Petitioner Rebecca D. Duke seeks writ relief based on her claim that real parties in interest Gregory Klis and David W. Lewis (real parties) committed conversion when they enforced a writ of execution against shares of stock Duke owned in Skinsation Medical Aesthetics, a Medical Group, Inc. (Skinsation). Duke and real parties were, individually, guarantors on a liability that gave rise to the judgment from which the writ of execution arose. Real parties contend they were legally entitled to take an assignment of the judgment and enforce the full amount of the debt against the principal obligor, Skinsation. According to real parties, this permitted them to levy Duke's shares of stock in Skinsation. The trial court sustained real parties' demurrer without leave to amend as to Duke's cause of action for conversion.
Duke seeks writ review, claiming real parties were limited to obtaining contribution for Duke's share of the debt either through a noticed motion or by a separate civil action. As a result, she asserts real parties' demurrer to her cause of action for conversion should have been overruled. The petition for writ of mandate is granted.
FACTUAL AND PROCEDURAL HISTORY
Duke is the founder and was the chief executive officer and general manager of Skinsation. Real parties were investors with Duke and were members of the board of directors. In 2011, Skinsation, Duke, and real parties were sued by Elizabeth Callaway, as Trustee of the Callaway Living Trust UTD, 1989, over a commercial lease, which Duke and real parties personally guaranteed. A judgment of $385,072.10 was entered against Skinsation, real parties, and Duke, jointly and severally (the Callaway judgment). At that time, Duke owned 49 percent of Skinsation stock and real parties combined owned the remaining 51 percent.
In 2013, Skinsation's outstanding capital stock had a fair market value of between $1.2 million and $1.5 million.
On or about June 2, 2014, real parties entered into a settlement agreement with Callaway under which Callaway released real parties from all obligations under the judgment and assigned all right, title, and interest in the judgment to real parties.
On March 12, 2015, real parties served Duke with a notice of levy on all of her capital stock in Skinsation, claiming $448,029.90 was necessary to satisfy the judgment. Duke claims her shares were devalued by at least $100,000 based on a 2013 valuation conducted by Skinsation's accountancy firm.
On April 14, 2015, a sheriff's sale was conducted. Real parties purchased all of Duke's shares of Skinsation at the sale.
On November 23, 2015, Duke filed a first amended complaint stating the following causes of action: (1) wrongful termination of employment in violation of implied agreement to terminate only for cause; (2) wrongful termination of employment in violation of the implied covenant of good faith and fair dealing; (3) shareholder derivative claim for injury to corporation (resulting from Duke's termination and other actions taken by real parties) ( Corp. Code, § 800 et seq. ); (4) shareholder's derivative claim for breach of fiduciary duty ( Corp. Code, § 800 et seq. ); (5) conversion; (6) indemnity ( Civ. Code, § 2847 ); (7) implied contractual indemnity; (8) defamation per se; (9) unauthorized use of name and likeness in advertising ( Civ. Code, § 3344 ); (10) violation of right of publicity; (11) unfair business practices and unfair competition ( Bus. & Prof. Code, § 17200 et seq. ); and (12) contribution from joint judgment debtors ( Code Civ. Proc.,
On December 28, 2015, real parties demurred to various causes of action in Duke's first amended complaint, including Duke's cause of
On February 29, 2016, at the hearing on the demurrer, Duke asserted the sheriff's sale had resulted in real parties obtaining stock valued far in excess of Duke's proportional share of the judgment. Following argument on the issue, the court took the matter under submission.
After the contested hearing, the court sustained the demurrer to Duke's cause of action for conversion without leave to amend. In addition, the court granted real parties' motions to strike Duke's first amended complaint, finding Duke did not obtain proper leave to amend after the court sustained real parties' demurrer, and it overruled real parties' demurrer to the third, fourth, and seventh causes of action.
