Filed 2/25/21 Zhao v. Global Valley CA2/4
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IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION FOUR
JESSIE ZHAO, B304372
Plaintiff and Appellant, (Los Angeles County
Super. Ct. No.BC597103)
v.
GLOBAL VALLEY et al.,
Defendants and
Respondents.
APPEAL from a judgment of the Superior Court of
Los Angeles County, Randolph Hammock, Judge. Affirmed.
Gonzalez & Gonzalez, Rosendo Gonzalez and Zachary
Gonzalez for Plaintiff and Appellant.
Wright Kim Douglas, J. Andrew Douglas, David Kim and
Max Yueh for Defendants and Respondents.
INTRODUCTION
Plaintiff Weijing “Jessie” Zhao sued David Kuo and Global
Valley, LLC, asserting that Zhao invested in and was part owner
of Global Valley, which Kuo managed, but Kuo never repaid Zhao
her investment or provided her with required information about
the company. Defendants moved for summary judgment on the
basis of issue preclusion, asserting that Zhao’s contentions about
ownership in Global Valley had been fully litigated and decided
against her in a previous action. The trial court granted the
motion and entered judgment in favor of defendants.
We affirm. The previous judgment addressed the identical
issue of whether Zhao had an ownership interest in Global
Valley, and Zhao had a full and fair opportunity to assert her
contentions in the underlying action. Issue preclusion therefore
bars Zhao’s claims.
FACTUAL AND PROCEDURAL BACKGROUND
A. Complaint
Zhao’s original complaint was apparently filed on October
8, 2015; it is not included in the record on appeal. The first
amended complaint (FAC), filed January 8, 2016, is the operative
complaint for purposes of the motion for summary judgment. In
the FAC, Zhao asserted that she was a member and 50 percent
shareholder of Global Valley, and defendant Kuo was a member,
manager, and 50 percent shareholder of Global Valley. Zhao
asserted that she included Global Valley “as a nominal defendant
for the sole purpose of a Court ordered accounting and
dissolution.”
Zhao alleged that she provided $2,250,000 in cash
contributions to Global Valley, but from the time of Global
Valley’s inception in 2009 through December 2014, Kuo never
2
provided Zhao with financial statements or other information
about the business. Zhao asserted that in November 2014 she
discovered that Kuo had removed her name from Global Valley’s
tax returns in 2012. She alleged that in November 2014, Kuo
had Zhao sign a document that was backdated to January 2,
2012, purporting to transfer Zhao’s 50 percent interest in Global
Valley to Kuo in exchange for $2,800,000. Kuo told Zhao that the
document was intended to resolve issues with the Internal
Revenue Service, and would not be used for any other purpose.
Zhao alleged that she learned in December 2015 that in
March 2015, Kuo had transferred the company’s main asset,
three parcels of land in San Gabriel, to an entity called Jia Jia
US Investment Company, Inc., which later changed its name to
San Yi US Investment Company, Inc. Zhao alleged she was
never informed of this transaction.
Zhao alleged nine causes of action. In the first two causes
of action for breach of fiduciary duty and breach of the “obligation
of good faith and fair dealing,” Zhao alleged that Kuo failed to
provide Zhao with financial records for Global Valley, and
fraudulently induced Zhao to transfer her share of the company
to Kuo. In the third and fourth causes of action for breaches of
the Corporations Code, Zhao alleged that Kuo failed to obtain
Zhao’s consent before transferring Global Valley to a third party,
and failed to provide financial documents to Zhao. In the fifth
cause of action for fraud, Zhao alleged that Kuo defrauded her
into transferring her share of Global Valley to him; in the sixth
cause of action for rescission of contract, Zhao requested that the
transfer be rescinded. In the seventh cause of action Zhao
requested a constructive trust; in the eighth cause of action she
3
requested an accounting, and in the ninth cause of action she
requested a judicial dissolution of Global Valley.
B. Motion for summary judgment
Defendants filed a motion for summary judgment asserting
that Zhao’s claims were barred by collateral estoppel. They
contended that Zhao’s claims relied on her having an ownership
interest in Global Valley, but another court had already
determined that Zhao did not have an interest in Global Valley.
