Wednesday, April 18, 2018
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Man Lost Ownership Interest by Lying That He Had None—Court of Appeal
Justice Zelon: Partner in Business Who Falsely Represented in His Dissolution of Marriage Proceeding That He Had No Stake in the Company Is Collaterally Estopped From Contending to the Contrary
By a MetNews Staff Writer
A man who owned a 50 percent interest in a business, with his brother owning the other half, and who represented in a dissolution of marriage settlement agreement that he had no ownership interest, was collaterally estopped from later claiming, in an action against his brother, that he did, the Court of Appeal for this district held yesterday.
The unpublished opinion, by Acting Presiding Justice Laurie Zelon of Div. Seven, affirms a judgment of dismissal following Los Angeles Superior Court Judge Lisa Hart Cole sustaining a demurrer without leave to amend.
David Vafa brought the action against Ray Vafa to wind up their partnership and for an accounting. He sought a declaration as to his 50 percent ownership and the imposition of a constructive trust.
Settlement Agreement Representation
Ray Yafa demurred on the basis of collateral estoppel. He pointed out that his brother, in dividing property with his then-wife, “warranted and represented that he has no right, title, or interest, whether present or contingent, in EuroCoach Company.”
That company had conducted an automobile sales business on Robertson Boulevard, the eastern boundary of West Los Angeles, and owned two parcels of property and had interests in investments.
It was Ray Yafa who suggested that the false representation be made in the divorce action in order to prevent his brother’s wife from gaining an interest in the business. As the result of suggesting that ploy, the falsehood was turned into fact.
Ray Yafa has gained sole ownership because, Zelon declared, because collateral estoppel precludes David Yafa’s claim to any ownership interest in the business.
Issue Preclusion Applies
Zelon wrote:
“Collateral estoppel, a form of res judicata, is a doctrine of issue preclusion: it ‘precludes relitigation of issues argued and decided in prior proceedings.’…There are five threshold requirements for the application of the doctrine: the issue must be identical to that decided in the previous proceeding; the issue must have been actually litigated; the issue must have been necessarily decided; the decision in the prior proceeding must be both final and on the merits; and the party against whom issue preclusion is asserted must be the same as, or in privity with, the party in the prior proceeding….All of these requirements were met here: David is the party in both proceedings; the issue of ownership in the partnership is the same, and is necessary to the decision in both proceedings; and the judgment in the prior proceeding is final.”
David Yafa insisted that he did not intend to be bound by his assertion of lacking an ownership interest outside the confines of the marital dissolution action. Zelon responded by citing the California Supreme Court’s 1990 decision in California State Auto. Assn. Inter-Ins. Bureau v. Superior Court where then-Chief Justice Malcolm Lucas said that “a stipulated judgment may properly be given collateral estoppel effect, at least when the parties manifest an intent to be collaterally bound by its terms.”
Intent Inferred
Lucas, now deceased, went on to observe:
“It seems fair to say that by specifically stipulating to the issue of liability, the parties intended the ensuing judgment to collaterally estop further litigation on that issue. Were their intent otherwise, the parties easily could have expressly restricted the scope of the agreement.”
Zelon noted that “[o]ther authority confirms that a party may not freely disregard the impact of a stipulation for judgment, especially when, as here, the parties make clear their intent to resolve all issues pertaining to their relationship.”
The plaintiff argued that under the Court of Appeal’s 1995 decision in Landeros v. Pankey, the question of intent of the parties as to the future effect of their agreement cannot be determined in connection with a demurrer. In that case, Acting Presiding Justice Charles Vogel of this district’s Div. Four (later presiding justice, now back in law practice) said that “the stipulated judgment contains no express language manifesting an intention of the parties.”
Contrasting Fact Situations
Differentiating that case, Zelon said:
“Here, in contrast, there is no ambiguity. The parties clearly and specifically documented their intention to resolve all issues pertaining to the marriage, including, but not limited to, the assets of the spouses and the community. The stipulated judgment sufficiently demonstrated David’s intention to be bound, and provides the requisite showing for the application of collateral estoppel to bar this action.”
For sake of issue preclusion, Zelon said, it does not matter that Ray Yafa was not a party to the dissolution proceeding.
The case is Vafa v. Vafa, B280707.
The counsel on appeal were Lewis R. Landau, for David Vafa, and Richard T. Baum, Ray Vafa.
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