ANALYSIS
I. Grounds for Granting Writ Review
Duke contends that without writ review, the anticipated amendment of her complaint will forfeit her right to appellate review of the trial court's erroneous ruling
A writ of mandate " 'must be issued in all cases where there is not a plain, speedy, and adеquate remedy, in the ordinary course of law. It must be issued upon the verified petition of the party beneficially interested.' " ( Braude v. City of Los Angeles (1990)
However, where an order is only reviewable on appeal from a later judgment, the court will consider the following factors in determining the
Here, Duke contends writ review is appropriate because she lacks a plain, speedy, and adequate appellate remedy. She specifically claims that without writ review, she is faced with an untenable choice: either she must stand on her first amended complaint so as not to forfeit review of the court's erroneous ruling on her conversion claim, or she must seek leave to file a second amended complaint, which will forfeit review of the error. Her assumption is incorrect.
"The rule that a choice to amend waives any error can reasonably be applied only on a cause-of-action-by-cause-of-action basis ." ( County of Santa Clara v. Atlantic Richfield Co. (2006)
"If a plaintiff chooses not to amend one cause of action but files an amended complaint containing the remaining causes of action or amended versions of the remaining causes of action, no waiver occurs and the plaintiff may challenge the intermediate ruling on the demurrer on an appeal from a subsequent judgment. It is only where the plaintiff amends the cause of action to which the demurrer was sustained that any error is waived." ( Ibid ., italics added; see National Union Fire Ins. Co. of Pittsburgh , PA v. Cambridge Integrated Services Group , Inc . (2009), 44, 171 Cal.App.4th 35 ; Lee v. Hanley (2015) 89 Cal.Rptr.3d 473 , 1232, 61 Cal.4th 1225 , 191 Cal.Rptr.3d 536 .) 354 P.3d 334
Thus, whether Duke decides to stand on her first amended complaint or seeks leave to amend her complaint to allege additional causes of action, neither course of action will necessarily result in forfeiture. Only if she amends her cause of action for conversion
Duke further contends writ review is required to prevent a needless and expensive trial and reversal. She directs us to Coulter v. Superior Court (1978)
We find persuasive the reasoning in Coulter v. Superior Court . Here, the trial court's ruling on real parties' demurrer has deprived Duke of pleading her cause of action for conversion. Without writ review, she will only be able to challenge the trial court's ruling on her conversion claim following the conclusion of trial. Thus, timely appellate intervention by extraordinary writ would permit the entire case to be disposed of in a single trial. Although Duke may ultimately prevail on her claim for contribution, we do not think this possibility should fоreclose her from pursuing her claim for conversion. Her claim for contribution may not afford her the same remedies the claim for conversion might. Therefore, we exercise our discretion to reach the merits in this case.
A. Standard of Review
Our standard of review of an order sustaining a demurrer on the ground that the complaint fails to state facts sufficient to constitute a cause of action is well settled. We review the sufficiency of the complaint de novo. ( Zelig v. County of Los Angeles (2002)
B. The Trial Court's Ruling
On October 28, 2015, the trial court sustained real parties' demurrer as to Duke's fifth cause of action, her conversion claim. The court explained Duke's "theory оf wrongful sale of stock and conversion based upon the extinguishment of her obligation due to release of the principal ignores the fact that the underlying obligation was reduced to judgment for which [Duke] was jointly and severally liable and the complaint admits that this judgment was purchased." As a result, the court concluded the facts do not support a claim for conversion, but granted Duke leave to amend her claim.
On February 29, 2016, during a contested hearing, the court issued a tentative ruling granting real parties' motion to strike the first, second, ninth, tenth, and eleventh causes of action, and overruling the demurrer to the third and fourth cаuses of action. With respect to the fifth cause of action, Duke's conversion claim, the court stated, "I'm inclined to sustain the
C. Elements of Conversion
" ' "Conversion is the wrongful exercise of dominion over the property of another." ' " ( Welco Electronics , Inc. v. Mora (2014)
D. Legal Analysis
Here, the issue is whether real parties' purchase of Duke's shares of Skinsation at the sheriff's sale constituted a wrongful act or disposition of her property rights. Duke contends real parties cоuld obtain contribution from her only to the extent of her proportionate liability, and only then by a motion pursuant to section 883, or by a separate civil action.
