# Opposition Brief — Ulloa v. Western Systems, Inc.

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Opposition Brief
- **Published:** January 1, 1993
- **Citation:** 506 U.S. 1050

## Text

———

Supreme Court, U.S.
FILED

DEC 195 1992

OFFICE OF THE CLERK

No. 92-715
IN THE
UNITED STATES SUPREME COURT
OCTOBER TERM, 1992

RICHARD F. ULLOA and DAVID J. ULLOA,
Petitioners
= a

WESTERN SYSTEMS, INC. and LEE M. HOLMES,
Respondents

On Petition for a Writ of Certiorari to the United States
Court of Appeals for the Ninth Circuit

RESPONDENTS' BRIEF IN OPPOSITION

MARK SNYDER HOLMES
Counsel of Record

530 West O'Bnen Drive
Agana, Guam 96910
Telephone: (671) 477-9334

VERNON F. L. CHAR
Char Sakamoto Ishii & Lum
841 Bishop Street, Suite 850
Honolulu, Hawaii 96813
Telephone: (808) 522-5133

Counsel for Respondents

QUESTION PRESENTED FOR REVIEW

Did the district court err in enjoining two Guam suits that
sought to collaterally attack and circumvent the final judgments
resulting from eighteen years of federal litigation, including two trials
and four separate appeals to the Ninth Circuit Court of Appeals?

- iii -

PARTIES

Pursuant to Rule 29.1, Western Systems, Inc. subsidiaries
are all wholly owned. Western Systems, Inc. has no parent.

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& The Present Case Does Not Warrant Review
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Il. The Ninth Circuit's Decision is Consistent
WithThis Court's Opinion in Chick Kam
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A The Exxon v. Chick Kam Choo
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B. General Discussion of Claim and
Issue Preclusion Principles .........
od The Present Case Does Not Conflict
With Chick Kam Choo ...........
Ill. Other Circuit Decisions Cited by the

TABLE OF CONTENTS

Petitioners Do Not Conflict With the Ninth
eh) re

-V-
IV. The Ninth Circuit's Opinion Does Not
Conflict With Other Circuits’ Interpretation
ig Ee 26

| PETE TU CCRT TTT ECE eee Tree ee 29

APPENDIX

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- Vi «
TABLE OF AUTHORITIES

CASES Page

American Town Center v. Hall 83 Assocs.,
a ee Se a BD sb ov oe woe eee cee meaeeenel 25

Brown v. Felsen,
442 U.S. 127, 131, 99 S.Ct. 2205,
eT ee a eel 21

Browning Debenture Holders' Comm. v. DASA Copp.,
454 F.Supp. 88, 101 (S.D.N.Y.), aff'd, 605 F.2d 35
es Es ie bas Dake waa Peewee aes ee eee 27

Browning Debenture Holders' Comm. v. DASA Corp.,
See Fae Be OO CO, FPR) ak vc ccc sens vensses 22, 28

Budinich v. Becton Dickinson & Co.,
486 U.S. 196, 108 S.Ct. 1717,
er EE Gow i hoo 0 a 0040S 0h 2

Camacho v. Civil Serv. Comm.,
ge oy ee + ne en es 27

Chick Kam Choo v. Exxon,
le aes EE Wing 4 soe bd ke a eee 11, 13-14, 16, 21

DeCosme v. Sea Containers, Ltd.,
Se ee Ne a, ude Swe oe ca wee See 23

Farias v. Bexar County Bd. of Trustees,
oe errr rer ere re errr 23

Federated Dep't Stores Inc. v. Moitie,
452 U.S. 394, 401, 101 S.Ct. 2424,
Pee es SED ov ce esate ee enseGawe cede 13

- Vii -

Guam Economic Dev. Auth. v. Ulloa, :
Ge Fae Re GE BED 6 bb dob wwe dae cceellaces 2,8 1

Guam Economic Dev. Auth. v. Ulloa,
O41 FOG Fee Cee CW, PFGE) ccc cect eee ccccsivers 2,8

Hagan v. Lucas,
Be Us ROD vce cern cenccecsnarewewan 22

Hankins v. Finnel,
759 F.Supp. 569, 571 (W.D.Mo. 1991) ................ 21

Hawaii Hous. Auth. v. Midkiff,
467 U.S. 229, 238, 104 S.Ct. 2321,
81 L.Ed.2d 186, 195 (1984) ....... 0... ....... 0.20 eee 26

Hoffman v. Pursue, Ltd.,
420 U.S. 592, 95 S.Ct. 1200,
43 L.BG26 GEE CISTS) 2. ww ccc cer vccceccccvesssece 27

In re G.S.F. Corp.,
936 F.2d 1467 (tat Cir. 1991) 0. cc cece cece ec cees 24

Juidice v. Vail,
430 U.S. 327, 97 S.Ct. 1211,
DE REPENTED gcc cnc eeceeeesecenbiws®awes 27

Julian v. Central Trust Co.,
See TK RE we 8'v cv 6-0 atacekevestd cians 22

Kidder Peabody & Co., Inc. v. Maxus Energy Corp.,
eR ee ee ee rr ee 25

Lamb Enters., Inc. v. Kiroff,
Sa rae ee SO ED. bk 6a bak keh owen be eee 26

LCS Servs., Inc. v. Hamrick, .

925 F.2d 745 (4th Cir. 1991) . 0... eee eee eee eee eens 25

Migra v. Warren City School Dist. Bd. of Educ.,
465 U.S. 75, 77 n.1, 104 S.Ct. 892,
79 L.E4.2d 56 (1984) 0. wc eww weer cece cece ce enccess 14

Mitchum v. Foster,
407 U.S. 225, 236 (1972) ..... cece cere reer erences 23

Mizokami Bros. of Arizona v. Mobay Chem. Corp.,
660 F.2d 712 (8th Cir. 1981) .. 1... eee eee ee eee eee 18-19

Montana v. United States,
440 U.S. 147, 153 (1979) . 2... eee ee ee ete 17

Moore v. Sims,
442 U.S. 415, 423, 99 S.Ct. 2371,
60 L.Ed.2d 994 (1979) 2... cece ec eee er er etre eens 27

Nationwide Mut. Ins. Co. v. Burke,
897 F.2d 734 (Ath Cir. 1990) .. 0... eee ee ee ee eee 25

Nevada v. United States,
463 U.S. 110, 103 S.Ct. 2906,
77 L.Ed.2d 509 (1983) .... cc cece cece cece ee eeene 9,21

Parklane Hosiery Co., Inc. v. Shore,
439 U. S. 322, 326 n.5, 99 S.Ct. 645,
58 L.Ed.2d 552 (1979) ...... eee cree erent eer eenee 17

Parsons v. Chesapeake & Ohio Ry. Co.,
FU kc bck cece vend ade dace Has oa nee 18

Riggs v. Johnson County,
73 (6 Wall.) U.S. 166, 187,
18 L.Ed. 768 (1867) ...... 2. cece cece cree reece eccee 22

Royal Ins. Co. of America v. Quinn-L Capital Corp.,

« i=»

759 F.Supp. 1216, 1237 (N.D.Tex. 1990) .

Samuel C. Ennis & Co., Inc. v. Woodmar Realty Co.,

waa F208 4 (7 Civ. T9796) 2. wees

Staffer v. Bouchard Transp. Co., Inc.,
876 F.26 G38 (2d Cir. 19969) ..........

