Larsen v. Beekmann

denying his motion to recall and quash a writ of execution which plaintiff, the unpaid judgment-creditor of a judgment entered upon a stipulation for judgment, had caused to> he levied. The question presented is whether the judgment was one dischargeable in bankruptcy, or more particularly whether the stipulation upon which the judgment rests is a compromise settlement and a waiver of plaintiff’s right to -assert thereafter that the genesis of his claim for accounting is a tort not dischargeable under section 17 of the Bankruptcy Act ( 11 U.S.C.A. §35 ).

I.

Plaintiff filed an action averring in substance that he and defendant were partners in an employment agency known as the “Nosker Agency,” that defendant had wrongfully converted partnership assets to his own use, and praying for a judicial declaration of dissolution of partnership, an accounting, and recovery of such sums as the accounting should determine to be due to plaintiff.

The allegations of the complaint pertinent to the bankruptcy question raised read: 11 That since the commencement of said partnership, the defendant ... in violation of the partnership agreement, wrongfully and without the knowledge or consent of plaintiff, misappropriated and converted substantial sums of money, receipts and profits of the [partnership business] said Nosker Agency to his own use and

Defendant’s answer to the complaint appropriately denied these allegations. The pretrial order lists “Whether . . . defendant misappropriated or diverted partnership funds in the approximate amount of $11,000.00 or any other amount” as an issue to be tried; it also enumerates among plaintiff’s contentions the one that defendant did commit the alleged misappropriations and conversions, which he denied.

On March 21, 1966, a document entitled “Stipulation For Judgment And Judgment” was signed and filed by the trial court and entered in the judgment book on March 22, 1966. It states in part: “The parties to the above entitled litigation, by and through their respective attorneys, entered into a Stipulation for Judgment and pursuant to that judgment, the court enters its judgment and order” of the following tenor:

“Defendant Carl H. Beekmann is ordered to pay to plaintiff Herold W. Larsen the sum of $6,000.00, to be paid as follows: (a) $2,500.00 in cash, to be paid within 30 days from the date of judgment; (b) The balance of $3,500.00, which shall bear interest at the rate of 6% per annum, commencing from the date of this judgment, shall be paid in monthly installments of $50.00 per month on the 1st day of each month commencing on the 1st day of May, 1966, and continuing until the balance of principal and interest is paid in full. If any of the installments is not paid when due, the plaintiff shall have the right to notify either the defendant or his attorney by regular mail of the fact that he declares a default, whereupon, the defendant will be given a five day grace period within which to make the payment then in default. If said payment is not paid within five days of said notice, then the full unpaid balance of the principal and interest due under this judgment shall automatically become due and payable. ’ ’

The balance of the stipulation and judgment: declared the existence of a partnership business between plaintiff and defendant which had terminated on October 9, 1964, after which date plaintiff had the right of sole ownership of the business and exclusive use of the name, “Nosker Agency”;

Defendant failed to make the payments required by the judgment. On May 6, 1966, he was adjudicated a bankrupt in. bankruptcy proceedings No. 210279IH in the United States District Court, Southern District of California, Central Division, and his discharge was subsequently entered.

On February 9, 1967, defendant’s mother, Ida Wolff Beekmann, died testate providing by her will that defendant share equally in her estate along with four other children.

Plaintiff caused a writ of execution for $6,000, plus $420 interest, to be levied on the executrix of Ida Wolff Beekmann’s estate on June 9,1967.

On October 4, 1967, defendant filed his notice of motion to recall and quash the writ of execution, based on the theory that the stipulated judgment had been discharged in bankruptcy. His declaration in support of his motion stated in part: 1 ‘ The settlement of this case was predicated upon negotiations between our attorneys, and the settlement finally determined was the result of a compromise of the above lawsuit, and for that reason the settlement was less than the demand. The settlement embraced more than the agreement to pay $6,000.00 at stipulated intervals, as is reflected by the stipulation for such judgment.” Plaintiff’s declarations filed in opposition to the motion did not deny this averment of a compromise settlement, but set forth statements of defendant’s misfeasance, fortified by exhibits, from which a trier of fact could have found the alleged conversions to be within the category of “winful and malicious injuries to property of another” within the meaning of the bankruptcy act.

On November 17, 1967, the .trial court by minute order denied defendant’s motion, and he appeals from that order.

II.