Defendants’ motion and related request for judicial notice,
along with Zhao’s opposition and related evidence, reveal the
nature of the parties’ dispute. Kuo formed Global Valley in 2009
to build, operate, and manage a real property and hotel in San
Gabriel called the Crowne Plaza Hotel. Kuo stated in a
declaration that one of the investors in Global Valley was East
Asia Investment Group, Inc., which was owned by Kuo’s friend
and Zhao’s uncle, Yue “Gary” Zhao.1 However, documents
relating to Global Valley show that Zhao, not Yue,2 was an
investor in and member of Global Valley. Kuo asserted Zhao was
only listed as a straw investor due to restrictions relating to
Zhao’s student visa status and her family’s residency in China,
and Yue/East Asia was the only true investor.3 Zhao asserts that
1 Zhao objected to the portion of Kuo’s declaration stating
these facts, and the court overruled the objection.
2 We refer to Yue by his first name for clarity; no disrespect
is intended.
3 Kuo’s testimony on this point is not entirely clear. He
testified that the investment came from Yue, and “Weijing Zhao’s
name was merely used for the purpose of this investment. [¶] In
addition to that, back then she held an F1 student visa. As a
student, she was not allowed to make an investment.
Furthermore, due to her father’s identification and status, who
4
the Global Valley tax returns and other documents showing her
as the investor are accurate.
Yue died in March 2015. In May 2015, Global Valley sold
its assets, and $750,000 from the sales proceeds was held in the
trust account of a law firm that represented Global Valley.
On February 29, 2016—about seven weeks after Zhao filed
the FAC in this case—Global Valley’s law firm filed an
interpleader action because “it was unclear who was entitled to
[the] $750,000 in proceeds from Global Valley’s sale of the Hotel .
. . particularly in light of certain transfers of property as a result
of a marital settlement agreement” between Yue and his ex-wife,
Jennifer Tan. Zhao was named as one of the defendants in the
interpleader action. The law firm stated in its complaint that
Yue’s estate might be entitled to the funds, Tan contended that
entitlement to the funds was disputed, and Zhao claimed she was
entitled to the funds. The law firm asked the court to resolve the
conflict.
In the interpleader action, Zhao argued that the disputed
$750,000 was from the proceeds of the sale of Global Valley’s
assets, and because Zhao was a 50 percent owner of Global
Valley, she was entitled to at least part of the disputed funds.
Zhao filed a demurrer asking the court to dismiss the
interpleader action because her entitlement to the funds was
already being litigated in this case, which was filed first. Zhao
asserted that the interpleader action and the earlier-filed action
was working in China, her family would not – would be improper
for her family to invest here.”
5
“involve the same parties and same cause of action.”4 Defendants
stated that Zhao later withdrew the demurrer.
The interpleader action went to trial over three days before
Judge Elizabeth R. Feffer, who took the matter under submission
on February 2, 2018. In a statement of decision following the
trial,5 the court stated that Yue controlled East Asia Investment
Group, Inc., and he had been married to Tan for 25 years before
they divorced. A marital settlement agreement between Yue and
Tan assigned to Tan a “business interest held in the name of East
Asia,” including interests in Crowne Plaza. The marital
settlement agreement was entered as a judgment on February
14, 2017.
The court noted that in January 2015, Zhao testified in a
deposition in Yue and Tan’s divorce proceeding that she did not
invest in Global Valley6:
“Question: Did you invest any funds in Global Valley LLC?
Answer: No.
4Although Zhao asserted that the law firm was included as
a defendant in this case, the record on appeal does not suggest as
much.
5Zhao and defendants cite the interpleader court’s tentative
statement of decision signed on February 23, 2018, as the court’s
statement of decision. This statement of decision notes that it is
tentative and subject to objection by the parties. A minute order
included in the record stated that on April 9, 2018 the court
issued a final statement of decision, which does not appear to be
in the record on appeal. Because the parties do not dispute that
the tentative statement of decision reflects the interpleader
court’s final analysis, we also rely on that version.
6The statement of decision does not make clear why Zhao
testified as a part of Yue and Tan’s divorce proceeding.
6
[Question:] Did you ever invest in a hotel called Crown[e]
Plaza?
Answer: No.”
In a second exchange the court quoted, Zhao testified again
that she did not invest in Global Valley:
“[Question:] . . . . Did you invest $2,250,000 into Global
Valley LLC in 2009?
Answer: No.”
The court stated that at the interpleader trial, by contrast,
Zhao testified that she had invested over $3.5 million in Global
Valley. When asked about her contradictory testimony in the
divorce, Zhao said she had been confused by the term
“investment.” The court noted that although Zhao used a
Mandarin interpreter in the divorce deposition, in the
interpleader action she testified in English that she had been in
the United States since she was 16 or 17 years old, and she had
attended high school in San Marino; college at the University of
California, Irvine; and graduate school in Las Vegas—all with
instruction in English. The court also noted, “Prior to the Final
Settlement [sic] Conference on August 2, 2017, [Zhao] failed to
file an exhibit list, witness list or trial brief. . . . [Zhao’s] exhibits
and witness testimony, other than those witnesses and exhibits
offered by [Tan], were excluded.”
