NCP Imperial v. L.A. County Flood Control Dist. CA2/2

Opinion

Filed 9/23/26 NCP Imperial v. L.A. County Flood Control Dist. CA2/2 NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SECOND APPELLATE DISTRICT

DIVISION TWO

NCP IMPERIAL, LLC, et al., B334618, B336982 Plaintiffs and Appellants, (Los Angeles County Super. Ct. No. 23NWCV01150) v.

LOS ANGELES COUNTY FLOOD CONTROL DISTRICT,

Defendant and Respondent.

APPEAL from a judgment of the Superior Court of Los Angeles County, Olivia Rosales, Judge. Reversed and remanded. Anderson, McPharlin & Conners LLP, William R. Larr and Ali Z. Vaqar for Plaintiffs and Appellants. Nossaman LLP, Patrick J. Richard and Nathan Guttman for Defendant and Respondent. NCP Imperial, LLC, and Family Property Holdings, LLC (appellants), filed an inverse condemnation case seeking compensation from Los Angeles County Flood Control District (County) and the Department of State Hospitals (DSH) for an underground drainage pipe running through their real property. After the trial court found appellants lacked standing, the parties stipulated to judgment seeking to facilitate appellants’ appeal. While that appeal was pending, appellants filed this action against the County for quiet title and declaratory relief and dismissed the pending appeal. The County demurred to the complaint on grounds that res judicata barred appellants from relitigating any claims based on the underground drainage pipe. The trial court agreed and sustained the demurrer without leave to amend. We reverse because the judgment in the prior inverse condemnation action expressly excluded from the disposition questions other than standing from disposition.

FACTUAL AND PROCEDURAL BACKGROUND When reviewing an order sustaining a demurrer, we treat the facts alleged in the operative complaint and judicially noticed documents as true.1 (Brown v. Deutsche Bank National Trust Co. (2016) 247 Cal.App.4th 275, 279.) I. Prior inverse condemnation action A. Allegations Appellants sued County and DSH (collectively, defendants). The operative first amended complaint filed in April 2022 (L.A. Super. Ct. No. 21STCV37773) contained one cause of action for inverse condemnation.