1. The Assignment of the Calloway Judgment to Real Parties Was Proper
Preliminarily, we note Duke does not contend the assignment of the judgment
Nor does Duke challenge the notion that real parties were entitled to contribution from her. A joint obligor who pays a judgment in full
Duke takes issue with the fact that real parties sought a writ of execution for the full amount of the judgment against her. She contends real parties were first required to utilize the contribution and repayment procedures pursuant to Code of Civil Procedure sections 882 and 883, and in so doing, they were entitled to recover no more than Duke's proportionate share of the judgment.
We agree real parties were not entitled to enforce the full amount of the judgment against Duke. As we explain below, real parties had only a right of contribution from Duke.
2. Real Parties Acted Improperly by Enforcing the Full Amount of the Judgment against Duke
A judgment debtor who has paid more than his or her proportion of a judgment has three options for enforcing the right to contribution: statutory contribution, assignment, or an action on implied contract for contribution.
Section 882 provides the following with rеspect to contribution from a co-obligor or repayment from a principal:
"(a) A judgment debtor who has satisfied more than his or her due proportion of the judgment, whether voluntarily or through enforcement procedures, may compel contribution from another judgment debtor who has satisfied less than his or her due proportion of the judgment.
"(b) If the judgment is based upon an obligation of one judgment debtor as surety for another and the surety satisfies the judgment or any part thereof, whether voluntarily or through enforcement procedures, the surety may compel repayment from the principal."
Section 883 providеs that a judgment debtor may seek contribution or repayment by a noticed motion:
"(a) A judgment debtor entitled to compel contribution or repayment pursuant to this chapter may apply on noticed motion to the court that entered the judgment for an order determining liability for contribution or repayment. The application shall be made at any time before the judgment is satisfied in full or within 30 days thereafter.
"(b) The order determining liability for contribution or repayment entitles the judgment debtor to the benefit of the judgment to enforce the liability, including every remedy that the judgment creditor has against the persons liable, to the extent of the liability.
"(c) Nothing in this section limits any other remedy that a judgment debtor entitled to contribution or repayment may have."
In addition to bringing a noticed motion to compel contribution or repayment,
In Williams v. Riehl, supra ,
"The respondents, by paying the plaintiff and taking an assignment of the judgment, only became entitled to use it for the purpose of enforcing contribution from their cosureties or payment from their principal. They were only subrogated to the rights of the plaintiff for the purpose of using the judgment in order to protect themselves and their cosureties, and for the purpose of compelling contribution ." ( Williams v. Riehl , supra ,127 Cal. at p. 371 ,, italics added.) 59 P. 762
This principle was clarified in National Bank v. Los Angeles etc. Co. , supra ,
In Tucker v. Nicholson , supra ,
The court noted that when an assignment is taken by a judgment debtor or a third party, "[t]he judgment is kept alive in equity to be used by the debtor paying to recover from his co-obligors the proportions they should pay , and he may have execution against them." ( Tucker v. Nicholson , supra ,
Case authority makes clear that real parties here were entitled to obtain contribution from Duke for her proportionate share of the judgment. ( Woolley v. Seijo (1964)
Real pаrties, nonetheless, maintain the sale of Duke's stock was permitted because they had the right to seek repayment from Skinsation, and "the levy was solely against stock of the principal." Relying on Great Western , they claim: "[Duke] and [real parties] were not solely co-obligors, but became so by way of their personal guarantees to the
In Great Western , a partnership defaulted on a loan and the bank obtained a deficiency judgment against the partnership and the individual partners. ( Great Western , supra ,
Our holding, however, was qualified in the following manner: "This rule applies where the co-obligors share primary liability. If, however, a surety or guarantor, whose liability is secondary, pays the debt, that obligation is not automatically extinguished. [Citation.] Rather, the surety or guarantor can maintain an action on the original obligation against the party primarily liable for its payment." ( Great Western , supra , 90 Cal.App.4th at pp. 32-33,
Here, although real parties were entitled to seek repayment from Skinsation for
We conclude real parties' act of enforcing the full value of the judgment against Duke was improper. A judgment debtor may not enforce an assignment of the judgment against a cojudgment debtor for more than the cojudgment debtor's proportionate share of the judgment. Further, a judgment debtor may not enforce an assignment of the judgment against a cojudgment debtor without first applying to the court for a determination of
3. Duke's Conversion Claim
Duke contends real parties' levy of her stock in Skinsation supports a cause of action for conversion. We agree.