The court stated, “The court finds that [Zhao’s] trial
testimony regarding having invested any amount of funds into
Global Valley or Crowne Plaza is not credible. . . . The court also
finds that [Zhao’s] trial testimony that she had any actual
interest in Global Valley to not be credible.” The court further
noted that Zhao testified she had assigned any interest she had
in Global Valley to Kuo in November 2014. The court stated that
7
it appeared Zhao was using the interpleader action to attempt to
effectively set aside the judgment in Yue and Tan’s divorce. The
court ordered the disputed funds at issue to be distributed to Tan.
Zhao appealed the court’s judgment, but later abandoned the
appeal.
In their motion for summary judgment, defendants argued
that each of Zhao’s causes of action relied on her having an
interest in Global Valley as an investor and member, but that
fact had already been fully litigated and rejected in the
interpleader action. Defendants asserted, “This lawsuit is yet
another improper attempt by [Zhao] to collaterally attack an
issue that has been previously decided. A court has already
determined that [Zhao] has no interest in Global Valley. That
decision is binding on her here.” Defendants argued that
summary judgment was warranted because collateral estoppel
provided a complete defense to each of Zhao’s causes of action.
C. Opposition
In her opposition to defendants’ motion for summary
judgment, Zhao asserted that collateral estoppel and res judicata
were not applicable to her claims. She contended that Kuo issued
her a stock certificate for 50 percent of Global Valley in July
2009, and Kuo and Zhao confirmed in writing that “member
Weijing Zhao contributed two million two hundred fifty thousand
dollar [sic] ($2,250,000) cash.” Zhao argued that tax returns and
other documents also showed that she was part owner of Global
Valley. Beginning in 2012, tax returns showed that Kuo or his
family members were the members of Global Valley. Zhao
alleged that following the May 2015 sale of Global Valley’s assets,
“no disbursements were actually made from the sale proceeds to
8
any of the members of Global Valley,” but instead, Kuo made
“payments to companies related to and/or controlled by Kuo.”
Zhao asserted that her claims were not precluded by the
decision in the interpleader action. She contended that in this
case she was seeking the recovery of approximately $2.8 million
that she invested in Global Valley, in contrast to the $750,000 at
issue in the interpleader action, and therefore the claims were
not the same in the two cases. She also asserted that different
parties were involved in the interpleader action, since Kuo and
Global Valley were not parties in that case. Zhao argued that
“[a]s a result, the doctrines of collateral estoppel and/or res
judicata are not applicable in this lawsuit.”
Zhao further asserted that the interpleader appeal was
resolved through settlement agreements addressing multiple
litigations involving Zhao; Tan; and Yue and Tan’s son Zidan
Zhao, acting individually, as executor as Yue’s estate, and on
behalf of East Asia Investment Group. Zhao asserted that in the
settlement agreement addressing the interpleader action, “J. Tan
agreed that W. Zhao is the sole holder of any claims or causes of
action as to Global Valley.” Zhao argued that as a result, “W.
Zhao, and not J. Tan, . . . is the rightful and only party that can
proceed and assert the causes of action against the Defendants in
the case before this Court.”
Zhao also asserted that even if collateral estoppel did apply,
any prior decision should not be enforced because “Kuo’s evasive
and misleading testimony in the Interpleader Action” constituted
extrinsic fraud. She noted that Kuo testified in the interpleader
action that Yue and East Asia invested in Global Valley, and
“Weijing Zhao’s name was merely used for the purpose of this
9
investment.” However, Kuo acknowledged that the tax returns
he signed stated that Zhao was a member of Global Valley.
D. Reply
Defendants asserted that Zhao was “using the exact same
evidence that she submitted in the Interpleader Action in an
effort to relitigate Judge Feffer’s decision. Indeed, while that
Court considered evidence on both sides of the issue as to
whether [Zhao] had an actual ownership issue [sic] in Global
Valley, that issue was, ultimately and definitively, decided
against [Zhao].” Defendants requested judicial notice of Zhao’s
exhibit list and closing trial brief from the interpleader action,
asserting that her opposition to the motion for summary
judgment “simply makes the same arguments based on the same
evidence from the Interpleader Action.”
