Equity,  Estoppel

You can’t change the rules on appeal just because you don’t like the outcome at trial: how judicial estoppel can foil your appeal

California trial courts classify civil cases as either “limited jurisdiction” or “unlimited jurisdiction,” depending on the amount in dispute. If the amount in dispute is $25,000 or less, the case is a limited jurisdiction case. If the amount in dispute is more than $25,000, it is an unlimited jurisdiction case. Thus, a court in a limited jurisdiction case cannot award more than $25,000  . . . except under the quirky circumstances of AP-Colton, LLC v. Ohaerie, case no. E059505 (4th Dist., Sept. 15, 2015).

AP-Colton is a commercial landlord-tenant dispute, in which the landlord originally sued to evict the tenants and for damages of less than $25,000. The tenants surrendered the premises, then cross-complained for: one million dollars!

At that point, the case should have become an unlimited civil case, right? The problem is that the tenants never paid the $140 “reclassification fee” necessary to convert the case from limited to unlimited status, so the clerk never reclassified the case. (Code Civ. Proc., § 403.060, subd. (b).) When the landlord amended its complaint to seek in excess of $25,000, it presumed the case had already been reclassified.

Starting with the filing of the tenants’ cross-complaint, all the parties identified the case as “unlimited” in the captions of their pleadings, and the tenants put the same label on a case management statement. The trial court entered a judgment against the tenants for about $120,000.

On appeal, the tenants contended that the judgment had to be reversed because the case had never been reclassified, the case was thus a limited one, and the judgment therefor could not exceed $25,000. Would such a result seem equitable to you, considering that the tenants were the ones to identify the case as unlimited and maintained that fiction all the way through judgment?

The Court of Appeal doesn’t think so. It invokes the equitable doctrine of judicial estoppel to prevent the tenants from benefiting from their change of position. They had, after all, contended the case was unlimited from the moment they filed their cross-complaint, and maintained that position through the entry of judgment. In other words, so long as the tenants still had a chance of winning in excess of $25,000, they maintained the case was unclassified. Once they lost, they changed their tune and tried to limit the judgment against them to the limited case limit of $25,000. Under the doctrine of judicial estoppel, a party cannot successfully take one factual position in judicial proceedings, then take a contrary factual position in later proceedings; the party is bound to its earlier position, so long as it was not the result of ignorance, fraud or mistake. The Court of Appeal finds that the doctrine applies here to preclude the tenants from taking the position that the case was a limited case.

Where was the requisite “success” the tenants had in asserting that the case was unlimited? Well, it does not take much to meet that threshold. A party’s earlier position is a “success” if “the tribunal adopted the position or accepted it as true[.]” Most times, that means the court’s adoption of the position resulted in some victory or benefit, such as a ruling in that party’s favor. Here, however, all it took to establish success was that the trial court had tried the case as an unlimited case and awarded damages accordingly against the party asserting the position. Some success! But in the judicial estoppel sense, it was a success because the court adopted the position that the case was unlimited.

Judicial estoppel does not apply if the earlier position was taken because of fraud, ignorance, or mistake. Since the tenants represented themselves from the beginning of the case to the entry of judgment in the trial court, one would think they might plead ignorance that their failure to pay the fee kept the case a limited one. Surprisingly, however, they apparently never moved to vacate the judgment on that ground (arguably forfeiting the argument), and the Court of Appeal notes that the tenants “never claimed” the benefit of this exception, even on appeal.