Division Eight Refuses to Follow Manier’s “Allegations Alone Suffice” Estoppel Theory.
In a wild case involving contentions of contract formation, untimely acceptance, and a critically forged document, the Second District, Division Eight affirmed a trial court’s equitable rulings but modified a judgment to delete an attorney’s fees award against a nonsignatory plaintiff to the alleged real property purchase agreement. In doing so, yet another division of the Second District aligned itself with Leach v. Home Sav. & Loan Assn., 185 Cal.App.3d 1295, 1306-1307 (1986) and parted company with Manier v. Anaheim Business Center Co., 161 Cal.App.3d 503, 507-508 (1984) in the debate about whether merely alleging fee recovery in pleadings is enough to give rise to application of the judicial estoppel doctrine. The case is Hills v. Pro Value Properties, Inc., Case No. B193025 (2d Dist., Div. 8 Aug. 8, 2008) (unpublished).
Hills concerned several appellants’ (including Hills’) claim to be the legal and equitable owner of a Los Angeles residence under an aborted purchase transaction. Appellants brought several equitable and legal claims all aimed toward an adjudication that they were the owners of the residence. Another appellant, not Hills, was a signatory to the alleged purchase documents, although Hills and others did allege and pray entitlement to attorney’s fees in their pleadings. The trial court found against appellants, determining no contract had been formed because appellants relied principally on a forged document. The trial court also found that appellants’ principal witness Moore was not credible based upon prior falsification of signatures on deeds and lis pendens instruments as well as having gone through several bankruptcies and owing unsatisfied judgments to several creditors. The trial court also awarded prevailing defendants $320,868.25 in attorney’s fees as against appellants (including Hills), even though the defense requested an award of $580,594.25 in fees.
Appellants appealed and lost, although the judgment was modified to eliminate the fees award against Hills.
Justice Flier, writing for a 3-0 panel of the Second District, Division Eight, confronted the judicial estoppel debate that has been the subject of prior posts on May 18, 2008 (discussing the Sixth District’s recent Blickman decision) and August 7, 2008 (discussing the Second District, Division Five’s unpublished Zislis opinion). Because Hills was a nonsignatory and only alleged entitlement to fees in the causes of action involving him, the appellate panel had to choose between the Leach perspective (no estoppel unless Hills was actually entitled to recover fees) or the lines of cases typlified by Manier (nonsignatory Hills’ mere claim for fees gives rise to equitable estoppel). Justice Flier, on behalf of Division 8, expressly found that Leach “is the better approach. Enforcing an attorney fees clause against a nonsignatory who would not actually have been able to collect attorney fees gives [Civil Code] section 1717 an unfairly broad scope.” (Slip Opn., at p. 14.) Hills was not even a named party in the specific performance count, but to five causes of action that were dismissed prior to trial. However, in an interesting twist, the trial court—over appellants’ objection—actually entered judgment against Hills as a party defendant on the specific performance count. This gave Justice Flier an opportunity to show why the panel believed Leach was the preferable approach: “Since we do not follow Manier v. Anaheim Business Center Co., we do not discuss what effect this would have on the fact that Hills was not a named plaintiff in this cause of action, i.e., is the effect of the judgment that Hills should be estopped from claiming that the fee provision cannot be enforced against him? The unrealistic nature of this exercise is another reason why in this case we think that Leach v. Home Savings & Loan Assn. is preferable to Manier.” (Slip Opn., at p. 13 n. 9.)
The Second District, in at least three divisions, has followed Leach over the Manier estoppel-oriented cases. See, e.g., Hills (Division 8--unpublished); Zislis (Division 5—unpublished); Myers Bldg. Indus., Ltd. v. Interface Technology, Inc., 13 Cal.App.4th 949, 962 n. 12 (1993) (Division 5—published); Tran v. Nguyen, Case No. B141907 (Dec. 26, 2001) (Division 4—unpublished).
BLOG BONUS COVERAGE—The trial court credited testimony on forgeries that was offered by Howard C. Rile, a Long Beach-based questioned documents examiner who Marc Alexander and Mike Hensley have had the pleasure of working with. Mr. Rile is well respected in his field. Hills also has a nice discussion of California’s “equity first” rule under which equitable issues are tried first (and, if they dispose of legal issues, means that nothing further remains to be tried before the jury). See Slip Opn., at pp. 8-9; Nwosu v. Uba, 122 Cal.App.4th 1229, 1238 (2004).