Defendants also asserted that the settlement agreement
from the interpleader action did not support Zhao’s claims,
because it showed only that Tan waived any claims against
Global Valley, and did not “undo Judge Feffer’s decision on the
issue that is dispositive of all [of Zhao’s] claims.” In addition,
defendants argued that although Zhao claimed that there was
fraud in the interpleader action, she “fails to identify what the
alleged fraud was, how that alleged fraud prejudiced her ability
to argue her position in the Interpleader Action and/or how
[Zhao] did not know about that alleged fraud earlier.”
Defendants asserted that Kuo’s testimony had been consistent,
but even if it had not, inconsistencies in testimony or other
evidence did not constitute fraud.
E. Hearing and ruling
The court issued a tentative ruling granting the motion for
summary judgment. The court granted defendants’ requests for
10
judicial notice of documents from the interpleader action. The
court noted the question presented was “whether the previous
findings of another department of this Court meet the
requirements for collateral estoppel or whether there is a genuine
dispute of material fact as to whether collateral estoppel applies.”
The court found there had been a final adjudication in the
interpleader action, and the parties’ settlement agreement “does
not . . . render the judgment in the interpleader action less than
final.” The court also found that Zhao’s claim to an interest in
Global Valley was identical to the one she asserted in the
interpleader action, and the issue had been actually litigated in
that case. The court stated, “[G]iven that another department of
this Court already expended resources to determine the factual
issue that [Zhao] attempts to relitigate here, the Court finds that
the application of the doctrine of collateral estoppel to this issue
will promote judicial economy and the integrity of the judicial
system.” The court also rejected Zhao’s claim of extrinsic fraud,
noting that she did not “point to new evidence that was not
considered in the interpleader action.”
At the hearing on December 19, 2019 before Judge
Randolph M. Hammock, Zhao’s counsel contended for the first
time that the case had not been “actually litigated” in the
interpleader action. Zhao’s counsel noted that the court’s
tentative ruling cited Murphy v. Murphy (2008) 164 Cal.App.4th
376, 401 (Murphy), which states, “A party urging collateral
estoppel must prove that the issue was actually litigated and that
the evidence was not restricted, but need not establish that oral
testimony, or any particular type of evidence was presented.”
(Emphasis added.) Zhao’s counsel argued that the evidence in
the interpleader action was restricted, because Judge Feffer
11
barred Zhao from presenting evidence or witnesses after she
failed to follow a local rule regarding the timing of pretrial
disclosures. Zhao’s counsel argued that Zhao had been “prevented
from introducing a single exhibit or calling a witness,” and asked
to introduce Judge Feffer’s order and a transcript.
The court noted that Zhao failed to present evidence or
argument to support this argument in her opposition to the
motion for summary judgment. However, the court agreed to
“consider [Zhao’s] point about whether Judge Feffer’s evidentiary
ruling was to the effect that resulted in a travesty of justice,”
such that collateral estoppel should not apply. The court agreed
to take judicial notice of additional documents from the
interpleader case, and took the issue under submission.
Later the same day, the court issued a written ruling
granting defendants’ motion for summary judgment. The ruling
included the analysis in the written tentative ruling, and also
addressed Zhao’s arguments from the hearing. The court rejected
Zhao’s interpretation of Murphy, stating, “It is non-sensical [sic]
to assert that [in] every case where there is an issue preclusion
analysis, this Court must first determine whether material
evidence in the prior case was ‘restricted,’ and if it was,”
determine if the prior decision lacked collateral estoppel effect as
a result. The court also stated that evidence restricted due to a
discovery sanction “willfully caused by a party . . . cannot mean
that a resulting final judgment does not have res
judicata/collateral estoppel effect. That would be absurd, and
would simply give incentive for a party to violate rules . . . .” The
court noted that if Zhao felt Judge Feffer’s rulings were unfair or
resulted in a miscarriage of justice, she could have appealed; but
Zhao abandoned her appeal and “[h]aving agreed to let that
12
judgment stand, it would be unfair to allow [Zhao] to attack it
collaterally here.” The court also stated that the documents from
the interpleader action showed that Zhao “was allowed to make a
full and complete argument on her alleged ownership” in Global
Valley, “which is the same issue in this case.” The court
concluded, “No matter how you spin it, the simple fact is that
[Zhao] in this case is merely attempting to re-litigate the exact
ownership issue which was adequately and fairly presented in
the interpleader action.”
The court entered judgment in favor of defendants. Zhao
timely appealed.