Thibodeau v. Foremost Ins. Co.,
605 F. Supp. 653 (N.D. Ind. 1985) .....

Toucey v. New York Life Ins. Co.,
ee ee eee

Trainer v. Hernandez,
431 U.S. 434, 444, 97 S.Ct. 1911,
RO

Ulloa v. Guam Economic Dev. Auth.,
580 F.2d 952 (9th Cir. 1978) ..........

Western Systems, Inc. v. Ulloa,
958 F.2d 864 (9th Cir. 1992) ..........

Williams Natural Gas Co. v. Oklahoma City,
890 F.2d 255, 264 (10th Cir. 1989) .....

Younger v. Harris,
401 U.S. 37, 91 S.Ct. 746,
rep) re

Zagano v. Fordham Univ.,——
720 F.Supp. 266, 268 (S.D.N.Y. 1989) ..

&.68°2 62 6. 82 2 28) 9. °C 2: o

STATUTES

ee OD 5 6005 MOWER WOO Rae an EE ed hee Res 3
28 U.S.C. § 2283 (Anti-Injunction Act) ............ >» 35, 9
oR SS rere reer rr re errr rr ree 22
MISCELLANEOUS

17 C. Wright, A. Miller, & E. Cooper,
Civil, Federal Practice and Procedure,

ne Ee os a ag BEADS 28
18 C. Wright & A. Miller,

Civil, Federal Practice and Procedure ,
a ne 20

Restatement (Second) Judgements

Eee aha ip ir ok See oe ae ae een OPE aa 17
DO Od Oo Ua ee eeu esa eee e ae one ew eens 27
DC GeaG toss Fie tee ee Mh ROSS LON akan eee he 16
GU eee ers cha ees SE CEEA LER Rt ewer eee 16-18
2 RAE er ere ho ee ane eer eee wa ee ee 9,20
DS ieee kee beeen have vic eh UA bea kee Oe ee 20

No. 92-715

IN THE
UNITED STATES SUPREME COURT

OCTOBER TERM, 1992

RICHARD F. ULLOA and DAVID J. ULLOA,
Petitioners
ek: Me

WESTERN SYSTEMS, INC. and LEE M. HOLMES,
Respondents

On Petition for a Writ of Certiorari to the United States
Court of Appeals for the Ninth Circuit

RESPONDENTS' BRIEF IN OPPOSITION

OPINIONS BELOW

In this case there have been two trials, an evidentiary
injunction hearing, and six appeals to the Ninth Circuit Court of
Appeals. The previous opinions are as follows:

1. The unpublished February 16, 1977 decision in Ulloa v. Guam
Economic Dev. Auth., United States District Court for the District of
Guam, Civ. No. 24-72, Appendix at 1b.

2. The unpublished November 18, 1977 decision and judgment in
Guam Economic Dev. Auth. v. Ulloa, United States District Court for
the District of Guam, Civ. No. 197-72, Appendix at 28b.

3. The March 21, 1974 memorandum opinion of the Ninth Circuit
Court of Appeals, Civ. No. 72-3159, denying the Ulloas' appeal of
the disqualification of their counsel. 9th Cir. CR. 129.

4. Ulloa v. Guam Economic Dev. Auth., 580 F.2d 952 (9th Cir.
1978), affirming the district court's decision in Civ. No. 24-72,

Appendix at 36b.

5. Guam Economic Dev. Auth. v. Ulloa , 628 F.2d 1356 (9th Cir.
1980), affirming without published decision the district court's
decision in Civ. No. 197-72.

6. Guam Economic Dev. Auth. v. Ulloa, 841 F.2d 990 (9th Cir.
1988), affirming the enforceability of the federal judgments against the
Ulloas. Appendix at 51b.

7. The unpublished May 11, 1990 decision in Guam Economic Dev.
Auth. v. Ulloa, United States District Court for the District of Guam,
Civ. No. 197-72, enjoining the Ulloas from relitigating their claims in
the local Guam court, Petitioners’ Appendix 33a-53a.

§. Western Systems, Inc. v. Ulloa, 958 F.2d 864 (9th Cir. 1992),
consolidated appeals Civ. Nos. 90-15732 and 90-16407, affirming
the injunction against the Ulloas, Petitioners’ Appendix 1a-16a.

JURISDICTION

Respondents agree with the jurisdictional statement of
petitioners. Although the Ninth Circuit remanded the case for further
hearing on the amount of attorneys fees to be awarded as sanctions,
the pendency of a fee dispute does not affect the finality of the
underlying injunction. Budinich v. Becton Dickinson & Co., 486
U.S. 196, 108 S.Ct. 1717, 100 L.Ed.2d 178 (1988).

Sa
STATUTES INVOLVED

"The Supreme Court and all courts established by Act of
Congress may issue all writs necessary or appropriate in aid of their
respective jurisdictions and agreeable to the usages and principles of
law." 28 U.S.C. § 1651.

"A court of the United States may not grant an injunction to
Stay proceedings in a State court except as expressly authorized by Act
of Congress, or where necessary in aid of its jurisdiction, or to protect
or effectuate its judgments."
28 U.S.C. § 2283.

STATEMENT OF FACTS

The petitioners David and Richard Ulloa began this case in the
federal district court of Guam more than twenty years ago. More than
fifteen years ago, following two separate trials, the district court found
them guilty of unclean hands and misrepresentation, and liable for
issuing watered stock to themselves. These findings were affirmed on
appeal by the Ninth Circuit Court of Appeals. The petitioners failed to
pay the federal judgments against them for over twelve years. Finally,
pretending to settle, they agreed to pay the judgments if they received
a $132,000.00 discount. Respondents agreed. One hour after the
settlement was filed in federal court, petitioners filed two new suits
against respondents in the local Guam court based on the same alleged
contracts rights litigated for almost eighteen years in the federal courts.
The district court again found them in bad faith, enjoined the new
cases in the local Guam court, and imposed sanctions. The Ninth
Circuit affirmed the injunction, but vacated the sanctions award to
allow petitioners a further opportunity to challenge the amount. The
petitioners now seek review of this twenty year old case.

The Ulloas are among the original incorporators of Marianas
Communications Systems, Inc. ("MCS"), now known as Wester
Systems, Inc. ("WSI"), one of the respondents. In 1968, they
formed MCS for the purpose of providing cable TV service in the

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territory of Guam. As the district court later found, the Ulloas
misrepresented their capital contributions to MCS:

At the time, the original four shareholders indicated
on the corporate books that the $230,000 worth of
stock that had been subscribed to was paid in full in
exchange for the efforts expended in obtaining the
loan. No cash or property was ever paid for the
23,000 shares issued.

