Keidatz v. Albany
1952 Cal. LEXIS 310, 39 Cal. 2d 826, 249 P.2d 264 (1952)
Rule of Law:
A judgment entered on a sustained demurrer does not have the same broad res judicata effect as a judgment after a full trial on the merits; it will not bar a subsequent action between the same parties if the second complaint alleges new or additional facts that cure the defects of the original pleading.
Facts:
- Plaintiffs were induced to buy a newly-constructed home from defendants due to certain false and fraudulent representations regarding the character of its construction and its location on the property.
- Plaintiffs alleged that the defendants knew these representations were false and made them to induce the purchase.
- The contract price of $6,500 for the home exceeded its actual value by $3,000.
- Plaintiffs' original complaint for rescission and fraud did not allege that the property was worth less than the price they agreed to pay for it, which is a required element for damages for fraud.
- In their first action, the alleged defects in construction became apparent to plaintiffs over a year before they sought to rescind the contract.
- In the present action, plaintiffs added the allegation that the property was worth less than the purchase price, curing a defect from their prior complaint.
Procedural Posture:
- Plaintiffs brought an action in the trial court to rescind a contract for fraud and failure of consideration.
- A demurrer to plaintiffs' second amended complaint was sustained with leave to amend.
- Plaintiffs failed to amend their complaint within the time allowed, and judgment was entered for defendants for costs by the trial court.
- Plaintiffs unsuccessfully sought relief from the judgment in the trial court under section 473 of the Code of Civil Procedure.
- No appeal was taken from the judgment or from the order denying relief under section 473.
- Approximately four months after the judgment in the rescission action was entered, plaintiffs brought the present action for damages for fraud in the trial court.
- Defendants moved for summary judgment, arguing the former judgment was res judicata, which the trial court granted.
- Plaintiffs appealed the trial court's grant of summary judgment.
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Issue:
Does a prior judgment entered on a demurrer, where leave to amend was granted but not exercised, bar a subsequent action between the same parties if the second complaint alleges new or additional facts that cure the defects in the original pleading?
Opinions:
Majority - Traynor, J.
No, a prior judgment entered on a demurrer does not bar a subsequent action between the same parties if the second complaint alleges new or additional facts that cure the defects in the original pleading. The Court explained that a judgment on demurrer is 'on the merits to the extent that it adjudicates that the facts alleged do not constitute a cause of action, and will, accordingly, be a bar to a subsequent action alleging the same facts.' However, if new or additional facts are alleged that remedy the deficiencies of the initial pleading, the former judgment does not operate as a bar to the later action, even if the plaintiff had an opportunity to amend. The Court distinguished this principle from judgments entered after a full trial on the merits, which do have broad res judicata effect, barring not only issues actually raised but also those that could have been raised. In the plaintiffs' first action for rescission, the demurrer was sustained primarily because the action was barred by laches and failure to rescind promptly, and significantly, the complaint did not allege that the property was worth less than the purchase price, thus failing to state a cause of action for damages for fraud. The current action remedied this defect by including the specific allegation of diminished property value. The Court emphasized that this rule regarding judgments on demurrer is a settled procedural principle in the state, upon which parties rely, and any change should be made by the Legislature, not the courts.
Concurring - Schauer, J.
Justice Schauer concurred in the judgment without offering separate reasoning.
Analysis:
This case significantly clarifies the application of res judicata, particularly distinguishing its effect following a judgment on demurrer from one following a full trial on the merits. The ruling provides plaintiffs with an opportunity to correct pleading deficiencies by alleging new facts, even after a prior dismissal based on a demurrer, thereby promoting the resolution of disputes on their substantive merits rather than on initial technicalities. It highlights a judicial reluctance to expand the preclusive effect of judgments beyond established precedent, especially where doing so would create a more restrictive environment for litigation. This decision underscores the procedural nuance in California law regarding claim preclusion and provides a clear path for litigants whose initial complaints were found wanting but can be cured with additional factual allegations.