DISCUSSION
On appeal, Zhao asserts that the trial court erred in
granting defendants’ motion for summary judgment. She asserts
four arguments: that the issue litigated in the interpleader action
was not identical to the issues presented here, that the issues in
the interpleader action were not “actually litigated” due to Judge
Feffer’s limitation of Zhao’s evidence, that the interpleader
judgment was based on Kuo’s fraud, and that the trial court erred
in overruling Zhao’s objection to Kuo’s declaration. Defendants
assert that the trial court was correct in finding that collateral
estoppel bars Zhao’s claims, and that the court did not err in
overruling Zhao’s evidentiary objection. We find no error and
affirm.
Summary judgment is appropriate when “all the papers
submitted show that there is no triable issue as to any material
fact and that the moving party is entitled to a judgment as a
matter of law.” (Code Civ. Proc., § 437c, subd. (c).) A defendant
may establish that a cause of action has no merit by
demonstrating that there is a complete defense to that cause of
13
action. (Id., subd. (p)(2).) “[T]he party moving for summary
judgment bears an initial burden of production to make a prima
facie showing of the nonexistence of any triable issue of material
fact; if he carries his burden of production, he causes a shift, and
the opposing party is then subjected to a burden of production of
his own to make a prima facie showing of the existence of a
triable issue of material fact.” (Aguilar v. Atlantic Richfield Co.
(2001) 25 Cal.4th 826, 850.) “We review the trial court’s grant of
summary judgment de novo and decide independently whether
the parties have met their respective burdens and whether facts
not subject to triable dispute warrant judgment for the moving
party as a matter of law.” (Jessen v. Mentor Corp. (2008) 158
Cal.App.4th 1480, 1484.) “[A] trial court judgment is ordinarily
presumed to be correct and the burden is on an appellant to
demonstrate, on the basis of the record presented to the appellate
court, that the trial court committed an error that justifies
reversal of the judgment.” (Jameson v. Desta (2018) 5 Cal.5th
594, 608-609.)
Each cause of action alleged in Zhao’s FAC relies on
allegations that Zhao invested in Global Valley and that Kuo
owed her certain duties as a result of her membership in Global
Valley. Thus, if the court in the interpleader action determined
that Zhao had no ownership interest in Global Valley, and that
determination precludes Zhao from asserting otherwise in this
action, summary judgment in favor of defendants is appropriate.
California courts “now refer to ‘claim preclusion’ rather
than ‘res judicata’ [citation], and use ‘issue preclusion’ in place of
‘direct or collateral estoppel.’” (Samara v. Matar (2018) 5 Cal.5th
322, 326.) Claim preclusion “‘prevents relitigation of the same
cause of action in a second suit between the same parties or
14
parties in privity with them.’” (DKN Holdings LLC v. Faerber
(2015) 61 Cal.4th 813, 824 (DKN Holdings).) By contrast, issue
preclusion “prohibits the relitigation of issues argued and decided
in a previous case, even if the second suit raises different causes
of action.” (Ibid.)
Claim preclusion does not apply here, because the
interpleader action involved Zhao, Tan, and Global Valley’s law
firm; it did not involve the same parties as this case. In addition,
the interpleader action involved rights to $750,000 in disputed
funds, and therefore did not involve the same causes of action as
Zhao has alleged here. We therefore focus solely on issue
preclusion.
“[I]ssue preclusion applies: (1) after final adjudication (2)
of an identical issue (3) actually litigated and necessarily decided
in the first suit and (4) asserted against one who was a party in
the first suit or one in privity with that party.” (DKN Holdings,
supra, 61 Cal.4th at p. 825.) It is undisputed that the
interpleader action resulted in a final adjudication, and that Zhao
was a party to that action.
A. Identical issue
Zhao contends that “the legal and factual issues in the
Interpleader Action were not ‘identical’ to those” in this case. She
asserts that the issue here is “whether W. Zhao was entitled to
recover any damages for Kuo’s acts and conduct of having taken
or embezzled [money] from Global Valley, without paying back
anything to W. Zhao on her $2,250,000 initial investment,” which
she contends was not decided in the Interpleader Action.
Defendants argue that the interpleader action directly addressed
the factual basis upon which all of Zhao’s claims rely: whether
Zhao had an ownership interest in Global Valley.
15
“The ‘identical issue’ requirement addresses whether
‘identical factual allegations’ are at stake in the two proceedings,
not whether the ultimate issues or dispositions are the same.”