Cruz v. Guam Economic Dev. Auth., D.Guam, Civ. No. 24-72,
February 16, 1977 Opinion at 2, Appendix at 2b. Instead of their
own capital, the Ulloas used the proceeds of a loan guaranteed by a
governmental development agency, the Guam Economic Development
Agency (GEDA). By May 1971 "the company was indisputedly in
grave financial trouble and was insolvent." /d.

To keep the company alive, GEDA agreed to take over MCS
and its debt. On May 21, 1971, the Ulloas and the other shareholders
sold their stock for $1.00 each to GEDA. The former shareholders
retained a "collective" right of first refusal if GEDA resold the stock,
on condition that they pay a minimum purchase price of $421,000, the
outstanding debt of MCS. They falsely warranted to GEDA that the
shares were "lawful." /d. at 4.

GEDA approached respondent Holmes as a prospective buyer
of the company. /d. at 6. On July 14, 1971, Holmes made a proposal
to purchase 70% of MCS stock from GEDA at $2 a share. On July
20, 1971, after extensive negotiations, the Ulloas signed a contract
giving up their right of first refusal, but receiving certain MCS stock
options. These options were subsequently detailed in an "Agreement
For Sale of MCS Stock,” dated August 4, 1971.

In paragraph 1 of the contract Holmes agreed to purchase
70% of MCS stock for $2 a share. In paragraph 2, MCS agreed to
"make available" 15% of its stock to the former shareholders,
including the Ulloas, for $1 a share. In paragraph 3, GEDA agreed to
offer the remaining 15% of MCS stock in equal amounts to 5 persons,

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including David Ulloa, for $4 a share (plus a 10% increase each year)
when the MCS debt to GEDA was "repaid in full." /d. at 6-12.

In July and August, 1971, the Ulloas signed subscription
agreements and promissory notes to purchase their portion of the
reissued MCS stock, but for tactical reasons later decided not to pay
the full amount due. Their stock purchase contracts were cancelled for
nonpayment in 1972. May 11, 1990 Injunction Order, petitioners’
Appendix at 36a-37a.

Thereafter, Holmes invested personally or obtained the
investment of $219,000 in new capital for MCS, "moved himself and
his family to Guam," "devoted his constant labor to MCS," and
"personally guaranteed loans to MCS.” Feb. 16, 1977 Decision at 30-
32, Appendix at 25b. As a result of “large cash liabilities and
considerable time, effort and reputation on the part of Holmes," MCS
"tumed around, reached the breakeven point and was faced with the
prospects of a bright future." /d. at 32.

On February 28, 1972, the Ulloas, and other former
shareholders, filed suit in the Guam federal district court against
GEDA and Holmes seeking shares of MCS stock. Cruz v. Guam
Economic Dev. Auth., Civ. No. 24-72 CR 1, Exh. "G" EOR at 337.
The 1971 contracts were attached to their complaint. They alleged that
Holmes "at ail times acted in bad faith and conspired" with GEDA to
deprive the Ulloas of their shares. The Ulloas sought a constructive
trust, an accounting, and $15 million in damages. May 11, 1990
Order, petitioners’ Appendix at 37a.

On November 28, 1972, GEDA, Holmes and MCS sued the
Ulloas for their breach of warranty in the 1971 contracts, and to
collect the unpaid stock subscriptions owed MCS. Guam Economic
Dev. Auth. v. Ulloa, United States District Court for the Territory of
Guam, Civil No. 197-72. The complaint specifically referred to the
1971 contracts, alleging that the "warranties and representations of
[the Ulloas] as set forth in said contracts...were false and untrue." /d.
at 37a-38a.

«ti

During the discovery phase of these two cases, the district
court found "the Ulloas had the opportunity to inspect all stock
transactions involving MCS between 1971 and 1973." /d. at 38a.

Thus, they "had the opportunity to investigate fully their
rights to stock not purchased by the other former stockholders." /d. at
48a.

The Ulloas' suit, Civ. No. 24-72, went to trial in 1975. The
Ulloas' rights to purchase MCS shares pursuant to the August 4, 1971
agreement were the subject of frequent testimony. 24-72 Tr. at 654-
56, 1141-42, 1151-54, 1235-38. The August 4, 1971 contract was
admitted into evidence as Exh. AA. David Ulloa testified that he was
aware of his rights to purchase MCS stock and, as general manager of
MCS, even pressured other former shareholders to purchase their
shares. 24-72 Tr. at 563-64, 577, 649-54, 796-97, 1230. According
to Ulloa, Holmes made "constant requests" for the former
shareholders to buy their stock. /d. at 1230.

Holmes testified that the Ulloas made downpayments for their

stock, but had failed to pay the balance due. 24-72 Tr. at 1151-57.

The Ulloas' subscription agreements, stock certificates, and

promissory notes were admitted into evidence as Exh. GG. Holmes

testified that the Ulloas’ subscription agreements were cancelled in
1972 for nonpayment. 24-72 Tr. at 1153-54.

On February 16, 1977, the district court issued a 34 page
opinion rejecting all claims made by the Ulloas and finding them guilty
of unclean hands:

Plaintiffs, and each of them, lack clean hands to bring
an equitable action seeking the imposition of a
constructive trust for the stock of MCS acquired by
defendant Holmes, for the reason that the shares of
stock of MCS originally issued were issued contrary
to the provisions of law . . . David Ulloa himself was
a witness to the August 4, 1971 agreement and was
one of the primary beneficiaries of the unlawful
issuance of stock....

Plaintiffs cannot be permitted to come into a
court of equity to attempt to recapture a company
which they claim, as of February, 1972, is worth
$15,000,000 after (1) investing only $30,000 to
$40,000, (2) misrepresenting the value of the
corporation's capital unlawfully as $300,000, (3)
requiring the loan by GEDA of an additional
$270,000 and subsequently another $75,000, and (4)
encouraging outside equity parties under the
reorganization, including Holmes, to invest
approximately $219,000 more. The company was
insolvent and floundering during the period of time
the former stockholders operated it.

After February 1972 when the company was
operational and financially feasible, the plaintiffs then
suddenly decided that they wished to have the stock
and operation of the company retumed to them. To
benefit the very persons who had created the initial
distress condition of the corporation based upon
under-capitalization and the unlawful issuance of
stock would be inequitable. The wrongful acts of
plaintiffs are clearly related to the conduct of the
subject matter of this litigation.

Id. at 30-32, Appendix at 25b (emphasis added).

The Ulloas appealed. The Ninth Circuit affirmed on all
grounds. Ulloa v. Guam Economic Dev. Auth., 580 F.2d 952 (9th
Cir. 1978), Appendix at 35b.

