Filed 8/19/22 Holistic Alternative v. City of Los Angeles

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SECOND APPELLATE DISTRICT

DIVISION FOUR

APPEAL from a judgment of the Superior Court of Los Angeles County, Rupert A. Byrdsong, Judge. Reversed.

Michael N. Feuer, City Attorney, Scott Marcus, Chief Assistant City Attorney, Blithe S. Bock, Managing Assistant City Attorney, and Jonathan H. Eisenman, Deputy City Attorney, for Real Party in Interest and Appellant.

Ingber & Associates and Kenneth S. Ingber for Plaintiff and Respondent.

INTRODUCTION

The City of Los Angeles (City), a nonparty to this lawsuit, challenges the judgment entered against it. We conclude the judgment is void and reverse.

FACTUAL AND PROCEDURAL HISTORY

The Holistic Matter

The proceedings leading to this appeal involve two separate lawsuits resulting from a dispute between two medical marijuana dispensaries in the City of Los Angles over use of a trade name.

In the first case (the Holistic matter) which is the case in which this appeal is taken, Holistic Alternative, Inc. (Holistic) filed a lawsuit in March 2016 against Holistic Alternative, Inc. #57/D (#57/D). Holistic alleged that it had sole ownership of the trade name, “Holistic Alternative, Inc.” under which it operated a medical marijuana business within the City of Los Angeles. (Holistic Alternative, Inc. v. Holistic Alternative, Inc. #57/D, et al. (L.A. Super. Ct., case No. BC612908) (hereafter, the Holistic matter).)

In turn, #57/D filed a cross-complaint alleging that Holistic was impermissibly using the trade name, “Holistic Alternative, Inc.,” which belonged to #57D. The cross complaint also alleged that Holistic was using #57/D’s business tax registration certification (BTRC).[1]

The City Case

In the second lawsuit relevant to this appeal, the City case, Holistic filed a petition for writ of mandate and declaratory relief against the City on December 8, 2017, contending that the City impermissibly conveyed its BTRC number to #57/D. (Holistic Alternative, Inc. v. City of Los Angeles et al. (L.A. Super. Ct., case No. BS171827) (hereafter, the City matter).) In January 2018, the trial court deemed the Holistic and City matters related within the meaning of Los Angeles Superior Court Local Rule 3.3(f).

The City’s Licensing Framework After Legalization

On January 1, 2018, recreational marijuana became legal statewide in California. (Holistic Supplements, LLC v. Stark, supra, 61 Cal.App.5th at pp. 550–551.) In response, the City established a licensing framework for storefront marijuana retailers and opened a 60-day window in which then-existing medical marijuana dispensaries could apply for licenses. (L.A. Mun. Code, § 104.07, subd. (a).) (See Holistic Supplements, LLC v. Stark, supra, at p. 551.) In order to be eligible to apply for a license, a medical marijuana dispensary needed (1) a certain BTRC (L.A. Mun. Code, §§ 104.01, subd. (a)(22), 104.07, subd. (a)) and (2) to comply with the City’s previous marijuana enforcement regime (L.A. Mun. Code, § 104.01, subd. (a)(22); L.A. Ord. No. 182580). If an applicant met these requirements, the City would issue its licensing decision in writing. An aggrieved applicant could seek an administrative hearing on appeal within 15 days of an adverse decision. (L.A. Mun. Code, §§ 104.07, subd. (c), 104.10.)

The License Applications

On January 19, 2018, #57/D filed a retail marijuana storefront license application with the City, relying on BTRC No. 0002247944-0001-1. On January 25, 2018, Holistic also filed a license application and relied on the same BTRC.

In February 2018, the City approved #57/D’s application by issuing an invoice for the requisite license fees. The City subsequently denied Holistic’s application because #57/D had already relied on the BTRC used by Holistic. However, the City informed Holistic of its right to appeal the decision. Holistic did not file an appeal.