(Lucido v. Superior Court (1990) 51 Cal.3d 335, 342.) Thus,
“when an issue of ultimate fact has been determined by a valid
and final judgment, that issue cannot be relitigated . . . in a
future lawsuit.” (California Logistics, Inc. v. State of California
(2008) 161 Cal.App.4th 242, 249.) In addition, “findings that
were important to the court’s decision may be binding even if
they were not themselves dispositive of an ultimate legal issue.”
(Key v. Tyler (2019) 34 Cal.App.5th 505, 534-535.)
In the interpleader action, the court’s statement of decision
made clear that Zhao asserted she was entitled to the disputed
funds “as partial payment of her alleged investment in Global
Valley of $2.8 million which investment she asserts has not been
repaid.” Zhao also asserted that “the interest in Global Valley
represented by the Disputed Funds belongs to [Zhao] and has
never belonged to East Asia/Yue Zhao.” The court rejected these
claims, finding that Zhao’s “trial testimony regarding having
invested any amount of funds into Global Valley or Crowne Plaza
is not credible. . . . The court also finds that [Zhao’s] trial
testimony that she had any actual interest in Global Valley to not
be credible.” Based on the finding that Zhao had no interest in
Global Valley, the court awarded the disputed funds to Tan.
Zhao’s claims here rely on an identical underlying premise:
that Zhao invested in Global Valley, had an interest in it, and is
entitled to funds from Global Valley based on that interest. The
interpleader court directly addressed and rejected that
contention. Thus, the “identical issue” factor is met here.
16
B. Actually litigated
Zhao further contends that the issue was not “actually
litigated” in the interpleader action because “Judge Feffer
prevented W. Zhao from introducing any exhibits or witnesses at
trial in the Interpleader Action.” In the interpleader action, the
court found “that defendant Zhao did not comply with the Final
Status Conference filing rules and will not be allowed to offer
documents or witnesses from the untimely filed witness and
exhibit lists.” Zhao again relies on Murphy, supra, 164
Cal.App.4th at p. 401, which states, “A party urging collateral
estoppel must prove that the issue was actually litigated and that
the evidence was not restricted . . . .” She argues that the
evidence was “restricted” by Judge Feffer, so Zhao “was not
afforded a ‘full and fair opportunity’ to present her case.”
We disagree. “[W]here, as here, the party to be estopped
was a party who participated in the earlier proceeding, due
process requires that this party must have had an adequate
incentive to fully litigate the issue in the prior proceeding
[citation], and must have had a fair opportunity to pursue [her]
claim the first time.” (Murphy, supra, 164 Cal.App.4th at p. 404.)
Zhao had notice of the interpleader action; she appeared
throughout the proceedings; she testified at trial; she cross-
examined the other witnesses at trial, including Kuo; and she
had every incentive to assert arguments to establish her interest
in Global Valley, because that was the central issue in the action.
To the extent Zhao’s ability to present any evidence was
limited, any such limitation resulted from her own actions.
Judge Feffer limited Zhao’s presentation of evidence because she
failed to follow local rules regarding the timing of pretrial
disclosures. Although Zhao could have challenged this ruling in
17
her appeal of the interpleader judgment, she abandoned that
appeal and allowed the judgment to stand. Zhao now argues that
Judge Feffer’s ruling was “improper,” “inexplicable,”
“contradicted by a number of legal authorities,” and an “excessive
decision to penalize” Zhao. However, she may not collaterally
attack the interpleader judgment in a separate litigation because
she was unsatisfied with the result.7 (See, e.g., OC Interior
Services, LLC v. Nationstar Mortgage, LLC (2017) 7 Cal.App.5th
1318, 1328 [“[A] judgment that is valid on the face of the record is
generally not subject to collateral attack. [Citation.] In other
words, a judgment that is valid on the face of the record must be
challenged by direct attack, such as a motion in the original
action, an appeal in the original action, or an independent
equitable action.”].)
Zhao quotes Murphy, supra, 164 Cal.App.4th 376 and
Smith v. ExxonMobil Oil Corp. (2007) 153 Cal.App.4th 1407
(Smith) in support of her arguments, but she does not discuss the
issues or findings in those cases. They do not support her
position. In Murphy, supra, 164 Cal.App.4th 376, a brother filed a
lawsuit against his sister challenging an estate plan for their
father, William, which had been imposed pursuant to various
orders by the probate court. The brother argued in part that the
estate plan resulted from fraud on the part of the sister. The
sister argued that “collateral estoppel barred all of the causes of
action because the validity of William’s living trust, including the
issues of William’s capacity, intent and undue influence were
7With her reply brief, Zhao filed a request that we judicially
notice Judge Feffer’s courtroom rules. That request is denied; the
document is not relevant to the issues on appeal. (See Roth v.