The watered stock case against the Ulloas, Civil No. 197-72,
was tried before a jury in September, 1977. The August 4, 1971
contract was again admitted into evidence, as Exh. 13. The Ulloas'
rights to MCS stock were discussed often during the trial. 197-72 Tr.
355, 380-83, 495, 523, 539-40, 763-64. Following a jury verdict in
the Ulloas' favor, the Court granted a partial judgment

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notwithstanding the verdict, and found the Ulloas liable for watered
stock because "defendants David Ulloa, Richard Ulloa ... failed to pay
any legal consideration for these shares." Memorandum Order, Nov.
18, 1977 at p. 7, Appendix at 31b. On November 18, 1977, a
judgment in the amount of $153,000 was entered against David Ulloa
and $36,000 against Richard Ulloa. /d. The Ulloas appealed. The
decision was affirmed by the Ninth Circuit without published opinion.
Guam Economic Dev. Auth. v. Ulloa, 628 F.2d 1356 (9th Cir.
1980).

The Ulloas failed to pay the federal judgments. On March 27,
1979, the federal court issued an Alias Writ of Execution against
David Ulloa in the amount of $153,000. On April 4, 1979, the federal
court marshal issued a Notice of Levy, levying "any and all” contract
rights of David Ulloa arising from the August 4, 1971 contract. On
April 12, 1979, the United States marshal conducted the sale. David
Ulloa attended and submitted bids through an intermediary. Tr.
4/3/90 at 29. Holmes was the highest bidder and bought the contract
rights. David Ulloa did not object to the levy and sale. May 11, 1990
Order, petitioners’ Appendix at 39a.

The Ulloas refused to pay the remainder of the judgments for
more than 12 years. On August 12, 1986, the federal district court
ruled that WSI could continue to enforce its judgment against the
Ulloas. The Ulloas appealed; the Ninth Circuit affirmed the judgment
was enforceable. Guam Economic Dev. Auth. v. Ulloa, 841 F.2d
990 (9th Cir. 1988). The district court ordered the Ulloas to begin
monthly payments on the judgment. When they failed to appear at
court hearings, an arrest warrant for both Ulloas was issued on
September 8, 1989. May 11, 1990 Order, petitioners’ Appendix at
40a. Statutory post-judgment interest had increased the amount owed
by the Ulloas to approximately $370,000.00. Tr. 4/3/90 at 30.

Finally, the Ulloas offered to settle the judgments against
them, thus ending the federal litigation, if they were given a discount
of $138,000.00. WSI agreed. A satisfaction of judgment was
entered on December 5, 1989. May 11, 1990 Order, petitioners’

Appendix at 40a.

One hour after the satisfaction of judgment was entered, the
Ulloas filed two new lawsuits against WSI and Holmes in the Guam
Superior Court. /d. In Ulloa v. Western Systems, Inc., CV 1223-89,
the Ulloas alleged they were denied rights of first refusal to MCS
shares granted in "paragraphs 2 and 3 of the agreement for sale of
MCS Stock, dated August 4, 1971....". 9th Cir. EOR at 317. The
August 4, 1971 contract is attached as an exhibit to the amended
complaini. The same claim for 1971 MCS shares is expressed as
seven different causes of action, each based on the August 4, 1971
contract. The Ulloas ask the court to "grant 30% of Guam Cable
Television to the plaintiffs and the other original shareholders...." /d.

In the second suit, Ulloa v. Holmes, CV 1224-89, David
Ulloa alleged that the 1971 contracts "remain in effect." 9th Cir. EOR
at 327. He contended that the federal court's levy and sale of his
contract rights "was invalid since the payment for the shares had not
been made pursuant to Guam law" and specifically requested the
Guam court to declare the federal marshall's sale "null and void." /d.
By voiding the sale Ulloa sought to revive his claims under the
contracts for more Western Systems shares.

WSI and Holmes filed a petition for injunction in the same
federal district court of Guam that had heard the Ulloas'’ claims since
1972. The district court held an evidentiary hearing on April 3, 1990.
Testimony and documentary evidence were submitted by WSI and
Holmes without objection. The Ulloas presented no evidence. Tr.
4/3/90.

On May 11, 1990, the court issued a permanent injunction
against the Ulloas. Petitioners’ Appendix 33a-53a. The petitioners
wrongly contend that "the court acknowledged that the Ulloas' stock
and contract claims were not actually raised and litigated in the prior
federal proceeding.” Petition at 5. In fact, using the definition of

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“claim” found in Restatement (Second) Judgments § 24, | the court
held that "the territorial suits filed by the Ulloas concern exactly the
same ‘transaction or series of connected transactions’ involved in
previous federal court litigation: the 1971 corporate reorganization of
Guam Cable TV, and the Ulloas' claims to stock under the August 4th
agreement." /d. at 44a. The court held that the remarkable similarity
between the Ulloas’ discovery requests in the federal and Guam suits
further confirmed that the 1989 "claim" made by the Ulloas in Guam
court to obtain MCS shares was the same as the 1972 "claim" made in
federal court:

The August 4th agreement was a single agreement.
The claims made under paragraph 2 of the agreement
are interwoven with the claims made under paragraph
1. As the Ulloas' discovery requests demonstrate,
the facts and evidence are the same. Judicial
economy and good sense dictate that the same
agreement may not be litigated ad infinitum.

Petitioners’ appendix at 46a.2 “res judicata,” the court held, "does not
permit parties to sue seriatim for different paragraphs of a single
contract.” Jd. at 48a.

1 This definition of "claim" was cited with approval
in Nevada v. United States, 463 U.S. 110, 130 n.12 (1983).

2 The Ulloas contend that the district court should
not "rely on new matters not raised or considered in the prior
federal proceeding to decide on an injunction petition under the
relitigation exception.” Petition at 6. Yet, to determine whether a
single cause of action exists "the test is whether identical evidence
will support the issues involved in both actions.” Thibodeau v.
Foremost Ins. Co., 605 F. Supp. 653 (N.D. Ind. 1985). Whether
the evidence and events at issue in two separate cases are the same
necessarily requires some factual investigation by the district
court. 10

.

Further, David Ulloa's attempt to "void" the federal court's
1979 levy and sale of his rights to MCS stock "is a direct assault" on
the federal court. /d. at 49a. The court concluded the Guam suits "had
no merit whatsoever and were obviously filed for harassment”:

Such blatant disregard for the final judgments of this court
and the Ninth Circuit Court shall not go unsanctioned. The
courtroom is not the place for personal vendettas.

Id. at 52a. The court issued a permanent injunction against further
litigation by the Ulloas of the claims asserted in the Guam cases. /d.
The court later awarded WSI and Holmes $28,117.06 in attorneys
fees and costs. August 28, 1990 Order.

The Ulloas appealed both the injunction order and the amount
of fees awarded, their fifth and sixth appeals to the Ninth Circuit since
they first filed suit in 1972. The Ninth Circuit affirmed "both the
injunction and the award of sanctions,” but remanded "the amount of
the sanction to the district court for reconsideration.” 958 F.2d at
866. Recognizing that exceptions to the Anti-Injunction Act, 28
U.S.C. § 2283, are to be strictly construed, the court nevertheless
upheld the injunction because the issues raised in the Ulloas' Guam
Suits "arose from the same contracts and factual circumstances which
had been litigated in federal court for the past seventeen years." 958
F.2d at 871.