As noted, it is undisputed rеal parties were entitled to contribution from Duke for her share of the debt resulting from the Callaway judgment. However, based on the facts alleged in Duke's complaint, real parties obtained contribution far in excess of Duke's proportionate share of the debt. According to Duke, the amount required to avoid the sheriff's sale was $448,029.90-the entire amount of the judgment. However, in her opposition to real parties' demurrer, Duke claimed she was responsible for only one quarter of the judgment because she, real parties, and Skinsation were jointly liable for the debt.
Generally, taking property without consent or authority is not excused by the fact that the owner is indebted to the person taking it.
" 'It is essential to the orderly administration of the law that a person be prevented from obtaining payment of a claim by the unlawful seizure of the property of his debtor and, consequently, as a general rule the taking of property without authority or consent is neither warranted nor excused by the fact that the owner is indebted to the person taking the property....' " ( Hildebrand v. Delta Lumber & Box Co. (1944), 92-93, 67 Cal.App.2d 88 , quoting Travis Glass Co. v. Ibbetson (1921) 153 P.2d 377 , 729, 186 Cal. 724 .) 200 P. 595
Nor is a taking that is initially authorized necessarily insulated from a claim for conversion. "If a defendant is authorized to make a specific use of a plaintiff's property, use in excess of that authorized may subject the defendant to liability for conversion, if such use seriously violates another's right to control the use of the property." (Thomas et al., Cal. Civil Practice Guide: Torts (2017) Methods of Converting Property, § 15:8; see Hollywood Motion Picture Equipment Co. v. Furer (1940)
Here, Duke's demurrer alleges real parties systematically sought to remove her from all control of and influence over Skinsation-beginning
A cause of action for conversion does not require a showing of bad faith. ( Gonzales v. Personal Storage , Inc. (1997)
Real parties contend even if the writ of execution was improper, "conversion cannot lie where the defendants have acted in accordance with [a] judicial process." (Capitalization and boldface omitted.) We disagree. The fact a particular act is done under court order or a lawful judicial process is not always sufficient to immunize that act from being a conversion. ( Mathew v. Mathew (1903)
The case real parties rely on to support their contention, Glass v. Najafi (2000)
In so holding, the court in Glass analyzed and distinguished Bedi v. McMullan (1984)
The conflicting conclusions reached in Glass and Bedi can rationally be explained by the intent of the parties. In Bedi , the defendants had acted without judicial authority by inducing the marshal to execute a writ based on a judgment they knew had been set aside. (
Our conclusion is guided by common sensе and a practical application of the elements of conversion. Here, real parties used a writ of execution, subscribed by a clerk rather than a judge, to levy all of Duke's shares of stock in Skinsation. To prove a cause of action for conversion, the plaintiff must show the defendant acted intentionally to wrongfully dispose of the property of another. ( Collin v. American Empire Ins. Co. (1994)
In the absence of more convincing authority showing Duke's convеrsion claim fails to state a cause of action as a matter of law, we conclude Duke may not be foreclosed from asserting her claim at this stage of the proceedings. We note, however, that nothing shall prevent real parties from challenging Duke's conversion claim pursuant to a motion for summary judgment, or challenging this cause of action by a subsequent appeal.
DISPOSITION
The petition for writ of mandate is granted. Let a writ of mandate issue directing the Superior Court of Kern County to modify its April 19, 2016,
WE CONCUR:
DETJEN, Acting P.J.
I CONCUR:
PEÑA, Acting P.J.
Notes
Judge of the Fresno Superior Court assigned by the Chief Justice pursuant to article VI, section 6 of the California Constitution.
All undefined statutory citations are to the Code of Civil Procedure unless otherwise indicated.
We grant real parties' unopposed motion for judicial notice. The matter to be noticed is real parties' reply memorandum in support of their demurrer to the first amended complaint. This document was filed in the superior court below.
As of 2013, Skinsation's outstanding capital stock-of which Duke was a 49 percent shareholder- had a fair market value of between $1.2 million and $1.5 million.