Opinion
F076823
11-21-2019
EVAN J. GEILENKIRCHEN et al., Plaintiffs and Respondents, v. LOWELL A. BAISDEN, Defendant and Appellant.
Lowell A. Baisden, in pro. per., for Defendant and Appellant. Klein, DeNatale, Goldner, Cooper, Rosenlieb & Kimball and Catherine E. Bennett for Plaintiffs and Respondents.
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. (Super. Ct. No. S1500CV261216)
OPINION
APPEAL from an order of the Superior Court of Kern County. Linda S. Etienne, Commissioner. Lowell A. Baisden, in pro. per., for Defendant and Appellant. Klein, DeNatale, Goldner, Cooper, Rosenlieb & Kimball and Catherine E. Bennett for Plaintiffs and Respondents.
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Plaintiffs Evan and Jane Geilenkirchen sued their former accountant, defendant Lowell A. Baisden, in the state of Nebraska for malpractice. Plaintiffs prevailed, and a money judgment was entered in their favor in the principal sum of $204,278.30. In 2007, on plaintiffs' motion to enter a sister state judgment, the Kern County Superior Court (the trial court) entered the Nebraska judgment in California. In 2017, plaintiffs filed an application in the trial court to renew the judgment for an additional 10-year period. In response, defendant filed a motion to vacate the renewal of judgment on the ground of extrinsic fraud, or alternatively, to modify the amount of the renewed judgment. After the moving and opposing arguments and evidence were considered, the trial court granted the motion in part and denied it in part. Plaintiffs' judgment was renewed but the amount of the judgment was reduced to reflect a $125,000 credit to which defendant was entitled. However, the trial court denied defendant's request to vacate the renewed judgment. Defendant now appeals from that denial. We conclude that defendant failed to meet his burden as appellant to affirmatively demonstrate the trial court prejudicially abused its discretion. Moreover, on the record before us, it appears that defendant's allegations of fraud, even if true, would only show intrinsic fraud, which is an insufficient ground to support the relief sought. For these reasons, the trial court's order denying defendant's motion to vacate is hereby affirmed.
FACTS AND PROCEDURAL HISTORY
In 2006, plaintiffs, as residents of Nebraska, filed a complaint in Nebraska against defendant, a resident of Bakersfield, California, alleging accountant malpractice in preparing their 2002, 2003, and 2004 tax returns. According to defendant, the parties engaged in discovery in that action. In the Nebraska action, plaintiffs' tax attorney, Todd Turner, filed an affidavit in which he explained some of the additional taxes and penalties incurred by plaintiffs as a result of defendant's malpractice. It was his opinion that the total penalties and interest were $142,044 at that time, but he informed the court that his office had received preliminary indications from the Appeals Office of the Internal Revenue Service (IRS) that the "fraud" penalty may be removed and the "negligence" penalty also may not be asserted. If the removal of these penalties occurred, the remaining penalties and interest would be $44,360. The affidavit also stated the amount of attorney fees incurred by plaintiffs in defending the IRS proceedings. Turner's affidavit was signed by him on March 2, 2007.
Defendant was found liable for malpractice and a money judgment was entered against him and in favor of plaintiffs in the total principal amount of $204,278.30. According to defendant, this amount included as damages the full $142,044 in penalties and interest.
In June of 2007, plaintiffs applied for a sister state judgment in California. That application was granted by the trial court on July 5, 2007. At that time, defendant moved to vacate the judgment on similar grounds to the present motion, but the motion was denied.
In 2017, plaintiffs applied to the trial court in California to renew their judgment for an additional 10 years.
On August 10, 2017, defendant opposed the renewal of judgment by bringing a motion to vacate the renewal of judgment on the ground of extrinsic fraud. The fraud purportedly consisted of, among other things, intentionally misrepresenting the facts to the Nebraska court or to defendant during discovery, including matters relating to the amount of the penalties, and/or withholding information or documentation regarding same. In the alternative to vacating the renewal of judgment, defendant's motion requested that the amount of the renewed judgment should be modified or reduced because the IRS ultimately did not charge the total amount of penalties reflected in the original judgment. In this regard, defendant noted that prior court records filed by plaintiffs reflected their acknowledgment that defendant was entitled to a credit of $125,000 against the judgment.