In its opinion the Ninth Circuit held that Chick Kam Choo v.
Exxon, 486 U.S. 140 (1988), did not limit the relitigation exception to
issues actually litigated in a prior federal case:

To read Choo as the other Circuits have, however,
would in essence be to read res judicata entirely out
of section 2283. Any issue which was "actually
litigated" by the parties in a prior proceeding will be
barred by collateral estoppel ("issue preclusion”),
without any need to rely on res judicata ("claim
preclusion"). This result seems to us to be contrary

———————

~B.

to the purposes of section 2283, as stated by the
Supreme Court in Choo. It is also contrary to the
language of Choo, which would bar relitigation of
"claims or issues [that] actually have been decided.”
486 U.S. at 148, 108 S.Ct. at 1690.

958 F.2d at 870 (original emphasis). The court found an injunction

was warranted here based on "the compelling circumstances of this

case":
The problems with limiting the relitigation exception
to collateral estoppel are particularly evident in this
case. This case began twenty years ago. It was
litigated for seventeen years in the United States
District Court for the District of Guam, and was
appealed to this Circuit no less than four times. One
hour after the federal case was settled, the Ulloas
filed suit in Guam territorial court. The issues raised
in that suit arose from the same contracts and factual
circumstances which had been litigated in federal
court for the past seventeen years. The federal court
was far more familiar with the issues presented than
the Guam court could have been. Furthermore, the
preclusion issues facing the Guam court were issues
of federal law. Under the compelling circumstances
of this case, we conclude that the principles
announced in Choo are not disserved by the district
court's injunction. We therefore conclude that the
relitigation exception to Section 2283 allows the
district court to enjoin the Guam litigation on the
ground that it is barred by res judicata.

958 F.2d at 871. The Ulloas' petition for rehearing and suggestion
for rehearing en banc was denied on June 18, 1992. The Ulloas now
seek a writ of certiorari from this Court.

as
ARGUMENT

I. The Present Case Does Not
Warrant Review By This Court

The "compelling circumstances" in the present case make it
inappropriate for review by writ of certiorari. This is not a case of
common application that would give guidance to the lower federal
courts in the interpretation of the Anti-Injunction Act and Chick Kam
Choo v. Exxon Corp., 486 U.S. 140 (1988). The facts here are
egregious: two trials, four appeals, a federal marshal's sale, and
eighteen years of federal litigation ostensibly ended by a "final"
settlement of the outstanding federal judgments, followed one hour
later by new suits attempting to void the marshal's sale and relitigate
the same contracts in the local court.

The petitioners have suffered no injustice. In 1977 the district
court found they "lack clean hands,” and were guilty of
"misrepresenting the value of the corporation's capital unlawfully,”
and "wrongful acts." February 16, 1977 Order at 30-32, appendix at
25b. In 1989, the same court ordered petitioners arrested for failure to
appear at judgment debtor examination hearings. In 1990 the district
court concluded the petitioners had "blatant disregard for the final
judgments of this court and the Ninth Circuit Court" and were
engaged in a "personal vendetta.” May 11, 1990 Order, petitioners’
appendix at 52a. The only injustice in this case has been suffered by
respondents, who have endured more than twenty years of litigation:

We have stressed that the doctrine of res judicata is
not a mere matter of praciice or procedure inherited
from a more technical time iia ours. /t is a rule of
fundamental and substantial jus. -e, a public policy
and a private peace, which will be :ordially regarded
and enforced by the courts.

Federated Dep't Stores Inc. v. Moitie, 452 U.S. 394, 401, 101 S.Ct.
2424, 69 L.Ed.2d 103, 108 (1981) (emphasis added).

iM.

The relitigation exception to the Anti-Injunction Act would be
meaningless if the federal courts were powerless to protect parties
who prevail after eighteen years of federal litigation from further
litigation of the same claims in lccal courts. "It is always to be
understood that Federal tribunals are not moot courts, and that parties
having substantial rights must when brought before those tribunals
present those rights or may lose them." Riverdale Cotton Mills v.
Alabama & Georgia Mfg. Co., 198 U.S. 188, 202 (1905). Despite
some controversy as to the precise scope of injunctions allowable
under the Act, nothing detracts from the common sense conclusion of
the district and circuit courts that this litigation should be over.

Cases similar to the present one are fortunately uncommon.
The petitioners’ bad faith, their petulant refusal to accept the
judgments of the federal courts, their attempt to use the local court to
obtain the stock denied by the federal courts are, as the Ninth Circuit
found, truly "compelling circumstances.” The petitioners’ attempt to
relitigate the 1971 contracts after losing eighteen years of federal
litigation--and pretending to settle--is extraordinary. This case does
not deserve further review.

II. The Ninth Circuit's Decision is Consistent With
This Court's Opinion in Chick Kam Choo y. Exxon

The core of petitioners’ certiorari application is their
contention that the Ninth Circuit's opinion is inconsistent with this
Court's opinion in Chick Kam Choo v. Exxon, 486 U.S. 140 (1988).
In fact, both opinions are harmonious. Petitioners have simply
confused issue preclusion with claim preclusion. 3 Chick Kam Choo

3 Because there is some confusion in the
terminology used by various courts, in this brief we use "claim
preclusion” (often, but not always, called res judicata) and "issue
preclusion” (often called collateral estoppel) as those terms are
used in the Restatement (Second) of Judgments. See discussion
in Migra v. Warren City School Dist. Bd. of Educ., 465 U.S. 75,
77 n.1, 104 S.Ct. 892, 79 L.Ed.2d 56 (1984).

_ =

was a forum non conveniens case in which there was no final
judgment on the merits in the federal court; the Ulloas' claim for MCS
stock was litigated on the merits to final judgment (and beyond) for
almost eighteen years. Chick Kam Choo was an issue preclusion
case, while the present case is a claim preclusion case. This simple
distinction disposes of the bulk of petitioners’ arguments.

A. The Exxon vy. Chick Kam Choo Decision

In Chick Kam Choo, a federal district court, after determining
that Singapore law governed a foreign seaman's claims, dismissed the
suit on forum non conveniens grounds. The plaintiff then filed an
action in Texas state court. Relying on the relitigation exception to the
Anti-Injunction Act, which allows a district court to enjoin state court
proceedings when an injunction is "necessary in aid of its jurisdiction,
or to protect or effectuate its judgments,” 28 U.S.C. § 2283, the
district court enjoined the plaintiff from litigating the merits of the case
in the Texas court. The Supreme Court reversed.

This Court began its analysis by noting that the Anti-
Injunction Act "is founded in the well recognized concepts of res
judicata and collateral estoppel." 486 U.S. at 147 (emphasis added).
"[A]n essential prerequisite for applying the relitigation exception"
continued the Court, "is that the claims or issues which the federal
injunction insulates from litigation in state proceedings actually have
been decided by the federal court." 486 U.S. at 148 (emphasis
added).

