DKN Holdings v. Faerber, No. E055732 (D4d2 Apr. 25, 2014).
The court holds that a judgment that plaintiff won against one of three jointly and severally liable defendants is res judicata as to the other two because the claims against all three defendants assert the same primary right. Thus, as to these defendants—who were sued in the original case but dismissed without prejudice because they weren’t served—plaintiff cannot get any recovery in a later filed action. I’m not so sure.
For reasons that have long ceased to exist (see here and here if you are interested) California’s preclusion rules are based on a nineteenth century formalist theory called the primary rights doctrine. Under the doctrine, a “cause of action” consists of the invasion of a primary right. What is a primary right, you ask? California’s courts have been failing to satisfactorily answer that question for 150 years.
Generally, the theory “provides that a ‘cause of action’ is comprised of a ‘primary right’ of the plaintiff, a corresponding ‘primary duty’ of the defendant, and a wrongful act by the defendant constituting a breach of that duty. The most salient characteristic of a primary right is that it is indivisible: the violation of a single primary right gives rise to but a single cause of action.” Crowley v. Katleman, 8 Cal. 4th 666, 681 (1994) (citations omitted). “As far as its content is concerned, the primary right is simply the plaintiff’s right to be free from the particular injury suffered. It must therefore be distinguished from the legal theory on which liability for that injury is premised: “Even where there are multiple legal theories upon which recovery might be predicated, one injury gives rise to only one claim for relief.” Id. at 681–82 (citations omitted).
While that might seem more or less commonsensical, the analysis tends to get bogged down when it comes to how generally or broadly to define the concept of a particular injury. And—like many legal issues where the level of generality at which a right is expressed can drive the results—the courts have never been able to articulate a satisfactory rule to address the framing issue. So, in application, the doctrine often seems pretty arbitrary.
This case avoids the framing issue, but gets into a thicket on another, even less clearly delineated one: If three defendants are jointly and several liable for a single breach of a contract, is that the invasion of one primary right, or three. And if the answer is one, would permitting separate suits against different defendants result in a splitting of the right, such that res judicata would bar any cases after the first judgment. The court here says one and yes, but this opinion is rather unconvincing.
The basic facts are relatively simple. Plaintiff is a landlord that leased commercial space to three co-lessees in a single lease that makes them jointly and severally liable for non-payment of rent. In a first action, plaintiff sued all three tenants, but never served two of them. Plaintiff won a $2.8 million judgment against tenant #1, and tenant #2 and #3 were dismissed without prejudice as unserved defendants. Although plaintiff could arguably have availed itself of Code of Civil Procedure § 989, which provides a procedure to add unserved joint debtors to a judgment, it didn’t take that route. Instead, it sued #2 and #3 in a separate case, who demurred on res judicata grounds, arguing that the first case was a bar as to them, even though they were not parties to the judgment. The trial court granted the demurrer.
In any jurisdiction that does not follow the primary rights doctrine, this case would be easy. Under § 49 of the Restatement (Second) of Judgments, the judgment against tenant #1 does not preclude a later case against tenant ##2 and 3, although plaintiff’s potential recovery is capped at the award in the first case based on issue preclusion principles. Plaintiff can then collect against each of the defendants until the total award is satisfied.
But in California, not so much. The court here reaches a different result. It reasons that the plaintiff’s primary right was the right to recover money under the lease, and thus that both cases were based on the same primary right, even though there were different defendants. Thus, according to the court, the first judgment was a bar to any liability of defendants ## 2 and 3.
To get there, the court does some fishy stuff. First, it rejects the plaintiff’s argument that res judicata must be mutual—that it applies only to judgments between the same parties. Notably, there any number of cases that recite a three-element test for res judicata that includes the element that “the parties in the present proceeding or parties in privity with them were parties to the prior proceeding.” To get to a different result, the court here cites two California Supreme Court cases—Arias v. Superior Court, 46 Cal. 4th 696 (2009) and Vandenberg v. Superior Court, 21 Cal. 4th 815, 828 (1999)—for the propositions that “[t]he party seeking the benefit of the [res judicata] doctrine . . . need not have been a party to the earlier lawsuit” and “[o]nly the party against whom the doctrine [of res judicata] is invoked must be bound by the prior proceeding.”