On August 28, 2017, plaintiffs filed an opposition to defendant's motion to vacate. Plaintiffs argued the motion to vacate was improper because any such issues (i.e., extrinsic fraud) had to be raised and addressed in the Nebraska court where the judgment was originally entered, and furthermore, no ground to deny a renewal of judgment was presented. However, plaintiffs conceded their application for a renewal of judgment had, by an oversight of counsel, erroneously failed to include the credit due to defendant for the $125,000. Plaintiffs stated they had contacted defendant and admitted the error and gave assurances that steps would be taken to correct it, but before they could do so defendant had filed the motion to vacate. In any event, plaintiffs' opposition informed the trial court that they had proceeded to amend their application for renewal of judgment and to amend their memorandum of costs after judgment, acknowledging the $125,000 credit and correspondingly reducing the accrued interest after judgment.
On August 30, 2017, defendant filed a reply in support of his motion. The reply argued the motion was procedurally proper under Code of Civil Procedure section 1710.40, subdivision (a), which expressly permits a motion to vacate judgment to be filed within 30 days after an application for entry of a sister state judgment is filed by the judgment creditor. Defendant's reply also reiterated the contention that the renewal of judgment may be vacated based on extrinsic fraud. He asserted there was extrinsic fraud because plaintiffs "concealed the truth" about the actual amount of the IRS penalties and interest.
Unless otherwise indicated, further statutory references are to the Code of Civil Procedure.
The hearing on the motion was held September 9, 2017, and the trial court took the matter under submission. On November 13, 2017, the trial court issued its ruling on the motion, stating as follows: "The motion is granted in part and denied in part. [¶] It is granted to the extent that the judgment renewal ... should reflect proper credit of $125,000.00 and the renewed judgment should reflect adjusted amounts of principal and interest remaining owing accordingly. [Plaintiffs] are directed to amend forthwith the renewal of judgment so as to accurately reflect the amount owing after all credits are applied. [¶] In all other respects the motion, which essentially seeks reconsideration of a similar motion heard and decided on 12/10/2007, or, alternatively, implores this court to review actions taken by a Nebraska court, is denied."
Defendant timely filed a notice of appeal from the order denying his motion to vacate the renewal of judgment.
DISCUSSION
I. Standard of Review
" 'The ruling on a motion to set aside a judgment rests in the sound discretion of the trial court and will not be set aside on appeal unless a clear abuse of discretion appears. [Citations.] On appeal ... we view all factual matters most favorably to the prevailing party. [Citation.]' " (Conseco Marketing, LLC v. IFA & Ins. Services, Inc. (2013) 221 Cal.App.4th 831, 841 (Conseco), quoting Tsakos Shipping & Trading, S.A. v. Juniper Garden Town Homes, Ltd. (1993) 12 Cal.App.4th 74, 88.)
It is generally accepted that the appropriate test for abuse of discretion is whether the trial court's ruling exceeded the bounds of reason, all of the circumstances before it being considered. (In re Marriage of Connolly (1979) 23 Cal.3d 590, 598.) Moreover, "[a] judgment or order of a lower court is presumed to be correct on appeal, and all intendments and presumptions are indulged in favor of its correctness." (In re Marriage of Arceneaux (1990) 51 Cal.3d 1130, 1133.) Because a trial court's order is presumed to be correct, error must be affirmatively shown. (Denham v. Superior Court (1970) 2 Cal.3d 557, 564.) Thus, an appellant must affirmatively demonstrate prejudicial error based on adequate legal argument and citation to the record. (Yield Dynamics, Inc. v. TEA Systems Corp. (2007) 154 Cal.App.4th 547, 556-557; Cahill v. San Diego Gas & Electric Co. (2011) 194 Cal.App.4th 939, 956-957.)
II. Preliminary Procedural Issue
Before proceeding to the substantive issues, we address a procedural issue raised by plaintiffs in their brief herein as respondents. Plaintiffs point out that, pursuant to section 1710.40, a motion to vacate judgment may be filed within 30 days after the sister state judgment is first entered and notice of entry of the sister state judgment is given. (§ 1710.40, subds. (a) & (b).) Thus, plaintiffs argue any motion to vacate should have been filed in 2007, when the Nebraska judgment was entered in California as a sister state judgment pursuant to section 1710.10 et seq. Further, plaintiffs argue that defendant did file such a motion in 2007, but it was denied. In their brief herein, plaintiffs contend it is now 10 years too late to file such a motion. According to plaintiffs, "It is frivolous to file a motion nearly 10 years after its latest due date. It is also frivolous to file a motion repeating the same basic arguments made ten years earlier."