This Court held that the district court's injunction was
overbroad because it precluded the plaintiff from litigating her
Singapore law claims in the Texas state courts. Claim preclusion was
not applicable because "(t]he District Court did not resolve the merits
of [the Singapore law] claim in its 1980 order. Rather, the only issue
decided by the District Court was that petitioner's claims should be
dismissed under the federal forum non conveniens doctrine." 486
U.S. at 148.

eee ai

Issue preclusion, however, was applicable and the district
court's injunction properly precluded further litigation of issues
decided by the federal court. “Because in its 1980 decision the District
Court decided that Singapore law must control petitioner's lawsuit, a
decision that necessarily precludes the application of Texas law, an
injunction preventing relitigation of that issue in state court is within
the scope of the relitigation exception to the Anti-Injunction Act." 486
U.S. at 150.

Petitioners extrapolate from the words "actually have been
decided,” 486 U.S. at 148, the theory that Chick Kam Choo restricted
the relitigation exception of the Anti-Injunction Act to issue preclusion
cases only. Under their theory, a federal court that renders a final
judgment has authority under The Anti-Injunction Act to enjoin
relitigation of issues barred by issue preclusion, but not relitigation of
claims barred by claim preclusion. Nothing in Chick Kam Choo
expressly states this theory, and it contradicts this Court's express
recognition that the relitigation exception to the Anti-Injunction Act "is
founded in the well recognized concepts of res judicata and collateral
estoppel," and allows an injunction of " claims or issues ... decided by
the federal court." Chick Kam Choo , 486 U.S. at 147-48 (emphasis
added).

B. General Discussion of Claim
and Issue Preclusion Principles

The petitioners’ argument confuses the doctrines of claim
preclusion (sometimes called res judicata) and issue preclusion
(sometimes called collateral estoppel). Briefly, the doctrine of claim
preclusion provides that "a valid and final personal judgment rendered
in favor of the defendant bars another action by the plaintiff on the
same claim." Restatement (Second) Judgments § 19. Claim
preclusion does not apply to cases dismissed on grounds of forum
non conveniens, however, such as Chick Kam Choo. This exception
is stated in § 20 of the Restatement (Second) Judgments:

-]7-

(1) A personal judgment for the defendant, although valid
and final, does not bar another action by the plaintiff on the
same claim:

(a) When the judgment is one of
dismissal...for improper venue...

As the Comment to the Restatement (Second) Judgments explains:

Ordinarily, after a judgment is rendered in an action,
the claim is extinguished by the judgment's bar or
merger effect, and therefore it is impossible to
maintain a subsequent action on the claim. But there
are exceptions. For example, when a judgment for
the defendant is based on lack of jurisdiction,
improper venue, Or nonjoinder or misjoinder of
parties, the plaintiff is not precluded from maintaining
another action on the claim.

Restatement (Second) Judgments § 17, Comment c (emphasis
added).

Issue preclusion, on the other hand, precludes relitigation of
issues actually litigated:

When an issue of fact or law is actually ligated and
determined by a valid and final judgment, and the
determination is essential to the judgment, the
determination is conclusive in a subsequent action
between the parties, whether on the same or a
different claim.

Restatement (Second) Judgments § 27. “Under the doctrine of
collateral estoppel...the second action is upon a different cause of
action and the judgment in the prior suit precludes relitigation of issues
actually litigated and necessary to the outcome of the first action.”
Parklane Hosiery Co., Inc. v. Shore, 439 U. S. 322, 326 n.5, 99

=~" =

S.Ct. 645, 58 L.Ed.2d 552 (1979); Montana v. United States , 440
U.S. 147, 153 (1979).

While the rules of claim preclusion do not apply to cases like
Chick Kam Choo dismissed on grounds of forum non conveniens, the
tules of issue preclusion do apply. The Comment to Restatement
(Second) Judgments § 20 makes this clear:

The rules of issue preclusion (see §§ 27, 28) apply to
a valid and final personal judgment for the defendant
even though the judgment is one which, under this
Section [listing exceptions to the general rule of claim
preclusion], does not bar another action on the same
claim.

The Restatement gives the following illustration:

1. A brings an action against B for personal
injuries, and the action is dismissed for improper
venue on the ground that the judicial district in which
suit was brought was not the district of defendant's
residence as required by law. Although A is not
barred from maintaining an action on the claim in
another district, the niles of issue preclusion are
applicable to the determination that venue was
improper in the initial action.

Restatement (Second) Judgments § 20, Illustration 1 at 171.

Thus, in Parsons v. Chesapeake & Ohio Ry. Co., 375 U.S.
71 (1963), this Court held that claim preclusion principles did not
apply to a case dismissed by a state court on grounds of forum non
conveniens. After the state court, located in Chicago, dismissed his
case, the plaintiff brought a similar claim in the federal district court,
also located in Chicago. The defendant argued that claim preclusion
required the federal court to dismiss the federal case as well on forum
non conveniens grounds. This Court held that different factual issues

-19-

were involved in the federal court's decision, and therefore "principles
of res judicata are not applicable....". 375 U.S. at 73.

In Mizokami Bros. of Arizona v. Mobay Chem. Corp. , 660
F.2d 712 (8th Cir. 1981), the plaintiff's suit in the District of Arizona
was dismissed against one defendant on forum non conveniens
grounds. The plaintiff then refiled in the Western District of Missouri.
The Eighth Circuit held that claim preclusion did not apply to the
forum non conveniens dismissal:

In the present case the applicable res judicata principle
is issue preclusion. Because there has been no
judgment on the merits of Mizokami's claim, a
second action is not barred by the rules of claim
preclusion. [citations omitted] The prior forum non
conveniens dismissal precludes relitigation of only
those issues of law and fact actually litigated and
necessary to the [prior court's} decision.

660 F. 2d at 715 (emphasis added). Similarly, in Chick Kam Choo
further litigation of issues actually litigated was barred by issue
preclusion, there was no basis for claim preclusion.

ty The Present Case Does Not
Conflict With Chick Kam Choo

With these principles in mind, the distinction between Chick
Kam Choo, a case dismissed for forum non conveniens reasons, and
the present case, a case litigated to final judgment over eighteen years,
becomes apparent. In Chick Kam Choo, the district court's injunction
was overbroad because the case had been dismissed on forum non
conveniens grounds; thus, issue preclusion applied but not claim
preclusion. The forum non conveniens dismissal in Chick Kam Choo
“preclude{d] relitigation of only those issues of law and fact actually
litigated and necessary to the [court's] decision." Mizokami Bros. of
Arizona v. Mobay Chemical Corp., 660 F.2d 712, 715 (8th Cir.
1981); Restatement (Second) Judgments § 20(1)(a).

- 20 -

The injunction approved by this Court in Chick Kam Choo
went as far as the law of claim and issue preclusion allowed: litigation
of the Singapore law claim was not barred by claim preclusion, but the
choice of Singapore law issue was issue preclusion and could not be
relitigated in the state court. In short, the district court's injunction in
Chick Kam Choo was overbroad because it violated the principles of
claim and issue preclusion; this Court did not hold, as petitioners
Suggest, that the relitigation exception is inapplicable in claim
preclusion cases.

