dismissals was final as of the time of the first opinion, and we were reviewing pleadings questions and allowing limited leave to amend. Now the question is whether dismissed cases may be revived, so our prior reasoning in that specific context does not rescue him.
We also emphasize that we have no occasion to express any opinions on any merit or lack of merit in Talley's potential claims that remained against the corporate defendants, after our prior opinion (aiding and abetting breach of fiduciary duty, and fraud as to Valuation). Previously, we noted the trial court had earlier deemed some of their remaining demurrer grounds to be moot, which we said was no longer the case (i.e., lack of sufficient facts, lack of standing, uncertainty and limitations bars). In any case, Talley made no amendments, and instead, the corporate defendants brought new demurrers, asserting the Bar orders, and they were sustained without leave to amend. No appeals were filed. Moreover, there is no claim of mistake or fraud that prevented Talley from having a hearing.
Despite the existence of the parallel tracks of the state and federal litigation here, this is not a case in which equitable tolling doctrines may apply, such as where different actions are pending in different courts, and a party may be allowed to pursue one set of remedies, without being penalized in a different forum, that may be able to award different remedies. (See 3 Witkin, Cal. Procedure, supra, Actions, § 741, pp. 966-970, citing, e.g., Addison v. California (1978) 21 Cal.3d 313 [on the concept that state limitations periods may be tolled during the period in which other remedies were being pursued]; Bollinger v. National Fire Ins. Co. (1944) 25 Cal.2d 399.)
Although Talley attempts to argue the various defendants should be collaterally estopped from "re-arguing the same issues decided by the Ninth Circuit holding that the 'judgments' did not preclude Mr. Talley's claims," collateral estoppel is not an appropriate doctrine to resolve these issues. The only issues before the Ninth Circuit were whether the Bar orders were overbroad, in terms of precluding any claims that arose out of an indemnity arrangement, as opposed to "independent" claims. The Ninth Circuit did not have any state law issues before it concerning the interpretation of section 473, under which this motion was brought, nor other procedural issues concerning the finality of state judgments. There is no sufficient identity of issues here. Instead, the Ninth Circuit was ruling on mootness issues, and deciding that Talley had potential avenues of relief that he could pursue in state court, but the Ninth Circuit acknowledged it did not have the power to resolve such state court issues.
Accordingly, Talley is not justified in claiming that either the Ninth Circuit appellate opinion or this court's prior opinion somehow guaranteed him a chance to assert his claims on the merits, against any of the defendants. Instead, both appellate courts were analyzing only the records before them at that time, concerning matters that were not yet final. Later, after our prior opinion became final in October 2007, the corporate defendants obtained dismissals with prejudice in February 2008. It may have been unfortunate for Talley's interests that the Ninth Circuit opinion assessing the Bar orders did not come out until October 2008, but the fact remains that nothing remained pending in this case after February 2008. As a threshold matter, Talley now appears to be attempting to revive an entirely dormant case, in which the dismissals are not void on the face of the record.
This situation is somewhat comparable to the problem of when a plaintiff's pending statutory cause of action is abolished, but where the plaintiff has obtained no vested rights in the statutory claim. In such a circumstance, " 'a repeal of such a statute without a saving clause will terminate all pending actions based thereon.' " (Governing Board v. Mann (1977) 18 Cal.3d 819, 829; also see, e.g., Zipperer v. County of Santa Clara (2005) 133 Cal.App.4th 1013, 1023-1025.) " 'The justification for this rule is that all statutory remedies are pursued with full realization that the legislature may abolish the right to recover at any time.' " (Governing Board, supra, at p. 829.)
Here too, the particular timing of the events in this case means that the factual predicate for the state law dismissal orders, the federal Bar order, was not effectively modified until a later point in time, after all of the dismissals with prejudice occurred of the state law claims. Talley seems to believe that somehow, his case was automatically revived, when that factual predicate was changed in 2008 and 2009 by the Ninth Circuit and the district court's implementing order. We reject that argument, because it presupposes that the state courts retained jurisdiction simply because the federal appeal was pending, but there is no showing of any stay order by the state court to toll or preclude the finality of the dismissals. Talley took the chance of litigating in both state and federal forums, but he essentially abandoned his state case while he waited for the federal appellate opinion to come out. Just because he saw "no point" in appealing the last set of dismissals does not mean he correctly analyzed the procedural posture of the case.
