Opinion
H048705
02-23-2022
In re the Marriage of SUNG YUE LAI and KAREN LAI. v. KAREN LAI, Respondent. SUNG YUE LAI, Appellant,
NOT TO BE PUBLISHED
Santa Cruz County Super. Ct. No. FL003832
LIE, J.In 2002, appellant Sung Yue Lai and respondent Karen Lai's marriage ended with a judgment of dissolution that incorporated a marital settlement agreement addressing the division of the parties' assets. In 2009, Sung Yue unsuccessfully sought to set aside the judgment, arguing that Karen had denied him his lawful share of the community estate, including but not limited to four real properties, several financial accounts, and Karen's pension.
For clarity, we refer to Sung Yue and Karen by their given names. No disrespect is intended by the informality.
Eleven years after the order denying this first request became final, Sung Yue filed a second request to set aside the judgment, this time arguing that four real properties and 1 five financial accounts were "omitted assets" still subject to division under Family Code section 2556. On appeal from the denial of this second request, Sung Yue argues that the trial court erroneously concluded that the 2009 order precluded his current claims. We affirm.
I. Background
A. The Marriage, Settlement and Judgment of Dissolution
Married in 1974, Sung Yue and Karen over time acquired four real properties. In 1995, the parties separated, and Sung Yue filed a petition for dissolution of the marriage.
On March 28, 1997, Sung Yue and Karen executed a marital settlement agreement (MSA) addressing the division of the parties' assets. In the MSA, the parties specified that the net proceeds from the sale of a community restaurant would be equally divided. Aside from the restaurant, no other community assets were specifically identified in the MSA. But the MSA generally provided: "Husband and Wife further declare that all other assets and liabilities of the community have been divided equally between them. The parties acknowledge that the division of assets and liabilities does not represent an equal division under Family Code Section 2550."
The MSA included a mutual declaration "[u]nder penalty of perjury . . . that they have disclosed to the other all material facts now known to them relating to the present value and probable future value of separate and community assets and obligations, and future income of the parties." The MSA also included a mutual general release of all claims, including a waiver of the protections relating to unknown claims under Civil Code section 1542.
On March 1, 2002, on Karen's application, the trial court entered an uncontested judgment of dissolution incorporating the terms of the 1997 MSA. 2
B. The 2009 Motion to Set Aside the Judgment
In 2009, Sung Yue sought an order to show cause, asking the trial court to set aside the 2002 judgment and the MSA and "to order the parties to cooperate to determine the nature and extent of the community property estate." In his memorandum of points and authorities, Sung Yue argued that he had "never received any portion of the community estate." He argued that the judgment should be set aside because Karen had breached her fiduciary duty to him under Family Code section 721, and the judgment and MSA had been entered based on actual fraud, duress, or failure to comply with disclosure requirements under section 2122. Sung Yue claimed that his order to show cause was timely under sections 1101 and 2122, and he had only discovered the facts giving rise to his order to show cause within the past year.
Unspecified statutory references are to the Family Code.
Section 1101, subdivision (d)(1) provides that an action under that section "shall be commenced within three years of a date a petitioning spouse had actual knowledge that the transaction or event for which the remedy is being sought occurred," except as provided in section 1101, subdivision (d)(2). Section 1101, subdivision (d)(2) provides that an action under section 1101 can be commenced "upon the death of a spouse or in conjunction with an action for legal separation, dissolution of marriage, or nullity without regard to the time limitations" set forth in section 1101, subdivision (d)(1).
In support of his request to set aside the judgment, Sung Yue submitted a declaration in which he attested to the following: Sung Yue claimed that he had limited English skills, unlike Karen. He was aware that he and Karen purchased several real properties during their marriage, and the couple had "some investment or bank accounts." But Karen told Sung Yue that the parties' investment or bank accounts were depleted because of the properties that they had purchased. In 1997, Karen arranged a meeting with an attorney, and Sung Yue signed several documents that Karen told him were needed to settle a legal dispute involving the restaurant. He subsequently learned that he 3 had signed four grant deeds to the parties' real properties. Karen subsequently told him that she would manage the properties, "take care of the children," and pass on the properties to their children if the properties "survived bad economic times." Karen also told him that he would receive a share of her pension after she retired. Karen prepared all the documents that he signed, including the grant deeds and the MSA.
One of the parties' adult daughters prepared a declaration and a supplemental declaration in support of Sung Yue's order to show cause. According to the daughter, her parents owned four real properties during their marriage, and Sung Yue transferred his interest in those properties to Karen as "Trustee for The Karen H Lai 1997 Trust" through grant deeds. The daughter also claimed that Karen had bank and investment accounts at Morgan Stanley and World Savings, which she had not included in her disclosure statement.