An entirely different situation is presented in the present case.
The merits of the Ulloas' claims for MCS stock under the 1971
contracts were litigated to final judgment. Thus, their claim in the first
Guam case, CV 1223-89, for more MCS stock based on the same
1971 contracts is barred by claim preclusion:

When a valid and final judgment rendered in an action
extinguishes the plaintiff's claim pursuant to the rules of merger or
bar...the claim extinguished includes all rights of the plaintiff to
remedies against the defendant with respect to all or any part of that
transaction, or series of connected transactions, Out of which the
action arose.

Restatement (Second) Judgments, § 24(1) (emphasis added). "All
breaches [of contract} occurring prior to commencement of the first
action constitute part of a single claim or cause of action, even though
each would have been pursued as a separate e joint
and not several. . . . This presumption in the case of a night,
can be overcome only by express words to the contrary."

In interpreting the words "joint right,” § 130(b) of the
Restatement, Contracts, provides that:

".... [A] discharge by a joint obligee of his individual right
operates as a discharge of the joint right of all...

"Tilustration:

- 45b -

eo A, B and C have a joint right to the delivery
of a horse by D. A discharged D from any duty to himself in
consideration of $50 paid by D to A. This discharges D's duty
to B and C as well as to A. It would be otherwise if with D's
knowledge, A was acting with intent to defraud B and _ ota

See also Forbes v. First Camden National Bank, 25
N.J.Super. 17, 95 A.2d 416, 418-419 (1953) ("[I]t is the general rule
that each of several joint obligees has power to discharge the entire
claim by release, or accord and Satisfaction, or the acceptance of
payment of other performance. Thus, in Ely v. Ely, 70 N.J.L. 31, 56
A. 246 (Sup.Ct. 1903), one joint creditor, acting without the
knowledge or consent of his Co-obligee, accepted from the debtor a
horse and a small sum of money in satisfaction of the debt: and the
court held that the obligation to both creditors was discharged. To a
like effect are Restatement, Contracts, § 130; Williston, Contracts, §
344; and Annotation in 142 A.L.R. 371. Professor Williston, at §
317, finds an implied agency whereby each obligee is empowered to
act for all in relation to the debt.").

[5] The language of the May 21st agreements does not
succeed in overcoming the presumption created by § 1431 of the
Guam Civil Code that the right of first refusal possessed by the former
MCS shareholders was joint, and not several. By releasing GEDA of
its promise to afford the former MCS shareholders first refusal in
consideration for the right to later purchase MCS stock, the sizuatories
to the July 20th Agreement thereby discharged GEDA of its Obligation
to the other former MCS shareholders (i. e., Cruz and the Halseys) as
well. .

Appellants further contend that even if the July 20th
Agreement is deemed to be binding upon all parties concerned,
Holmes and/or GEDA acted fraudulently, in bad faith, and/or
breached their fiduciary duties, and a constructive trust over the
21,000 shares owned by Holmes should therefore be imposed in
favor of them.3 The trial court held that "Plaintiffs have not pled nor

3 Section 2224 of the Guam Civil Code provides

"One who gains a thing by fraud, accident,
mistake, undue influence, the violation of a trust, or other

- 46b -

have they presented any evidence to show the existence of fraud, acci-
dent, mistake, undue influence, the violation of a trust, or other
wrongful act." (C.T. 701.)

[6] The complaint in this case was filed on February 28,
1972. Trial was ordered set for October 28,1975. On October 20,
1975, GEDA and Holmes filed a Trial Memorandum in which they
stated, inter alia, that since fraud had been neither speci y pleaded
in the complaint as required by Rule 9(b) of the Rules of Civil
Procedure nor included in the pretrial order as an issue for trial, the
plaintiffs should be precluded from trying the issue of fraud. In a
memorandum filed October 22, 1975, the plaintiffs conceded that with
respect to the issue of fraud, they had failed to satisfy the specificity
requirements of Rule 9(b) and include it in the pretrial order. The
plaintiffs therefore moved to amend the pretrial order so as to include
the issue of fraud. This motion was denied by the trial court,
y on the ground that it was “untimely and prejudicial to the
defendants and was not supported by the evidence." (C.T. 687.)
Although Appellants claim in their Opening Brief that "There was no
‘undue prejudice’ t.0 defendant because the discovery proceedings
had made amply clear to defendants the intention of plaintiffs to
introduce such evidence," they are unable to point to anything in the
record to support this contention. Given the complete failure of
Appellants to substantiate their claim of lack of undue prejudice, the
failure to specifically identity fraud in any of the pleadings, the three -
year delay in moving to amend the pretrial order (which order was
filed on October 18, 1972), and the raising of the issue of fraud on the
eve of trial, we cannot say that the trial court abused its discretion in
denying the plaintiffs’ motion.

also contend that the trial court erred in denying

their post-trial motion to amend the pre-trial order to conform to proof.
F.R.Civ.P. 15(b). While it is true that the trial court did state that the
intiffs had failed to plead the existence of fraud, it also found that
the plaintiffs failed to present any evidence to show the existence of
fraud. Under these circumstances, then, the question of whether the
trial court erred in denying the motion to conform to the evidence
collapses into the issue of whether the trial court erred in concluding

wrongful act is, unless he has some other and better right
thereto, an involuntary trustee of the thing gained, for the
benefit of the person who would otherwise have had it."

- 47b -

that the plaintiffs had failed to prove the elements of a constructive
trust (discussed infra ).

(7) Finally, Appellants argue that fraud was simply a "defense
to Appellees’ defense" and therefore did not fall within the specificity
requirements of Rule 9(b). Whether a "defense to a defense" falls
within Rule 9(b) is a question we need not answer at this time, for it is
clear that the thrust of the plaintiffs' complaint was to seek a
constructive trust over the shares owned by Holmes. As provided by
§ 2224 of the Guam Civil Code, fraud, mistake, undue influence,
etc., must be established in order to obtain a constructive trust. If the
plaintiffs intended to rely upon fraud as a basis for obtaining a
constructive trust, it was an element which had to be affirmatively
— and proved and therefore fell within the prescriptions of Rule

(b).

[8] Appellants claim that they are entitled to a constructive
trust on the ground that they were induced into entering into the July
20th Agreement by the fraudulent representation of Holmes that he
would obtain a firm loan commitment from FNCB prior to purchasing
any MCS stock from GEDA. In fact, no such loan commitment was
ever obtained from FNCB, or any other lending institution.

As those portions of the transcript of the July 20th meeting
between the former MCS shareholders and GEDA Board members
quoted in the margin clearly indicate, however, D. Ulloa specifically
agreed to withdraw the shareholders’ request for a firm loan
commitment.4 That the sale of MCS stock to Holmes was not made

4 "Mr. Ulloa: In other words, you're saying that
the agreement between you and GEDA would be contingent upon
securing this thing from the bank?