Jelley (2020) 45 Cal.App.5th 655, 678, fn. 10.)
18
actually litigated and finally decided on the merits in the
[probate] proceeding.” (Murphy, supra, 164 Cal.App.4th at p.
393.) The trial court rejected the sister’s contentions and found
in favor of the brother.
The Court of Appeal reversed. In discussing the “actually
litigated” requirement, the court noted that issue preclusion may
bar arguments that could have been asserted in an earlier
proceeding, but were not. The court stated, “‘If the matter was
within the scope of the [previous] action, related to the subject-
matter and relevant to the issues, so that it could have been
raised, the judgment is conclusive on it despite the fact that it
was not in fact expressly pleaded or otherwise urged. The reason
for this is manifest. 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.’” (Murphy, supra, 164 Cal.App.4th at p. 401, quoting
Interinsurance Exchange of the Auto. Club v. Superior Court
(1989) 209 Cal.App.3d 177, 182.) The Murphy court also added
that a prior judgment “‘is a collateral estoppel on issues which
were raised, even though some factual matters or legal
arguments which could have been presented were not.’”
(Murphy, supra, 164 Cal.App.4th at p. 401, quoting 7 Witkin, Cal.
Procedure (4th ed. 1997), Judgment, § 359, pp. 923-924.)
The Murphy court found that in approving William’s estate
plan, the probate court impliedly found the plan did not result
from the sister’s fraud or undue influence. (Murphy, supra, 164
Cal.App.4th at p. 403.) The court added, “[E]ven if we could not
conclude that fraud and undue influence were actually
adjudicated in the prior proceeding, we would find them barred in
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this proceeding. These arguments could have been raised before
Judge McMath [in the probate court] to persuade her on at least
two different issues she necessarily resolved: that the proposed
disposition plan was in the best interest of William and his estate
and that the plan was objectively reasonable. Therefore, [the
brother] was estopped from raising these contentions here.” (Id.
at pp. 403-404.)
Zhao also cites Smith, supra, 153 Cal.App.4th 1407, a
wrongful death case. In an underlying personal injury action, a
pipefitter, Smith, alleged that he had been exposed to asbestos at
various job sites, including an oil refinery owned by the
defendant, Mobil. After the trial had started, Mobil’s expert
witness on causation had a serious family emergency and could
not testify. Mobil could not immediately replace the witness.
“Because the presentation of evidence was by then nearly
completed, and Smith was seriously ill and apparently near
death, so that trial could not be significantly delayed beyond the
few days that had been allowed by the court, Mobil decided it had
no alternative but to proceed without the testimony expected of
[the expert].” (Id. at p. 1412.) The jury found Mobil liable for
negligence. (Ibid.) Mobil appealed, and the Court of Appeal
affirmed. (Ibid.)
After Smith died, his family members sued Mobil for
wrongful death. They moved to preclude Mobil from challenging
causation and negligence on the basis that those issues had been
litigated and adjudicated adversely to Mobil in the personal
injury action. (Smith, supra, 153 Cal.App.4th at p. 1412.) Mobil
opposed the motion, asserting that it would be unfair to apply
collateral estoppel because the expert’s “sudden inability to
testify at the personal injury trial, for which Mobil was not
20
responsible, prevented it from mounting a complete defense to
the liability claim.” (Ibid.) The trial court rejected Mobil’s
contentions, and a jury found in favor of Smith’s family.
The Court of Appeal reversed. It discussed the offensive use
of issue preclusion: issue preclusion used by a plaintiff against a
defendant. (Smith, supra, 153 Cal.App.4th at p. 1414.) The court
acknowledged that “collateral estoppel does not apply ‘when the
party against whom the earlier decision is asserted did not have a
“full and fair opportunity” to litigate the claim or issue.’
[Citation.] The problem is that parties against whom a verdict is
returned commonly feel they were denied a ‘full and fair
opportunity’ to litigate their claims and, because no trial is
perfect, it is usually not difficult for them to find a defect upon
which to try to hang their hats.” (Id. at p. 1416.) The court
emphasized that in the underlying action, neither Mobil nor its
counsel was responsible for the expert witness’s unavailability.
(Id. at p. 1420.) The court continued, “It is additionally clear that
those issues—causation, the applicable standard of care at the
time, and apportionment of fault—were all crucial issues. Mobil’s
fortuitous inability, through no fault of its own, to produce
evidence on these crucial issues makes it impossible to say that
the prior trial provided it a full and fair opportunity to present a
defense. In the unusual and compelling circumstances of this
case, the trial court’s application of collateral estoppel was unfair
and must be set aside.” (Ibid.)