Why, one might ask, does “res judicata” appear in brackets in both quotes? Because both Arias and Vandenberg are collateral estoppel cases. No doubt, the doctrines are related. But while non-mutual collateral estoppel has been around for quite a while, no one, even in California, ever talks of non-mutual res judicata. Indeed, Parklane Hosiery Co., Inc. v. Shore, where the U.S. Supreme Court abandoned the mutuality requirement for collateral estoppel in federal law, is all about how collateral estoppel is different from res judicata because of the “obvious difference in position between a party who has never litigated an issue and one who has fully litigated and lost[.]” 439 U.S. 322, 327 (1979).
Then, after some general discussion of primary rights theory, the court rejects the argument that “because joint and several obligors are jointly and severally, or individually, liable on an obligation, a claim against each of them constitutes a separate claim.” To get to this result the court declares that “the California Supreme Court’s 56-year-old decision” in Williams v. Reed, 48 Cal. 2d 57, 65 (1957), which says that a “judgment obtained against one is not a bar to an action against the remaining joint and several obligors,” is “‘wrong’ and incorrectly states the law.” It takes issue with a similar quote in the Witkin treatise. And then it distinguishes two other cases—including another Supreme Court case—that it admits stand for the proposition that “courts are generally authorized to render separate judgments, in the same action or in separate actions, against joint and several obligors” because none of them specifically holds that a final judgment in the first action will not bar the second.
I take no issue with taking issue with Witkin—I too think the treatise takes liberties with the cases it cites, and is in desperate need of a modernization. But it seems a little jarring for a court of appeal to refer to a decision of the Supreme Court as “wrong,” even if it’s old and the cited passage is arguably unnecessary to the result. That’s especially true when the only authority cited to the contrary is a parenthetical quotation from an almost as old court of appeal case, where the court remarked that “[a] single cause of action may not be maintained against various defendants in separate suits as the plaintiff has suffered but one injury.” Lippert v. Bailey, 241 Cal. App. 2d 376, 382 (1966).
Notably, Lippert doesn’t cite anything on this point. And the quoted language is an aside in the Lippert opinion, where the court is responding to a somewhat inscrutable argument advanced by the appellant. The result in Lippert, however, is not based on preclusion. It is, instead, grounded in an uncontroversial principle of agency law that, absent an agent's guarantee, a party has no actionable claim against an agent for a breach of the party’s contract with the agent’s principal. Put in terms of this case, it would be as if tenants #2 and #3 weren’t tenants at all, but instead, tenant #1’s real estate agents. The real issue in Lippert isn’t preclusion, but simple failure to state an actionable claim. So if Williams is dicta, Lippert is super dicta.
The court also fails to address the practical issue that might arise in a case like this: what happens when there are impediments to serving or obtaining personal jurisdiction over one of the co-obligors, such that it is practically impossible to litigate against all of them in the same case? Suppose for instance that tenant #2 becomes disabled or flees the country. That could toll the statue of limitations against tenant #2, see Cal. Code Civil Proc. §§ 351–352.1, but obviously not as to #1 and #3. Is the plaintiff forced to decide between blowing the statute on two defendants and being precluded from suing the other? Especially given that res judicata is a judge-made doctrine that encourages efficiency and fairness, this rule doesn’t seem to make much practical sense.
Don’t get me wrong. I can’t find a California case that clearly holds that a judgment in favor of plaintiff against joint and several obligor #1 is not res judicata against joint and several obligors #2 and #3. But if I were going to go up against the sensible majority rule in most jurisdictions, a lot of California Supreme Court dicta, a leading (albeit imperfect) treatise on California law, the numerous cases that list “the parties in the present proceeding or parties in privity with them were parties to the prior proceeding” as an element of res judicata, and a bunch of other cases that stand for more or less analogous points about the mutuality of parties for res judicata, see Gottlieb v. Kest, 141 Cal. App. 4th 110, 154 (2006); Knowles v. Tehachapi Valley Hosp. Dist., 49 Cal. App. 4th 1083, 1090 (1996), I would want more convincing than one line of dicta in a 1966 court of appeal opinion and some quotes where “collateral estoppel” is replaced with “[res judicata].”
Affirmed.
**Note: Review granted July 23, 2014.
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