Initial Stipulation Discussions

On February 7, 2018, the trial court held proceedings on the Holistic and City matters. The proceeding in the Holistic matter involved a request for a preliminary injunction not here relevant. After the court’s ruling, the court turned to the City matter, which was on calendar for trial setting.

Counsel for Holistic stated that the case was ready to be set for trial. Counsel for the City indicated the crux of the dispute was which party (Holistic or #57/D) had the right to the trade name “Holistic Alternative, Inc.,” and the BTRC associated with that name. Therefore, according to the City’s counsel, the dispute rested on the outcome of the Holistic matter. Counsel then requested that “if the court would be inclined to stay [the City matter] pending the outcome of [the Holistic matter], . . . the City has no problem stipulating to the outcome of that case.” Counsel for Holistic disagreed with the City’s characterization of the case, and the trial court declined to stay the action.

Later, on the record, counsel for Holistic inquired as to a potential stipulation by the City regarding the outcome of the Holistic matter. The trial court responded, “Hey, it’s your case. If you want to dismiss it, dismiss it.” When counsel for Holistic further inquired about a stipulation, the court cut counsel off by saying, “This is for a conversation with counsel outside the courtroom.”

The Dismissal of the City Case

Almost a year later, in January 2019, counsel for Holistic emailed the City’s counsel a proposed stipulation to consolidate the Holistic and City matters. In an exchange of emails, counsel for the City responded that consolidation was not required. Counsel for Holistic then stated he would dismiss the City, but he would like a stipulation to reflect the City’s position regarding the outcome of the Holistic matter. Counsel for the City agreed to review a potential stipulation regarding the outcome of the Holistic matter or a motion for consolidation.

Counsel for Holistic sent a proposed stipulation regarding the outcome of the Holistic matter. Counsel for the City responded that the language was much too broad. Specifically, the stipulation required the City to agree to be bound by “all final, non-appealable findings, rulings and Orders in the [Holistic matter].” Counsel for the City stated that the trial court did not need the City’s approval to enter judgment in the Holistic matter, and “if there is anything that [the City contends] is improper, [it would] not . . . foreclose any potential rights the City may have.” The next day, on January 9, 2019, Holistic filed a request for voluntary dismissal of the City matter without any stipulation signed by the parties.

The Settlement of the Holistic Matter

The Holistic matter then came before the trial court for a bench trial on February 19, 2020. However, on February 26, 2020, counsel represented that the parties had reached a settlement. The terms of the settlement were stated in open court. Counsel for Holistic and #57/D were to prepare stipulated findings of fact and conclusions of law in which the trial court would find that both parties had a right to a BTRC. In addition, #57/D would retain possession of the BTRC currently in their possession and would also gain the rights to the name “Holistic Alternative, Inc.” In addition, #57/D would pay Holistic $100,000 up front. Holistic would then take the court order to the City and seek to have a BTRC issued to it. If the City were to grant the BTRC, #57/D would pay an additional $100,000 to Holistic. If the City were to deny the BTRC, #57/D would pay $100,000 and then an additional $800,000 judgment in favor of Holistic.

The Order After Trial

On June 1, 2020, Holistic moved to enforce the terms of the settlement agreement based on #57/D’s refusal to make the initial upfront payment of $100,000 to Holistic and to cooperate in submitting the stipulated findings of fact and conclusions of law as required. (Code Civ. Proc., § 664.6.) Eventually, the parties jointly submitted an “order after trial,” which the trial court signed on August 28, 2020.

As relevant here, the order stated that the City “was a party to this dispute by way of a related case entitled Holistic Alternative, Inc. v. City of Los Angeles, et al. (Case No. BS171827). The City of Los Angeles’ counsel . . . advised the Court and represented to counsel that the City of Los Angeles would stipulate to the outcome of this action. Accordingly, Case No. BS171827 was dismissed.” Moreover, both parties had demonstrated a legal and equitable right to a BTRC, and to lawfully operate a marijuana business in the City of Los Angeles. Therefore, the City “shall allow [#57/D] to continue to hold [its] BTRC . . . and . . . shall immediately issue a second BTRC to [Holistic] with all of the rights and privileges necessary to apply for marijuana licensing.” Notice of entry of the order after trial was filed on September 1, 2020. On October 2, 2020, Holistic withdrew its motion to enforce the settlement.