The reasoning in Smith does not compel a similar
conclusion here. There were no unusual or compelling
circumstances in the interpleader action caused by factors beyond
Zhao’s control. To the contrary, Judge Feffer’s limitation on
Zhao’s evidence resulted from Zhao’s and her counsel’s failure to
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comply with court rules regarding the timing of filing pretrial
documents. The situation here is one that the Smith court
cautioned against: a litigant unsatisfied with a prior decision who
claims she was denied a fair trial and “find[s] a defect upon which
to try to hang [her] hat[ ].” (Smith, supra, 153 Cal.App.4th at p.
1416.) Moreover, as stated in Murphy, issue preclusion applies to
issues that were raised or could have been raised in the earlier
proceeding, which includes all of the contentions Zhao makes
here. In short, we find no support for Zhao’s assertion that the
relevant issue was not “actually litigated” in the interpleader
action.
C. Fraud
Zhao asserts that the “trial court should not have given
preclusive effect to the interpleader judgment obtained by Kuo’s
fraudulent means.” She argues that Kuo “falsely and evasively
testified in the Interpleader Action in favor of J. Tan,” and his
testimony contradicted various Global Valley documents
regarding whether Yue/East Asia or Zhao invested in Global
Valley. Zhao contends that “Judge Feffer specifically relied on
Kuo’s misrepresentations, evasiveness and false testimony” in
reaching her decision. She argues that issue preclusion “is an
equitable concept,” and therefore Kuo, who is “seeking to
capitalize on his fraudulent testimony,” should not be permitted
to use issue preclusion against Zhao.
As discussed above, Zhao had a full and fair opportunity to
assert her contentions in the interpleader action, including
addressing Kuo’s contentions about the history and ownership of
Global Valley. A transcript from the interpleader action filed
with Zhao’s opposition makes clear that Zhao cross-examined
Kuo about issues such as Global Valley’s investors and the
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documents demonstrating membership in Global Valley,
including documents showing that Zhao was part owner. The
interpleader court stated in its decision that it considered the
testimony presented and made credibility findings. Zhao chose
not to pursue an appeal of the court’s judgment. She may not
now collaterally attack the interpleader judgment on the basis
that she disagrees with the court’s credibility determinations.
Thus, Zhao’s contention that “Kuo gave evasive testimony, lied
and/or made a number of misrepresentations in the Interpleader
Action” is not a basis for limiting the application of issue
preclusion here.
Zhao also asserts that it was “no coincidence that Kuo
falsely testified in favor of J. Tan in the Interpleader Action,”
suggesting some sort of undefined collusion between Kuo and
Tan. She asserts that the settlement agreement from the
interpleader action “established that W. Zhao (and not J. Tan)
had all the legal rights and/or had acquired them to proceed in
[this action] against Kuo and Global Valley.” Zhao argues that
the trial court erred because it did not “fully and adequately
consider the fact that W. Zhao had the legal rights to proceed
(regardless of the Interpleader Judgment) against Kuo and
Global Valley.” She also asserts that these were “new facts or
changed circumstances from the Interpleader Action directly
affecting whether the doctrine of collateral estoppel should have
been applied.”
However, Zhao’s claims in the FAC are based on her
purported investment in and ownership of Global Valley—not on
rights assigned to her by Tan. Moreover, she does not explain
how these newly assigned rights differed from her own, or on
what basis they might warrant a different result. Thus, Zhao has
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not established any error regarding the court’s consideration of
the settlement agreement.
Because the identical issue was actually litigated in the
interpleader action, and Zhao’s claims of fraud are not supported
by the record, issue preclusion bars Zhao’s claims that she had an
ownership interest in Global Valley. Summary judgment was
therefore warranted.8
DISPOSITION
The judgment is affirmed. Defendants are entitled to their
costs on appeal.
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
COLLINS, J.
We concur:
WILLHITE, ACTING P.J.
CURREY, J.
8With her opposition to the motion for summary judgment,
Zhao objected to a portion of Kuo’s declaration stating that “One
of the investors in Global Valley was East Asia Investment
Group, Inc., which was owned and operated by Yue ‘Gary’ Zhao.”
The trial court overruled the objection, and Zhao asserts on
appeal that the court abused its discretion in doing so. Because
the facts stated in the declaration are not relevant to the
application of issue preclusion, and issue preclusion is
dispositive, we do not reach Zhao’s contentions regarding the
court’s evidentiary ruling.
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