Section 1710.10 et seq. sets forth California's statutory procedures relating to entry and enforcement of sister state money judgments.
We are unable to assess whether it is merely a repeat of the motion to vacate made in 2007, since the record does not include such motion.
We disagree with plaintiffs' contention that section 1710.40 creates a procedural impediment to the motion at hand, which was filed in 2017 after plaintiffs applied to renew their judgment. An application to renew a money judgment is not the same procedural action or step as entering a sister state judgment. Its purpose is to extend the ten-year period of enforceability of an existing (i.e., already entered) judgment for an additional 10 years. (see §§ 683.010-683.120.) The statutory sections relating to renewal of money judgments (§ 683.110 et seq.) contain a provision patterned after section 1710.40, that expressly allows a motion to vacate to be filed within 30 days after service of the notice of renewal. (§ 683.170, subd. (b); see Law Rev. Com. comments to §§ 683.110-683.220 [noting that renewal procedures were drawn from procedures for enforcing sister state money judgments at sections 1710.10 et seq.].)
Specifically, section 683.170 provides in relevant part, as follows: "(a) The renewal of a judgment pursuant to this article may be vacated on any ground that would be a defense to an action on the judgment .... [¶] (b) Not later than 30 days after service of the notice of renewal pursuant to Section 683.160, the judgment debtor may apply by noticed motion under this section for an order of the court vacating the renewal of the judgment. The notice of motion shall be served on the judgment creditor.... [¶] (c) Upon the hearing of the motion, the renewal may be ordered vacated upon any ground provided in subdivision (a), and another and different renewal may be entered, including, but not limited to, the renewal of the judgment in a different amount if the decision of the court is that the judgment creditor is entitled to renewal in a different amount."
Based on the above provision authorizing a motion to vacate following an application to renew a judgment, we conclude that plaintiffs' contention the motion was procedurally improper pursuant to statute is without merit.
III. Motion Properly Denied
Defendant, as moving party, had the burden to show by a preponderance of the evidence why he was entitled to relief. (Conseco, supra, 221 Cal.App.4th at p. 841.) Under the relevant statute, the renewal of a judgment "may be vacated on any ground that would be a defense to an action on the judgment." (§ 683.170, subd. (a).) Such grounds include extrinsic fraud, which is the sole ground raised in defendant's motion. (See Tsakos Shipping & Trading, S.A. v. Juniper Garden Town Homes, Ltd., supra, 12 Cal.App.4th at p. 94 [extrinsic fraud as ground for setting aside final judgment]; 8 Witkin, Cal. Procedure (5th ed. 2008) Enforcement of Judgment, § 459, p. 495 [same].) Plaintiffs argue that defendant's motion failed to demonstrate the existence of extrinsic fraud, and at most the purported fraud was intrinsic to the proceeding, which was fatal to defendant's motion. As explained below, we agree with plaintiffs.
The "essential characteristic" of extrinsic fraud "is that it has the effect of preventing a fair adversary hearing, the aggrieved party being deliberately kept in ignorance of the action or proceeding, or in some other way fraudulently prevented from presenting that party's claim or defense." (8 Witkin, Cal. Procedure (5th ed. 2008) Attack on Judgment in Trial Court, § 225, p. 832; accord, Singh v. Lipworth (2014) 227 Cal.App.4th 813, 827.) "Fraud ... is extrinsic when it deprives the unsuccessful party of an opportunity to present his case to the court. [Citations.] ... A party who has been given proper notice of an action, however, and who has not been prevented from full participation therein, has had an opportunity to present his case to the court and to protect himself from any fraud attempted by his adversary. [Citations.] Fraud perpetrated under such circumstances is intrinsic, even though the unsuccessful party does not avail himself of his opportunity to appear before the court. Having had an opportunity to protect his interest, he cannot attack the judgment once the time has elapsed for appeal or other direct attack." (Westphal v. Westphal (1942) 20 Cal.2d 393, 397; accord, Jorgensen v. Jorgensen (1948) 32 Cal.2d 13, 18.) To summarize, where "the aggrieved party had a reasonable opportunity to appear and litigate that party's claim or defense, fraud occurring in the course of the proceeding is not a ground for equitable relief. The theory is that these matters will ordinarily be exposed during the trial by diligence of the party and his or her counsel, and that the occasional unfortunate results of undiscovered perjury or other intrinsic fraud must be endured in the interest of stability of final judgments." (8 Witkin, Cal. Procedure (5th ed. 2008) Attack on Judgment in Trial Court, § 241, p. 857, italics added; Singh v. Lipworth, supra, 227 Cal.App.4th at p. 827; accord, City and County of San Francisco v. Cartagena (1995) 35 Cal.App.4th 1061, 1067 [stating rule that the type of fraud necessary to vacate a final judgment is extrinsic fraud, not fraud which is intrinsic to the trial of the case itself].)