On October 5, 2020, Holistic represented to the trial court that the City indicated it would comply with the order after trial. However, on November 13, 2020, Holistic filed an ex parte application to amend the order after trial. Holistic contended the City had not complied with the order and recently asserted that it is unclear whether the trial court intended for both parties to operate retail marijuana businesses. In order to resolve the ambiguity, Holistic submitted a proposed amended order after trial, which included an additional paragraph for purposes of “clarification of the intent of the Court.” The additional paragraph stated that #57/D would be entitled to continue its operations under the existing BTRC and its existing license. Holistic would be permitted to immediately apply for a BTRC and license at Holistic’s specified location with the same rights and privileges afforded by the existing BTRC. In addition, the City would be compelled to issue the requested BTRC and license and grant Holistic the right to operate a retail marijuana storefront at the specified location, with the same rights and privileges the existing BTRC affords #57/D.

On November 16, 2020, the ex parte application was reviewed in chambers, off the record, and the trial court declined to hear argument. Based on the grounds set forth in the application, the court signed the amended order after trial. Notice of entry of the amended order after trial was filed that day.

The Motion for Reconsideration

On November 20, 2020, the City moved ex parte for an order shortening time to hear its motion for reconsideration of the amended order after trial. The City contended the amended order after trial did not consider aspects of the Los Angeles Municipal Code nor did it comply with due process. The City further contended that the amended order after trial “fails to address how, as a non-party to this lawsuit, the Court’s factual findings could result in obligations on the City.” On December 10, 2020, the trial court denied the City’s ex parte motion “based on counsel’s representation in 2018 that the City would stipulate to the outcome of this case.”

The Motion to Vacate

On December 22, 2020, the City then moved to vacate the amended order after trial as it was “void for lack of jurisdiction over the City.” On March 22, 2021, the trial court denied the motion. The court reasoned that the City was estopped from claiming that it was not bound by the stipulation made in the related case.

This Appeal

On January 6, 2021, the City appealed from the November 16, 2020 amended order after trial and the December 10, 2020 order denying the City’s ex parte motion. On April 5, 2021, the City then appealed from the March 22, 2021 order denying the City’s motion to vacate. We consolidated the appeals. [2]

DISCUSSION

The City contends that judgment is void because the City is not a party to Holistic matter in which the amended order after trial was entered. We agree.

“It is an ‘elementary common law principle of jurisprudence’—followed in California, as elsewhere—that ‘a judgment may not be entered either for or against one not a party to action or proceeding.’ (Fazzi v. Peters (1968) 68 Cal.2d 590, 594.)” (Hassell v. Bird (2018) 5 Cal.5th 522, 549 (J. Kruger, concurring); Bronco Wine Co. v. Frank A. Logoluso Farms (1989) 214 Cal.App.3d 699, 717–718.) “This common law principle is backed by the Constitution’s guarantee of procedural fairness—a guarantee that, at its core, entitles persons to meaningful notice and opportunity to be heard before a court fixes their legal rights and responsibilities. (Hansberry v. Lee (1940) 311 U.S. 32, 40.)” (Hassell v. Bird, supra, at p. 549; see Lambert v. People of the State of California (1957) 355 U.S. 225, 228; Twining v. New Jersey (1908) 211 U.S. 78, 110–111.) A judgment entered in contravention of this principle is void. (Fazzi v. Peters, supra, at p. 594; see In re Wren (1957) 48 Cal.2d 159, 163 [“a judgment may not be entered either for or against a person who is not a party to the proceeding, and any judgment which does so is void to that extent”]; see also Sharon v. Sharon (1888) 75 Cal. 1, 39 [a judgment in favor of persons not parties to the lawsuit “was irregular and void”]; Bronco Wine Co. v. Frank A. Logoluso Farms, supra, at p. 717.)

