Litigation

Trial of Legal and Equitable Issues in California Courts

By Bruce Nye

           You all remember courts of chancery, right?  They were the ones where the chancellor  tried equitable issues, without a jury.  And the artifact of those courts, of course,  is the distinction between ?legal issues? and ?equitable issues.?  In California, and, in most instances, in the Federal courts, the former involve money damages and the parties have the right to a jury trial.  The latter involve things like injunctions, declaratory relief and ?equitable defenses,? (including those old faves laches, estoppel, waiver, unclean hands, etc.) and are usually tried to the court.  The new case of Hoopes v. Dolan (November 12, 2008) ___Cal.App.4th___ does a nice job of summing up what happens in cases with both legal and equitable issues. 

             The Dolans leased commercial real estate to several tenants, one a café operator and one a trucking company.  Hoopes, who had the trucking company, contended back in 1996 that he had exclusive use of some or all of an adjacent parking lot.  Dolans and the café operator said no, it was shared.  Seemingly, that was the end of it, and the parties shared the lot until 2004, when Hoopes sent a snarlogram to Dolans and a new café operator tenant, claiming he had exclusive rights to most of the parking lot.  And in 2005, he sued them for compensatory damages, punitive damages, injunction, declaratory relief, etc., etc.  Dolans asserted the affirmative defense of equitable estoppel, which doesn?t seem unreasonable when everybody had gone about their business in peace for eight years.

            Despite Dolans urging, and at Hoopes? insistence, the trial court conducted a thirteen day jury trial of the legal issues first.  The jury found for Hoopes and awarded compensatory and punitive damages.  Then, the court tried the equitable defense of estoppel (which trial looks as though it mostly consisted of reviewing briefs on both sides and considering the evidence the court had already heard).  As a court of equity, the court found that Hoopes was equitably estopped from taking the position that he had exclusive rights to the lot, and, notwithstanding the jury?s verdict, entered judgment for Dolans and the other tenant.

            The Court of Appeal affirmed the judgment, and made the following procedural observations:
 

• In federal practice, when there are legal and equitable issues, a jury first tries the legal issues, and any remaining equitable issues are then tried to the court.  (Beacon Theatres, Inc. v. Westover (1959) 359 U.S. 500, 510-511.)

• Preferred practice in California is exactly the opposite:  The trial court should hear any equitable issues first, and then convene a jury trial if anything is left.  (Bate v. Marsteller (1965) 232 Cal.App.2d 605, 617.)  But failure to follow this preference ? as occurred here ? is not reversible.

• In both the state and federal courts, a factual finding by the first fact finder (judge or jury) is binding on the second. (Raedeke v. Gibraltar Sav. & Loan Assoc. (1974) 10 Cal.3d 665, 671;  Hughes v. Dunlap (1891) 91 Cal. 385, 388-390; Beacon Theatres, Inc. v. Westover, supra, 359 U.S. 500, 504-505.)

            In my experience, most trial courts follow the ?preference? for trying the equitable issues first, and when a plaintiff has asserted equitable causes of action in what is, at heart, a contract or other damage case, this presents some pretty interesting tactical questions.

Full post as published by CalBizLit on November 13, 2008 (boomark / email).