1 On March 7, 2024, we granted appellants’ request for judicial notice dated February 2, 2024.

2 Appellants are fee owners of 7.24 acres of real property located at 12501 Imperial Highway in Norwalk (Property). The Property is improved with a six-story office building. Appellants subdivided the Property into lots 5 to 8 for development. The Property is bordered by two parcels of land: on the north (North Parcel) the land is owned by the State of California (State) and includes the Metropolitan State Hospital; on the west (West Parcel) the Property is improved with condominiums. A 78-inch reinforced concrete sewer pipeline (Pipeline), built by the DSH in 1968, runs from the North Parcel to the West Parcel. The Pipeline then travels under the Property for 339 feet and terminates south of the Property at a catch basin under Imperial Highway. DSH previously owned the Property and the West Parcel. In 1976, DSH conveyed the Property by quitclaim deed that did not reserve any easement rights to the Pipeline running under the Property. DSH allegedly abandoned any right, title, or interest to the Pipeline. Appellants acquired the Property in 2018 intending to redevelop the Property. They then discovered defendants had connected a 102-inch pipeline to a 78-inch piece of the Pipeline for the latter to handle storm water overflow as part of the Bloomfield Drain Project. Defendants’ connection of the two pipelines was purportedly done without legal right, title, permission, or consent after DSH failed to reserve any interest in the Pipeline. The use of the Pipeline interfered with appellants’ ability to develop the Property because they must comply with the County of Los Angeles’ stringent permitting process before defendants allow them to redevelop the Property. In the inverse 3 condemnation case, appellants sought compensation for the alleged taking by defendants. B. Demurrer, stipulated judgment, and appeal DSH demurred to the first amended complaint, arguing appellants lacked standing to sue for inverse condemnation because they did not own the Property at the time the Pipeline was connected to the Bloomfield Drain Project. The trial court sustained the demurrer without leave to amend. Prior to the trial court’s ruling on the demurrer, the County moved for summary judgment on the same grounds asserted by DSH in its demurrer. Appellants sought to appeal the court’s order on the DSH’s demurrer. To facilitate appeal, the parties stipulated to entry of judgment for the purpose to “hasten[] review in the Court of Appeal” and to “forgo[] unnecessary court time and expense of proceeding with the County’s MSJ in order to obtain an appealable judgment following the Court’s adverse determination of a critical issue (i.e., that the Plaintiffs lack standing).” The stipulation included the parties “have further agreed and confirmed that this Judgment is not intended to, and this Court confirms that this Judgment does not, settle any dispute between any of the parties hereto.” In its judgment, the trial court incorporated the parties’ stipulations by reference, determined appellants lacked standing against both the County and DSH, and vacated the County’s summary judgment motion. The court decreed the judgment was “entered without trial and without adjudication of any issue of fact or law other than as may be set forth herein” and “entered for the sole purpose of expediting appellate review.” On February 3, 2023, appellants filed a notice of appeal from the stipulated judgment. While the appeal was pending, 4 appellants filed a complaint for quiet title and declaratory relief. On June 14, 2023, the appeal was dismissed at appellants’ request. II. Current quiet title action A. Allegations On April 14, 2023, appellants sued the County for quiet title and declaratory relief causes of action. The operative complaint involves the same Property, the same surrounding North and West Parcels previously owned by DSH, and the same 78-inch and 102-inch pipe running under the parcels. The allegations in this quiet title action are mostly consistent with the allegations in the inverse condemnation action. Appellants again allege when the DSH conveyed the Property in 1976, it did not reserve any easement rights for the Pipeline running through the Property. In or about 1990, the County started directing storm waters from the hospital and other properties north of the North Parcel to a newly constructed 102-inch pipeline known as the Bloomfield Drain. Due to the new 102-inch pipeline, DSH and the County no longer claim any ownership of, or right to continue use, of the Pipeline. The County still asserts a right to use the Pipeline on an intermittent and infrequent basis for storm water overflow from the Bloomfield Drain. Appellants maintain that the County’s claim on the Pipeline is without basis, as it never obtained a written conveyance of easement rights on the Property, never held any recorded rights on the Property, and holds no interest in the Property. Appellants urge the County’s claim interferes with appellants’ efforts to redevelop the Property. Appellants seek a judgment quieting their title to the Property in fee simple, free from any adverse claim by the 5 County, as well as a declaration of the rights, duties, and obligations of the parties in the action. B. Demurrer, judgment, and appeal The County demurred to the quiet title complaint, asserting that it was barred by res judicata based on the disposition of the prior inverse condemnation action. The County argued the dismissal of the appeal in the prior action finalized the judgment for purposes of res judicata. On November 7, 2023, the trial court sustained the demurrer without leave to amend, finding the judgment in the prior action was on the merits because the court had found appellants failed to plead an element of inverse condemnation, specifically its ownership of the Property. The court also determined that appellants’ failure to include the quiet title and declaratory relief claims in the prior action precluded the assertion of those claims in the quiet title action because both actions involved the same parties and the same drainage pipe. The court also rejected appellants’ contention that application of res judicata would promote fundamental unfairness. On February 13, 2024, judgment was entered in favor of the County and notice of its entry was served. Appellants timely appealed.2 2 This appeal is consolidated with the appeal in B336982. In this appeal (B334618), appellants appealed the November 7, 2023 order sustaining the demurrer without leave to amend. In B336982, appellants appealed the February 13, 2024 judgment of dismissal. On May 3, 2024, the two appeals were consolidated pursuant to the parties’ stipulation. B334618 has been designated the lead case. We treat the notice of appeal in B334618 as a premature notice of appeal from the February 13, 2024 judgment. (Cal. Rules of Court, rule 8.104(d)(2).)

6 We conclude that res judicata does not apply here because the parties excluded issues other than appellants’ inverse condemnation standing from the stipulated judgment in the earlier inverse condemnation action. We therefore reverse and remand.