Except to assert the nondischargeability of the judgment, plaintiff has not otherwise attacked the validity of defendant’s discharge in bankruptcy. It is true that plaintiff’s

Defendant claims in his declaration supporting his motion that the stipulation for judgment was a negotiated compromise settlement of the dispute between the parties. Plaintiff acknowledged in his opposing declaration of October 13, 1967, “ [t]hat at the request and suggestion of Beekmann and his attorney, and with the concurrence of [plaintiff’s] former attorney, a Stipulated Judgment was entered herein for an amount less than the amount prayed for in the Complaint.” If the stipulation had read and if the judgment had recited that it was for a judgment “in accordance with the allegations of the complaint,” then under Wilson v. Walters (1941) 19 Cal.2d 111 , 122 [ 119 P.2d 340 ], the judgment would not have been dischargeable. Where the complaint set forth allegations averring liability in tort as well as on a common count,. a stipulation that judgment be entered under statutory provisions relating only to ‘' express or implied contract to pay money received or disbursed” has been held to render the judgment predicated thereon dischargeable in bankruptcy. (Application of Millington (N.Y.Sup.Ct. 1947) 188 Misc. 469 [ 67 N.Y.S.2d 472 , 477].) The stipulation in the cause before us does not go as far as either Wilson or Milling-ton. It is completely silent as to any alleged misappropriation, misapplication of funds, or fraud. It is not uncommon, however, that judgments are entered “by consent of the parties for the purpose of executing a compromise and settlement of an action.” (30A Am.Jur., Judgments, § 144, p. 253.) And the legal mutability of changing a nondisehargeable obligation into one which, is dischargeable has been recognized. (See Cowans, op.cit., supra.)

Generally speaking (i.e., outside of bankruptcy law) a judgment based on a stipulation of the parties “is binding only as to the matter consented to by the stipulation” (Laguna Drainage Dist. v. Charles Martin Co. (1907) 5 Cal.App. 166 , 171 [ 89 P. 993 ]), is confined only to issues within the stipulation (Emerson v. Yosemite Gold Min. etc. Co. (1906) 149 Cal. 50 , 56, 58 [ 85 P. 122 ], affirmed 208 U.S. 25 [ 52 L.Ed. 374 , 28 S.Ct. 196 ]), and does not cover matters not in the stipulation (Palace Hotel Co. v. Crist (1935) 6 Cal.App.2d 690 , 694 [ 45 P.2d 415 ]). A consent judgment between parties is regarded as a contract and must be construed like any other contract. (In re Ferrigno (1937) 22 Cal.App.2d 472 , 474 [ 71 P.2d 329 ].) Under the rule enunciated in Pacific Gas & Elec. Co. v. G. W. Thomas Drayage etc. Co. (1968) 69 Cal.2d 33 [ 69 Cal.Rptr. 561 , 442 P.2d 641 ] and Delta Dynamics, Inc. v. Arioto (1968) 69 Cal.2d 525 [ 72 Cal. Rptr. 785 , 446 P.2d 785 ], the stipulation here in question presents sufficient potentialities of a latent ambiguity as to require the trial court, after taking more extensive evidence of the circumstances surrounding the stipulation, to make a definite finding whether the stipulation constitutes a compromise settlement in release and discharge of the tort claim. If the stipulation was fairly and freely negotiated, with a view of releasing and discharging the conversion, particularly any claimed “willful and malicious” nature thereof within the meaning of the bankruptcy act, then the trial court should be foreclosed from going behind it.- On the other hand, if the parties did not so negotiate and the plaintiff did not waive his right to later raise the “willful and malicious” basis of his claim to an accounting, then in equity and good conscience,

The judgment, however, in context of whether it is dischargeable in bankruptcy, should be viewed in the light most favorable to the bankrupt, (Robinson v. Early (1967) supra, 248 Cal.App.2d 19 , 25), since the burden is upon the party asserting its nondischargeable character to prove it. (Morris v. Drubin (1958) supra, 165 Cal.App.2d 467 , 469-470; United States Credit Bureau v. Digoras (1959) 169 Cal.App. 2d 673 , 680 [ 337 P.2d 886 ]; Robinson v. Early, supra, at p. 24.) On the record before us, plaintiff has not sustained his burden in this respect with reference to the stipulation for judgment. But the tenor of the briefs filed by counsel indicates that this specific facet of the dischargeability issue was not fully considered either by counsel or the trial court. Under these circumstances, a remand fi> the trial court for further proceedings not inconsistent with the views herein set forth would appear to be the appropriate disposition. (Boyle v. Hawkins (1969) 71 Cal.2d 229 , 232-233, fn. 3 [ 78 Cal.Rptr. 161 , 455 P.2d 97 ].)

Order reversed and cause remanded for further proceedings consistent with the views set forth in the foregoing opinion.

Stephens, Acting P. J., and Reppy, J., concurred.

A petition for a rehearing was denied October 8, 1969, and respondent’s petition for a hearing by the Supreme Court was denied November 12, 1969.