As a preliminary analysis, we find that the last nail in the coffin of his action was hammered in when the two corporate defendants obtained their dismissals with prejudice, and no direct attack on the judgments by appeal was made. He created no vested interest in maintaining this action. That is the crucial issue in this procedural context, not whether this trial court was somehow endeavoring to overrule the substance of the prior trial court rulings, nor whether the court should enforce or comply with the prior opinion that we issued.
In light of these restrictive factors, we next examine whether Talley's theory has any merit, that the trial court nevertheless had the inherent discretion to overcome the difficulties that Talley was encountering in pursuing his state case. (Grain Dealers, supra, 200 Cal.App.3d 1083.)
IV
ANALYSIS: APPEAL
A. Inherent Powers of Court
Even though the trial court nominally ruled that this set of dismissals was neither void nor voidable, it is still necessary for our purposes to better understand the distinction between those two concepts. In Lee, supra, 168 Cal.App.4th 558, the court explained: "The distinction between void and voidable orders is frequently framed in terms of the court's jurisdiction. 'Essentially, jurisdictional errors are of two types. "Lack of jurisdiction in its most fundamental or strict sense means an entire absence of power to hear or determine the case, an absence of authority over the subject matter or the parties." [Citation.] When a court lacks jurisdiction in a fundamental sense, an ensuing judgment is void, and "thus vulnerable to direct or collateral attack at any time." [Citation.]' " (Id. at p. 563.) The court went on to say, " 'A court can lack fundamental authority over the subject matter, question presented, or party, making its judgment void, or it can merely act in excess of its jurisdiction or defined power, rendering the judgment voidable.' [Citation.]" (Id. at p. 565.)
In Topa Ins. Co. v. Fireman's Fund Ins. Companies (1995) 39 Cal.App.4th 1331, 1344-1345 (Topa Ins.), the court discussed the extent of the court's inherent judicial powers, as defined by case law and statute. (§§ 128, 187.) "[T]he concept relates primarily to procedural matters, typically to control the court's own process, proceedings and orders, but also may relate to situations in which the rights and powers of the parties have been established by substantive law or court order but workable means by which those rights may be enforced or powers implemented have not been granted by statute. [Citations.]" (Topa Ins., supra, at p. 1344.; see 2 Witkin, Cal. Procedure, supra, Courts, §§ 173-176, pp. 245-251.) "[C]ourts do have an inherent obligation to decide cases properly brought before them . . . ." (Topa Ins., supra, at p. 1345; italics added.) Our inquiry is whether Talley's request was properly brought before this trial court, in view of the earlier dismissals with prejudice that had been allowed to become final.
B. Nature of Ruling and Restatement Analysis
Talley contends that the trial court correctly followed the analysis in Grain Dealers, supra, 200 Cal.App.3d 1083, of the applicability of the Restatement Second of Judgments, section 16, at pages 146 to 147. The court's ruling, after noting there was no void or voidable order, continued, "the bar orders have been reversed and modified in plaintiff's favor, hence the bar orders are no longer final. In fact, to the extent applicable here, the bar orders no longer exist. [¶] The [Rest.2d] of Judgments provides a solution for the particular procedural problem at bar: 'When the later judgment is no longer open to a motion for a new trial or the like at the trial court level, nor subject to appeal, the fact of the nullification of the earlier judgment may be made the ground for appropriate proceedings for relief from the later judgment . . . .' [Rest.2d Judgments, § 16, com. c, p. 147, italics added.]"
Based upon that reasoning, the trial court's ruling acknowledged the importance of the public policy regarding finality of judgments, but continued: "However, this case is that rare but 'appropriate proceeding' for the relief requested. As noted, the Court of Appeal was aware of the pending appeal in the 9th Circuit. The purpose of the Federal Court appeal was to modify the Bar orders so that this lawsuit could proceed. The issue of whether plaintiff's State claims could be revived following the 9th Circuit decision was briefed and discussed by the 9th Circuit. [¶] Therefore, as to those judgments/orders of dismissal that were based on the bar orders, those judgments/orders of dismissal shall be set aside."