DISCUSSION I. Standard of review Once a demurrer is sustained and judgment of dismissal is entered, we determine de novo whether the complaint states a cause of action. (Folgelstrom v. Lamps Plus, Inc. (2011) 195 Cal.App.4th 986, 989.) We review a denial of leave to amend for abuse of discretion. (Saterbak v. JPMorgan Chase Bank, N.A. (2016) 245 Cal.App.4th 808, 813.) “We review a dismissal on grounds of res judicata de novo as an issue of law.” (Guerrero v. Department of Corrections & Rehabilitation (2018) 28 Cal.App.5th 1091, 1098.) II. Doctrine of res judicata The doctrine of res judicata has two aspects. The first, called claim preclusion, “prevents relitigation of the same cause of action in a second suit between the same parties or parties in privity with them.” (Mycogen Corp. v. Monsanto Co. (2002) 28 Cal.4th 888, 896 (Mycogen).) The second aspect of res judicata, called collateral estoppel or issue preclusion, “‘precludes relitigation of issues argued and decided in prior proceedings.’” (Ibid.) Here, the trial court found the claim preclusion aspect of res judicata applied. Claim preclusion bars a plaintiff from bringing a second lawsuit on an identical cause of action that has already been litigated to judgment. (Mycogen, supra, 28 Cal.4th at p. 904.) Claim preclusion also “extends to all legal theories, 7 proofs, and demands for relief that might have been presented in the first matter, provided both suits assert the same cause of action.” (Ferraro v. Camarlinghi (2008) 161 Cal.App.4th 509, 541, fn. 21, italics omitted.) The purpose of claim preclusion is “to limit the burden a plaintiff may impose upon the judicial system and upon prospective defendants on account of a single injury.” (Id. at p. 531.) Whether two cases involve the same causes of action involves the application of the “primary rights” theory. (Boeken v. Philip Morris USA, Inc. (2010) 48 Cal.4th 788, 797.) Under the theory, “the determinative factor is the harm suffered.” (Id. at p. 798.) Accordingly, “[F]or purposes of applying the doctrine of res judicata, the phrase ‘cause of action’ has a more precise meaning: The cause of action is the right to obtain redress for a harm suffered, regardless of the specific remedy sought or the legal theory (common law or statutory) advanced.” (Ibid.) “Claim preclusion arises if a second suit involves (1) the same cause of action (2) between the same parties (3) after a final judgment on the merits in the first suit.” (DKN Holdings LLC v. Faerber (2015) 61 Cal.4th 813, 824 (DKN Holdings).) III. Res judicata does not apply to this action In their briefing, the parties focus on whether the inverse condemnation action and the quiet title action involve the same primary right, whether the judgment in the first action constitutes a judgment on the merits, and whether application of res judicata was fundamentally unfair. We find it unnecessary to address these issues because, as appellants argue, the parties here agreed to exclude questions other than whether appellants had standing to assert an inverse condemnation claim from the stipulated judgment in the first action. Accordingly, even if all 8 three elements of res judicata were satisfied, res judicata still would not apply to the quiet title and declaratory relief claims in this action. A stipulated judgment has the same res judicata effect as a judgment after a contested trial. (Warga v. Cooper (1996) 44 Cal.App.4th 371, 377.) However, “it is axiomatic that its res judicata effect extends only to those issues embraced within the consent judgment. [Citations.] Thus, while a stipulated judgment normally concludes all matters put into issue by the pleadings, the parties can agree to restrict its scope by expressly withdrawing an issue from the consent judgment.” (Ellena v. State of California (1977) 69 Cal.App.3d 245, 260 (Ellena).) Louie v. BFS Retail & Commercial Operations, LLC (2009) 178 Cal.App.4th 1544 (Louie) illustrates the point. There, a consent decree resolved claims for injunctive and declaratory relief but expressly reserved any claim for damages. (Id. at p. 1547.) The court held that res judicata did not bar a later damages action because the reserved claim had been withdrawn from the judgment’s scope. (Id. at pp. 1557–1560.) One of the cases cited in Louie was Miller & Lux, Inc. v. James (1919) 180 Cal. 38 (Miller & Lux). In Miller & Lux, the parties stipulated that plaintiffs could divert 760 cubic feet from a river and that the stipulation could not be used to prove a diversion above that amount. (Id. at pp. 40, 42.) Our Supreme