In response, Karen disputed all of Sung Yue's claims, specifically contending that the MSA represented terms that he had dictated to her, that there were no undisclosed assets except those he kept from her, and that he had been aware of her retirement when he executed the MSA.
Ruling from the bench on June 19, 2009, the trial court denied Sung Yue's request to set aside the judgment and MSA but specifically reserved ruling as to Karen's pension. The record does not include a transcript of the reported oral proceedings, and the clerk's minutes are silent as to the basis for denial.
On November 5, 2009, after a further hearing, the trial court issued a statement of decision on the reserved issue of Karen's pension and made a number of findings.
The trial court rejected Sung Yue's claim that the statutory time to set aside the judgment under any subdivision of section 2122 should be tolled until his recent discovery that Karen had retired in 2008. The trial court found that Sung Yue had constructive notice during the marriage of Karen's pension. As to his claim that he had 4 been duped by Karen into signing instruments he did not understand, the trial court further found: "As stated in the previous decision on June 19, 2009, Mr. Lai has participated in legal transactions and sought legal advice in the past that enabled him to buy property, litigate in a civil lawsuit, acquire and run businesses, as well as execute the MSA. The court finds that he had the ability to understand the property division under the MSA."
As to Sung Yue's nonstatutory claim of extrinsic fraud, the trial court observed that it was Sung Yue who had petitioned for the dissolution, and that the evidence did not support his contention that Karen kept him "ignorant of the dissolution proceedings." The trial court therefore concluded: "[Sung Yue's] sole remedy for a community property division set aside would have been a timely motion under Code of Civil Procedure 473(b) (not to exceed six months) and a timely appeal back at the time the final judgment was entered in 2002. The only other recourse [Sung Yue] can subsequently seek is under narrow statutorily prescribed grounds and time limits of Family Code section 2122. The court incorporates its decision of June 19, 2009, in its decision herein for a discussion and rulings on fraud, duress, and non-disclosure under Family Code 2122. The court therefore does not find a basis for the court to now set aside the Judgment based on the grounds set forth in Family Code 2122, subsections (a) through (f)."
As to the terms and scope of the judgment itself, the trial court found: "At the time the MSA was executed, the parties did not expressly reserve any community assets for later court adjudication. Had the couple done so, the court would have jurisdiction continuing to the present time to adjudicate the asset. As it is, the court no longer has jurisdiction to grant the relief [Sung Yue] seeks." 5
C. The 2020 Request to Set Aside the Judgment
In 2020, Sung Yue again sought the court's adjudication of community assets, filing a request to "set aside" or "reopen" the judgment. He identified four real properties and at least five financial accounts as assets to be divided. The four real properties identified by Sung Yue in his 2020 motion were the same real properties that he had identified in his 2009 litigation. The five financial accounts were at World Savings, Bank of America, Home Savings, Morgan Stanley, and Hartford Annuity. Sung Yue claimed that he only learned of the Morgan Stanley and Hartford Annuity accounts "since the dissolution" because Karen never disclosed them. The Morgan Stanley account referenced by Sung Yue in 2020 is the same account he identified in 2009.
In September 2020, the trial court denied the motion on the ground that the 2009 decision barred Sung Yue's current claims under the doctrine of res judicata.
II. Discussion
On appeal, Sung Yue challenges the denial of his 2020 motion to set aside or "reopen" the judgment. We conclude that the denial of Sung Yue's 2009 request to set aside the judgment precluded his resurrection of his claims in 2020.
A. General Legal Principles and Standard of Review
We review de novo a trial court's determination that res judicata bars a party's further litigation. (Association of Irritated Residents v. Department of Conservation (2017) 11 Cal.App.5th 1202, 1218.) In exercising our independent judgment, we are mindful that it is the party who asserts claim or issue preclusion who "bears the burden of proving that the requirements of the doctrine are satisfied." (Hong Sang Market, Inc. v. Peng (2018) 20 Cal.App.5th 474, 489 (Hong Sang).)
"Claim preclusion, the '" 'primary aspect'"' of res judicata, acts to bar claims that were, or should have been, advanced in a previous suit involving the same parties. 6 [Citation.]" (DKN Holdings LLC v. Faerber (2015) 61 Cal.4th 813, 824 (DKN).)"Claim preclusion arises if a second suit involves: (1) the same cause of action (2) between the same parties (3) after a final judgment on the merits in the first suit. [Citations.] If claim preclusion is established, it operates to bar relitigation of the claim altogether." (DKN, supra, 61 Cal.4th at p. 824.)
In this case, the trial court did not distinguish between claim preclusion and issue preclusion, stating only that Sung's 2020 request was barred by the doctrine of "res judicata" based on the previous June 19, 2009 order.
B. Analysis
There being no dispute as to the identity of the parties, Sung Yue appears to contest the first and third requirements of claim preclusion: that the second suit involves the same cause of action and that there was a final judgment on the merits in the first suit. (DKN, supra, 61 Cal.4th at p. 824 .)