Tokio Marine & Fire Ins. Corp. v. Western Pacific Roofing Corp. (1999) 75 Cal.App.4th 110 (Tokio) is instructive. In Tokio, the parties to the litigation (a general contractor and a roofing contractor) and their respective insurers entered into a stipulated judgment that allowed for interim allegations of liability pending trial. (Id. at p. 113.) Although the general contractor’s insurer (a nonparty to the litigation) signed the stipulation, the stipulation said nothing about whether the insurer had submitted to jurisdiction, would be added as a party, or had agreed to be named as a judgment debtor. (Id. at p. 114.) After the roofing contractor received a favorable judgment at trial against the general contractor, it filed a motion to add the general contractor’s insurer as an additional judgment debtor. The trial court granted the motion. (Id. at p. 115.)

The court of appeal reversed. As pertinent here, the court held that the addition of the insurer as a judgment debtor violated due process, because the trial court lacked jurisdiction over the insurer. (Tokio, supra, 75 Cal.App.4th at p. 119.) As the court explained, the insurer had not automatically become a party to the litigation by becoming a party to the stipulation, and its entry into the stipulation was not tantamount to an intervention in the case or confession of judgment because the statutory requisites for those procedures had not been met. (Id. at pp. 119–121.)

Here, it is undisputed that the City was not a party to the Holistic matter. Rather, the City was a party only to a related case (the City matter), which was ultimately dismissed. Even assuming that the colloquy at the trial setting conference for the Holistic matter was sufficient to constitute a stipulation by the City to abide by the outcome of the Holistic matter (a doubtful conclusion on the entire record before us), the City did not automatically then become a party to this litigation, and it could not be foreclosed by a theory of estoppel from challenging the court’s personal jurisdiction. (See Tokio, supra, 75 Cal.App.4th at pp. 119–120; see also Canaan Taiwanese Christian Church v. All World Mission Ministries (2012) 211 Cal.App.4th 1115, 1127.)[3] Moreover, the City did not submit to the trial court’s personal jurisdiction by filing the ex parte motion or subsequent motion to vacate. (See Serrano v. Stefan Merli Plastering Co., Inc. (2008) 162 Cal.App.4th 1014, 1029 [“A party whose participation in an action is limited to challenging the court’s personal jurisdiction does not make a general appearance”]; see also Code Civ. Proc., § 418.11 [“[a]n appearance at a hearing at which ex parte relief is sought, or an appearance at a hearing for which an ex parte application for a provisional remedy is made, is not a general appearance”].) Accordingly, the judgment is void to the extent it applies to the City, a nonparty to the lawsuit.

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DISPOSITION

The judgment against nonparty City of Los Angeles is reversed. The City of Los Angeles is awarded its costs on appeal.

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

WILLHITE, J.

We concur:

MANELLA, P. J.

LUI, J.*

*Administrative Presiding Justice of the Second District Court of Appeal,

Division Two, assigned by the Chief Justice pursuant to article VI, section 6

of the California Constitution.

[1] “Every business within the City of Los Angeles must pay a business tax and obtain a BTRC in order to operate. (L.A. Mun. Code, § 21.03, subds. (a) & (b).) It is not a permit to do business, so obtaining a BTRC does not ‘authoriz[e] the conduct or continuance of any illegal business or of a legal business in an illegal manner.’ (Id. § 21.01.)” (Holistic Supplements, LLC v. Stark (2021) 61 Cal.App.5th 530, 548–549.) “Under this scheme . . . a BTRC is a required, but not necessarily sufficient, step to operate a business in the City.” (Id. at p. 549.)

[2] #57/D did not file a respondent’s brief and therefore is not a party to this appeal.

[3] To the extent Holistic contends that the trial court was enforcing the City’s alleged oral stipulation pursuant to Code of Civil Procedure section 664.6, the City was not a party to the litigation and therefore this statute does not apply. (See Tokio, supra, 75 Cal.App.4th at p. 119.)