This reasoning is flawed. First, the trial court was incorrect in stating that "to the extent applicable here, the bar orders no longer exist." Although the Bar orders were modified and restricted, that federal ruling did not automatically have legal consequences in state court, but rather, had to be implemented in a pending case. The text of section 16 of the Restatement Second of Judgments specifies that a judgment is not nullified automatically when a predicate judgment is set aside; "appropriate proceedings" must be pursued. In order for Talley to be entitled to implement that ruling, he had to have a pending state case, in which appropriate proceedings could take place. He cannot persuasively argue that merely because his litigation was continuous in nature, and taking place in more than one forum, no dispositive finality of judgment issues could have arisen. (See Romadka v. Hoge (1991) 232 Cal.App.3d 1231, 1237-1238 [following Grain Dealers, supra, 200 Cal.App.3d 1083, to coordinate two conflicting orders issued in different counties].)
In Grain Dealers, supra, 200 Cal.App.3d 1083, it was a crucial factor in the appellate court's reasoning that in the underlying federal case, upon which the state court summary judgment ruling was predicated, "there now is no judgment of any kind." (Id. at p. 1089.) The summary judgment on review accordingly had to be reversed for resolution on the merits of the issue that was particularly important on the insurance coverage problem presented (whether the insured willfully shot the victims, for whom compensation was being sought from his insurer, in that action). (Ibid.) Our case is distinguishable, because the underlying Bar orders still exist and are not void (albeit they exist in modified form), and the federal appellate court ruling was not self-executing, but rather had to be interpreted and applied in the state court case, assuming that one remained pending before the trial court.
Unlike in Grain Dealers, this is not a pending direct appeal from the challenged state court rulings that applied the underlying federal judgment, which had changed. (Grain Dealers, supra, 200 Cal.App.3d at pp. 1088-1089.) Unfortunately for Talley, there was no preserved opportunity to litigate the effect of the federal ruling in state court, due to the dismissals that had been entered based upon the valid Bar orders, and that had not been set aside through any timely direct attack on judgment.
Further, although the Ninth Circuit discussed the issue of whether plaintiff Talley's state claims could theoretically be revived following its decision, that discussion was essential to the mootness question presented, and the court found the case was not moot. However, the court acknowledged that it did not have the power to reinstate the state claims, and that Talley would have to make appropriate application to do so. (In re Heritage Bonds, supra, 546 F.3d at pp. 675-676, 681-682.)
The Restatement language relied upon here contemplates that "the fact of the nullification of the earlier judgment may be made the ground for appropriate proceedings for relief from the later judgment." (Rest.2d Judgments, § 16, com. c, p. 147; italics added.) The earlier "judgment" (Bar order) was not entirely nullified, but was only restricted and modified, and only pleadings issues were before the federal appeals court. Even assuming there was some "nullification," we must examine how these otherwise valid demurrer dismissals that were based upon the Bar orders came before this trial court on collateral attack, if the Restatement analysis is to be applied.
This was not an "appropriate" application for relief, since there was no longer a pending case in which the trial court could modify or correct any previous orders, that were not void. We disagree with Talley that the rule of Levy, supra, 19 Cal.3d 165, 172, granting finality to the federal order pending appeal, can only amount to a temporary bar to the state litigation he was pursuing, such that it may now be subject to removal by the trial court. Talley unpersuasively argues that the language that we used in our prior opinion, that the Bar orders were "currently" deemed to be final, and "[w]e must consider ourselves bound by the broad language of that Bar order," somehow showed that if the Bar orders were eventually lifted, he must be allowed to pursue his claims. However, he could only pursue his claims if he still had a viable lawsuit, such as by appealing (to delay the finality of the dismissals), or by somehow otherwise obtaining a stay order pending the resolution of the federal appellate proceedings.^[2] The Levy rule reasonably promotes certainty of review in the appellate process. In our prior opinion, this court did not have the power to suspend the normal rules about finality of judgment, merely to protect any potential claims that Talley wanted to assert, nor did we intend to make any such representations. The later occurring federal appellate opinion must now be taken into account in the current appeal, and nothing in our prior opinion could have resolved the finality issues that are now presented here.
Where adequate recourse under existing rules and procedures may exist, the concept of inherent judicial powers does not substitute for it nor extend it. (See Topa Ins., supra, 39 Cal.App.4th at pp. 1344-1345.) A court does have inherent power to vacate or set aside a judgment or order void on its face, sometimes colorfully referred to as "a dead limb upon the judicial tree." (8 Witkin, Cal. Procedure, supra, § 9, p. 593.) This process is "outside the scope of authorized methods of direct attack and is appropriate only as a collateral attack." (Ibid.) However, the availability of such equitable relief from judgment is more restricted than relief that may be allowed pursuant to the statutory grounds of section 473. (Carroll, supra, 32 Cal.3d 892, 901, fn. 8.)