1. Same Cause of Action
In 2020 as in 2009, Sung Yue's claim was that Karen's malfeasance and omissions in procuring the judgment warranted its being vacated in the interest of a more complete and equal division of the community estate. "To determine whether two proceedings involve identical causes of action for purposes of claim preclusion, California courts have 'consistently applied the "primary rights" theory.'" (Boeken v. Philip Morris USA, Inc. (2010) 48 Cal.4th 788, 797 (Boeken).) A cause of action "is the right to obtain redress for a harm suffered, regardless of the specific remedy sought or the legal theory (common law or statutory) advanced." (Id. at p. 798.)" '[T]he "cause of action" is based upon the harm suffered, as opposed to the particular theory asserted by the litigant. . . . "Hence a judgment for the defendant is a bar to a subsequent action by the plaintiff based on the same injury to the same right, even though he presents a different legal ground for 7 relief." '" (Ibid.) Thus, "[w]hen two actions involving the same parties seek compensation for the same harm, they generally involve the same primary right." (Ibid.)
In his 2009 request to set aside the judgment, Sung Yue argued that "a full accounting" by Karen was necessary to ensure that he received his full share of a community estate he maintained was larger than Karen had disclosed. Besides Karen's pension, he specifically claimed an interest in the four real properties and "some investment or bank accounts," including Karen's accounts at Morgan Stanley and World Savings. In his 2020 request to set aside or "reopen" the judgment, Sung Yue added an argument that the same real properties and accounts, as well as three additional accounts, were omitted assets within the meaning of section 2556 and should now be divided. That Sung Yue invoked different (if overlapping) legal grounds in support of his 2020 and 2009 actions is immaterial. (Boeken, supra, 48 Cal.4th at p. 798.) Both the 2020 request to reopen the judgment and the 2009 request to set aside the judgment concern the same primary right: Sung Yue's primary right to set aside provisions of the judgment in order to achieve a division of community assets not specifically enumerated in the MSA. (See Id. at p. 798.)
In re Marriage of Mason (1996) 46 Cal.App.4th 1025 (Mason) is instructive. In Mason, the Court of Appeal specifically disapproved the same sequential litigation Sung Yue has engaged in here-following an unsuccessful motion to set aside a judgment based on concealment of assets with a renewed motion predicated on section 2556. (Mason, supra, at p. 1028.) The Mason court noted that the husband's prior motion to set aside the property division had been based on the theory that the wife had deceived him and concealed her ability to reopen a business that the wife had closed during the marriage. (Ibid.) Thus, the Court of Appeal held that the husband's motion under section 2556 was barred by the doctrine of res judicata because he could not "resurrect[] the fraud claim based on the new theory that business goodwill was an 'omitted' asset." 8 (Ibid.) The Mason court reiterated that"' "[a] party cannot by negligence or design withhold issues and litigate them in consecutive actions. Hence the rule is that the prior judgment is res judicata on matters which were raised or could have been raised, on matters litigated or litigable." [Citation.]'" (Ibid.)
As in Mason, issues regarding Sung Yue's transfer of the four real properties and his community interest in Karen's financial accounts were litigated in 2009. He expressly argued in his 2009 order to show cause that he signed the grant deeds transferring his interest in the properties after Karen breached her fiduciary duty to him, and he was further entitled to his community share of financial accounts that had never been divided by the parties. He raised nearly identical arguments in his 2020 motion regarding the four real properties and Karen's financial accounts, except this time he alleged that the properties and financial accounts were omitted assets under section 2556.
Accordingly, we find that the 2009 and 2020 actions involve the same causes of action under the doctrine of claim preclusion, and, to the extent that the same legal theories were not pleaded in 2020, the matters were within the scope of Sung Yue's 2009 order to show cause and could have been raised in the earlier proceeding. (See DKN, supra, 61 Cal.4th at p. 824; Villacres v. ABM Industries Inc. (2010) 189 Cal.App.4th at p. 583.)
2. Final Judgment on the Merits
There being no dispute as to the finality of the 2009 denial, which Sung Yue never appealed, the sole issue remaining is whether the denial was on the merits. "The words 'on the merits' have an accepted legal meaning. They refer to the substantive elements of a claim or defense, as distinguished from technical or procedural impediments to proceeding with a claim." (Smart Corner Owners Association v. CJUF Smart Corner LLC (2021) 64 Cal.App.5th 439, 461.) 9
Notwithstanding the parties' omission of a transcript of proceedings, the trial court's statement of decision is instructive as to the findings it made orally on June 19, 2009. The trial court specifically referenced its finding that Sung Yue "had the ability to understand the property division under the MSA," thereby making clear its rejection of Sung Yue's claims of mistake and excusable neglect. The trial court also expressly relied on the parties' recitation in the MSA that all community property had been divided unequally by agreement, their express waiver of any and all claims, and the absence of any express reservation of any asset or obligation in concluding that Sung Yue's sole remedy was to set aside the judgment. Its finding that the broad language of the MSA precluded later adjudication of community assets not expressly reserved and that Sung Yue's sole recourse from the judgment would have been an appeal from the judgment or a motion under Code of Civil Procedure section 473, subdivision (b), implicitly rejected Sung Yue's characterization of any lately discovered assets as "omitted" within the meaning of section 2556. Accordingly, the trial court addressed the merits of Sung Yue's various challenges to the validity and scope of the judgment.