After the time for seeking a new trial has expired and any appeals have been exhausted, a final judgment may not be attacked and set aside on the ground that evidence was "suppressed, concealed, or falsified" during the course of the proceeding. (Cedars-Sinai Medical Center v. Superior Court (1998) 18 Cal.4th 1, 10 [summarizing cases].) "[I]n the language of the cases, such fraud is 'intrinsic' rather than 'extrinsic.' [Citations.]" (Id. at p. 10.) The Supreme Court further articulated the rationale for this rule by reciting the words of the older cases, as follows: " '[W]e think it is settled beyond controversy that a decree will not be vacated merely because it was obtained by forged documents or perjured testimony. The reason of this rule is, that there must be an end of litigation; and when parties have once submitted a matter ... for investigation and determination, and when they have exhausted every means for reviewing such determination in the same proceeding, it must be regarded as final and conclusive .... [¶] ... [W]hen [the aggrieved party] has a trial, he must be prepared to meet and expose perjury then and there.... The trial is his opportunity for making the truth appear. If, unfortunately, he fails, being overborne by perjured testimony, and if he likewise fails to show the injustice that has been done him on motion for a new trial, and the judgment is affirmed on appeal, he is without remedy. The wrong, in such case, is of course a most grievous one, and no doubt the legislature and the courts would be glad to redress it if a rule could be devised that would remedy the evil without producing mischiefs far worse than the evil to be remedied. Endless litigation, in which nothing was ever finally determined, would be worse than occasional miscarriages of justice ....' [Citations.]" (Cedars-Sinai Medical Center v. Superior Court, supra, 18 Cal.4th at pp. 10-11, quoting with approval Pico v. Cohn (1891) 91 Cal. 129, 133-134; accord, United States v. Throckmorton (1878) 98 U.S. 61, 68-69.)
Here, defendant's motion refers to matters occurring within the course of the proceedings in the Nebraska action, including purported fraud by plaintiffs relating to the amount of penalties and interest and to related matters within the discovery process or the trial of the case. Such issues, and any purported fraud on the part of plaintiffs regarding same, would necessarily be intrinsic in nature. Therefore, we conclude the trial court correctly denied defendant's motion to vacate the renewal of plaintiffs' judgment.
IV. Plaintiffs' Motion to Dismiss Appeal and for Sanctions
Plaintiffs have requested that we dismiss the appeal and/or impose monetary sanctions against defendant for filing and prosecuting a frivolous appeal. Section 907 provides: "When it appears to the reviewing court that the appeal was frivolous or taken solely for delay, it may add to the costs on appeal such damages as may be just." Our Supreme Court in In re Marriage of Flaherty (1982) 31 Cal.3d 637, has set forth the applicable standard: "[A]n appeal should be held to be frivolous only when it is prosecuted for an improper motive—to harass the respondent or delay the effect of an adverse judgment—or when it indisputably has no merit—when any reasonable attorney would agree that the appeal is totally and completely without merit." (Id. at p. 650.) The two strands of the standard are often used together, with one providing evidence of the other. Thus, the total lack of merit of an appeal is viewed as evidence that appellant must have intended it only for delay. (Id. at p. 649.)
Plaintiffs argue the filing of the present appeal was frivolous because the underlying motion to vacate was procedurally untimely and therefore facially improper under section 1710.40. However, as we have explained hereinabove, that procedural argument is misplaced and incorrect because another statute expressly authorized the motion. Additionally, plaintiffs contend the appeal was frivolous because the motion failed to present evidence of extrinsic fraud, and at most it referred to potential intrinsic fraud. Although we agree that defendant's appeal failed to show extrinsic fraud, we stop short of holding that this failure would warrant the conclusion, in this case, that any reasonable attorney would agree the appeal was totally and completely without merit. The motion to dismiss appeal and for sanctions is denied.
DISPOSITION
The order denying defendant's motion to vacate the renewal of judgment is hereby affirmed. Plaintiffs are awarded costs on appeal.
/s/_________
LEVY, J. WE CONCUR: /s/_________
HILL, P.J. /s/_________
DETJEN, J.