Common examples of void judgments or orders that must be set aside on collateral attack, as invalid on the face of the record, are those in which the judgment is beyond the complaint's prayer, or otherwise grants excessive relief. (8 Witkin, Cal. Procedure, supra, Attack on Judgment in Trial Court, § 207, pp. 812-813.) In such cases, where the trial court lacked jurisdiction in a fundamental sense at the time of the challenged rulings, its orders would be void, and " ' "thus vulnerable to direct or collateral attack at any time." ' [Citation.]" (Lee, supra, 168 Cal.App.4th 558, 563-564.)
In our case, the challenged orders of dismissal did not award excessive relief against a defendant, which would be void, but instead, they removed the possibility of Talley obtaining his desired relief in his action, as a matter of law. Since the dismissal orders were proper when rendered, they were neither void nor voidable, as the trial court recognized. Even if they were proper in light of then existing legal principles, did they later become void, because of the later action by the Ninth Circuit that changed their factual predicates‌
No. These dismissal orders were valid when made and no direct attack, by appeal, was taken. They did not become void when the change in the law occurred, to become subject to collateral attack. If Talley had taken action to preserve the state court's jurisdiction (originally obtained when he took action enabling the court to obtain jurisdiction over the defendants, when he sued and served them with process), then there would still be a pending case in which this attack on judgment could be made. However, he allowed the dismissals with prejudice of his action to become final, and then the trial court had no remaining " 'power to hear or determine the case.' " It no longer had ongoing authority over the subject matter and the parties. (Lee, supra, 168 Cal.App.4th at pp. 563-564.)
Since the dismissal orders were not void on their face, this was not a proper method of collateral attack on them, nor an appropriate exercise of trial court equitable powers. We do not find this result to be offensive to principles normally protecting access to the courts, because Talley could have taken appropriate action to preserve the viability of his case, but he did not. He could not legitimately depend on the pending federal proceedings as operating naturally to extend the life of his state case, because they resolved only an issue of pleading, and it was his responsibility to keep his case alive and pending in both forums, so that those pleadings principles could be implemented here in the state forum.
C. Different Dismissal Orders: Application
We next address whether it makes any difference that some of the dismissals with prejudice occurred in 2005 and 2006 (individual appellants; upheld by this court in 2007), and some in February 2008 (corporate defendants). In both situations, the dismissals obtained by the several sets of defendants in this matter are not subject to permissible collateral attack. The change in the factual predicate for the dismissals that occurred in October 2008, when the Ninth Circuit issued its opinion restricting the proper scope of the Bar orders, did not undermine or void the otherwise proper dismissals, and this change does not justify the current orders granting Talley relief from the judgments.
To use a common expression, Talley cannot expect "to make bricks without straw." (Oxford English Dictionary Online (2d ed. 1989), Straw, n. 1, [as of Dec. 15, 2010] ["phrase . . . commonly means '(to be required) to produce results without the means usually considered necessary' "].) In other words, his case is over and the trial court did not have the inherent power to "manage" proceedings that were no longer properly before it, nor may equitable relief be issued to bring this case file back from the dead.
In light of the entire history of the case, the important policy of promoting resolution of cases on the merits had to yield to the natural consequences of Talley's litigation choices in pursuing his actions in different forums, while failing to seek appropriate orders to safeguard their viability.
D. Cross-Appeal: Application
For the same reasons outlined above, Talley's arguments in his cross-appeal must fail. He cannot show that the trial court erroneously failed to grant his motion as to the Clarey Respondents, who were previously dismissed at both the trial and appellate levels.
Rather, the trial court correctly observed that the demurrers as to those defendants were previously sustained on other grounds that did not relate to the Bar orders. The court also observed that the Clarey Respondents had obtained dismissal from the proceedings leading to our prior opinion, and no rulings pertaining to the Clarey Respondents were reversed at that time. There was and is no basis to set aside the final judgments of dismissal entered in their favor, which are not void on the face of the record.
DISPOSITION
The order granting Talley's motion to set aside judgments and orders of dismissal and to file a second amended complaint is reversed in part with directions to enter a new order denying the motion; affirmed as to the balance of the order denying the motion.

Each party shall bear its own ordinary costs of appeal, except Talley shall pay the costs of the Clarey Respondents.

HUFFMAN, J.

WE CONCUR:



McCONNELL, P. J.



BENKE, J.



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