Sung Yue argues that without a complete record of the June 19, 2009 hearing, it is possible that the trial court denied his order to show cause for procedural or technical defects. For support, he relies on Henn v. Henn (1980) 26 Cal.3d 323 (Henn), which we find distinguishable. In Henn, the husband argued that the trial court's earlier denial of motion to modify the parties' divorce judgment by dividing his pension precluded his wife's later complaint seeking her share of the same community asset. (Id. at pp. 326-327.) When Henn was decided, a claim of an unadjudicated community property asset had to be raised by bringing a separate action, not by motion in the dissolution action.(Id. at p. 332.) Thus, Henn determined that the doctrine of res judicata was inapplicable 10 because the summary nature of the trial court's denial of the wife's motion prevented the husband from establishing that the denial was not on the purely procedural ground of the motion's irregularity. (Id.at pp. 331-332.)
Henn predated the enactment of section 2556.
Unlike Henn, the 2009 statement of decision reflects that the trial court did reach the merits of Sung Yue's challenge to the validity of the judgment and the scope of the MSA. Although the trial court deemed his claims under section 2122 to be untimely, it also made specific factual findings that were adverse to Sung Yue's claims of actual fraud and mistake of law or fact. More importantly, the court explicitly rejected the merits of his nonstatutory claim for setting aside the judgment, finding that Sung Yue "has failed to show facts to support his contention that [Karen] kept him ignorant of the dissolution proceedings."
Sung Yue's reliance on In re Marriage of Nassimi (2016) 3 Cal.App.5th 667 (Nassimi) and In re Marriage of Huntley (2017) 10 Cal.App.5th 1053 (Huntley) is similarly unavailing. In both cases, the court determined that the judgment of dissolution itself-not a subsequent adjudication of a motion to set aside that judgment-did not preclude a later claim under section 2556 for division of a community liability as to which the original judgment was silent. (Nassimi, supra, at pp. 691-692; Huntley, supra, at p. 1061.) Here, we are considering whether Sung Yue's 2009 request to set aside the judgment-not the judgment and the MSA-precluded his 2020 claims under the doctrine of claim preclusion. Based on the trial court's express and implicit findings in 2009, we conclude that the 2009 order bars his current claims.
Sung Yue places great weight on the fact that the trial court in 2009 never reached his claim that the 1997 transfers did not effectively transmute the community character of the real properties. His argument, however, is predicated on a redefinition of the 2009 cause of action and the primary right the trial court then adjudicated. In 2009 as in 2020, Sung Yue had no entitlement to adjudication of his claim to the real properties, unless the 11 trial court found on the merits that the assets were omitted within the meaning of section 2556, or that the judgment should be set aside on the equitable or statutory grounds Sung Yue asserted. The trial court in 2009 expressly rejected his claim of extrinsic fraud on the merits; although it concluded that Sung Yue's statutory claims were untimely, it also found that the merits of his claim of mistake were lacking; and it implicitly rejected his claim that specified assets-the real properties, the identified accounts, and the pension-were "omitted" given the breadth of the MSA's declarations that all assets had been divided and all claims resolved, in conjunction with the absence of any express reservation of property for division. Having reached the merits of Sung Yue's threshold claim that the properties remained subject to division notwithstanding the 2002 entry of judgment incorporating the MSA, the trial court could not have reached his subsidiary claims as to how the properties might otherwise have been divided. Nor could it have done so in 2020.
The 2009 statement of decision reflected that the trial court rejected Sung Yue's 2009 claims on the merits and concluded that the 2002 judgment and the MSA addressed the division of all the parties' assets. Accordingly, we find that the trial court's June 19, 2009 order was a final judgment on the merits of his request to "set aside" or "reopen" the judgment or to adjudicate the division of "omitted" assets. (See DKN, supra, 61 Cal.4th at p. 824.)
Based on the foregoing, we conclude Karen met her burden of establishing the requirements for claim preclusion. (See Hong Sang, supra, 20 Cal.App.5th at p. 489.)
III. Disposition
We affirm the trial court's September 23, 2020 denial of Sung Yue's request for order. Karen is entitled to her costs on appeal. 12
WE CONCUR: DANNER, ACTING P.J., WILSON, J. 13