Court found that res judicata did not bar the plaintiffs from seeking to divert more water in a subsequent lawsuit because the parties had withheld the issue of whether the plaintiffs could use more than 760 cubic feet from the judgment. (Id. at p. 44.) Here, in the prior inverse condemnation action, the parties agreed to the judgment to facilitate an appeal concerning 9 whether appellants lacked standing. The parties further agreed that judgment did not settle any dispute between the parties. The trial court incorporated the parties’ agreements into its judgment and entered the judgment “without adjudication of any issue of fact or law other than as may be set forth herein.” Consequently, the judgment in the first action expressly excluded resolution of any claim or issue other than whether appellants had standing to assert an inverse condemnation claim. The County contends that by arguing the stipulated judgment only dealt with one element of inverse condemnation, appellants are conflating claim preclusion with issue preclusion, as claim preclusion applies to claims that could have been raised in a prior action but were not. While claim preclusion has been confused with issue preclusion (DKN Holdings, supra, 61 Cal.4th at pp. 823–825), claim preclusion nevertheless does not apply here because the parties expressly withheld nonstanding issues from the scope of the judgment. That the withheld claims could have been asserted in the first action does not change the analysis; claim preclusion does not reach claims the parties expressly agreed to exclude from the judgment’s scope. The County relies on cases barring a later suit to quiet title where the plaintiff had earlier litigated over the same property. But none of these involved a stipulated judgment in which the parties mutually agreed to withdraw every issue but one from the judgment’s scope. In Weikel v. TCW Realty Fund II Holding Co. (1997) 55 Cal.App.4th 1234, 1249, the court barred claims plaintiff had left out of an earlier action but “could have been litigated therein.” That is the ordinary rule against unilateral claim-splitting. It does not apply to claims both parties expressly agreed to 10 withdraw from a stipulated judgment. Cade v. Superior Court (1961) 191 Cal.App.2d 554 and Myers v. Superior Court (1946) 75 Cal.App.2d 925 are not claim preclusion cases at all. Each concerned the rule of exclusive concurrent jurisdiction: which of two courts may proceed when related actions are pending in different counties. Neither addressed the preclusive effect of a final judgment. (Cade, at p. 559; Myers, at p. 930.) In Miller & Lux, the Supreme Court explained that the purpose of res judicata “is to prevent vexatious litigation and to require the parties to rest upon one decision in their controversy, but where they expressly agreed to withdraw an issue from the court, the reason for the rule ceases.” (Miller & Lux, supra, 180 Cal. at p. 44.) “If they consent to adjudicate their differences piecemeal, there is no reason that the court should extend the rules of law to prevent that which they had expressly agreed might be done.” (Ibid.) Thus, when the parties agree to exclude a claim from a judgment, the Supreme Court has held that no party can seek to preclude subsequent litigation of the claim by invoking claim preclusion. (See also Code Civ. Proc., § 1911 [“That only is deemed to have been adjudged in a former judgment which appears upon its face to have been so adjudged, or which was actually and necessarily included therein or necessary thereto.”].) If we were to agree with the County’s view of claim preclusion, parties to a lawsuit could never agree to limit the scope of a stipulated judgment, as a party could successfully preclude from a subsequent lawsuit a claim expressly omitted from a stipulated judgment by invoking claim preclusion. Because of the parties’ agreement, appellants were entitled to dismiss the appeal from the judgment in the first action, 11 abandon their inverse condemnation claim, and proceed with the quiet title and declaratory relief claims in this action. Accordingly, we reverse the judgment of dismissal entered in favor of the County in this action.

DISPOSITION The judgment is reversed. The trial court is ordered to vacate the judgment of dismissal entered in favor of respondent Los Angeles County Flood Control District and enter an order overruling respondent’s demurrer. Appellants NCP Imperial, LLC, and Family Property Holdings, LLC, shall recover their costs on appeal.

CHAVEZ, J.

We concur:

LUI, P. J.

GOORVITCH, J.