"Mr. Holmes; Absolutely. You bet. That's why I
don't want to have them sign the thing too. By gosh, to
get the bank to sign a contract-it's a lot different, you can
Sign a note to the bank and they're very happy to okay it,
but to get a bank to sign a contract, I don't know what
that involves with this bank here. I know what it involves
in the States. They've got to get the loan board together,
or somebody else (comment here by M,. Ulloa but cannot
be understood) and it's a real paid (sic). I just think it's an

- 48b -

contingent upon the securing of a loan commitment is made even
clearer by the following statement made by D. Ulloa at the July 20th

meeting:

"Mr. Ulloa: I think with the understanding that-it's
solely between GEDA and Mr. Holmes-if the bank does not
come up with these funds, or whatever the source that Mr.
Holmes has as far as his resources to raise money, I think we
could leave it up to you people-I think GEDA, we're going to
let GEDA be the guardian of our interest, then and see that
they weight the factor and in the event that there's nonceivable
there's no commitment anyplace, I think it's entirely up to
GEDA to consummate the deal or not.”

’

;

The above statement of D. Ulloa clearly indicates that the

former MCS shareholders were forsaking any further interest in the

question of whether Holmes would be able to obtain additional funds |

and from what source, and that it was entirely up to GEDA and |
Holmes as to whether any MCS shares would be sold to Holmes.

That Holmes was not being ee: to obtain any loan
commitment prior to his purchase of MCS stock is further }
substantiated by those portions of the transcript of the August 3rd
GEDA Board meeting quoted in the margin.5 Moreover, the August

unnecessary complication. ;

"Mr. Cepeda: Mr. Holmes, I don't think M,,.
Ulloa's referring to having the bank in the contract itself,
signing it.

"Mr. Ulloa: No.

"Mr. Cepeda: Just a condition in there that the
$50,000.00 as proposed in your letter be raised by either —
First City Bank or any other lending institution, or for
that matter, probably any individual as a loan to MCS.

"Mr. Ulloa: Yeah, you know we don't care what
the source is." R.T. 253-254.

5 "Mr. Holmes: Does it have to be FNCB?

"Mr. Wharton: I was going to say that we could make that
FNCB or some other financial institution, or some other lender.

"Mr. Guerrero: Or some other lending institution.

- 49b -

"Mr. Wharton: Or some other lender, it doesn't have to be
an institution.

"Mr. Perry: Some other source.

"Mr. Guerrero; Some other lender acceptable to GEDA,
you know, could be an individual, could be anybody.

"Mr. Holmes: Well, let's say if worse comes to worse
and FNCB tums it down. If FNCB tums it down in New York,
then we don't have a deal, it's back in your hands.

"Mr. Guerrero: Well, you would have a deal at that point,
see, but then you would have to look for the money someplace
else.

"Mr. Guerrero: Is there any source where you could get
this money if you don't get it from the FNCB?

"Mr. Holmes: Yeah.

"Mr. Guerrero: If we make the agreement flexible as to
that-

"Mr. Holmes: I'd rather make it-I don't want to say
‘lending institution’ in other words-

"Mr. Halliday: Any source.

"Mr. Guerrero: AnY source. Any source, as long as the
money comes in.

"Mr. Holmes: Any other source.

"Several: Any other source.

"Mr. Holmes: All right. Twenty thousand from Holmes.

"Mr. Guerrero: Is that agreeable?

"Several: Yes.” R.T. 449-456.

Appellants contend that while David Ulloa did in fact
attend the August 3rd meeting, none of Appellees’ witnesses at
the trial testified that Ulloa was present throughout the entire meet-
ing, But neither do Appellants point to any testimony which
indicates that Ulloa was not present throughout the meeting. Both
the transcript and minutes of the August 3rd meeting clearly
indicate that Ulloa was present. Furthermore, while the minutes of
the August 3rd meeting specifically note the fact that at one point
in the meeting, Holmes left the meeting, no such similar notation
exists With respect to Ulloa. Finally. even it Ulloa was not

- 50b -

4th Agreement embodying the sale of the MCS stock to Holmes is
absolutely devoid of any reference to the procurement of any loan
commitment either as a condition precedent or subsequent to the sale.
As previously indicated, this Agreement was witnessed and signed by
D. Ulloa without objection.

Even assuming, arguendo, that fraud should have been
properly included by the trial court as an issue for trial, the above
evidence demonstrates that the trial court did not commit clear error in
holding that the plaintiffs failed to fulfill the requirements of a
constructive trust. In light of this Court's holding, we need not reach

the remaining issues raised by Appellants.
The judgment of the district court is hereby AFFIRMED.

present throughout the entire meeting, he witnessed and signed
the August 4th Agreement without objection. That agreement
contained no promise or representation by Holmes that he would
procure a inn loan commitment from FNCB or any other lending

-51b-

GUAM ECONOMIC DEVELOPMENT
AUTHORITY, et al.,
Plaintiffs-Appellees,

v.
David J. ULLOA, et al.,
Defendants-Appellants.

No. 86-2535.
841 F.2d 990

United States Court of Appeals,
Ninth Circuit

Argued and Submitted April 10, 1987
Decided March 14, 1988.

Judgment creditor brought motion authorization to enforce
judgment. United States District Court for the district of Guam,
Cristobal C. Duenas, granted motion and appeal was taken. Court of
Appeals, Poole, Circuit Judges held that: (1) judgment creditor's
move for authorization to enforce judgment a expiration of five years
was within discretion of District Court; (2) judgment creditor was not
required to show exercise due diligence in attempting to enforce
judgment in order to be granted motion authorization to enforce
judgment after expiration of five-year Statutory period; (3) service of
notice of motion for authorization to enforce judgment upon attorney
of record was adequate.

Affirmed.

1. Federal Civil Procedure §2691

Guam statute providing for five years to obtain writ of
execution was not statute of limitations or repose and merely provided
limited time within which judgment creditor could obtain writ of
execution as of matter of right, while thereafter, issuance of writ called
for exercise of trial court's discretion, so that upon expiration of
five-year period in which execution was available as of matter of right,
judgment bad not lapsed or expired because enforcement was still
available by leave of court, by motion, or by judgment in original pro.
=— based upon supplemental pleadings. Guam Code Civ.Proc. §

85.

- 52b -

2. Federal Civil Procedure §2691

Notwithstanding fact that five-year period during which
j creditor could obtain writ of execution as of matter of writ
had expired, judgment did not lapse or expire, so that grant of
judgment creditor's motion for authorization to enforce judgment eight
yours after jademnent was obtsined was within dletestion of dlewict
court; motion for authorization to enforce judgment was not barred
either before or after amendment to code substituting six-year time
requirement Guam Code Civ. Proc. §§ 336, 681, 685.

3. Federal Civil Procedure §2691

Under Guam statute, judgment creditor was not required to
demonstrate exercise of due diligence in attempting to enforce
judgment in order to entitle judgment creditor to grant of motion for
authorization to enforce judgment eight years a judgment was
-obtained. Guam Code Proc. § 685.

4. Federal Civil Procedure §2691

At time judgment creditor served notice of motion for
authorization to enforce judgment upon judgment debtor's former
attomey, former attorney remained judgment debtor's attorney of
record, so that under federal rule, notice was adequate. Fed.Rules
Civ.Proc.Rule 5(b), 28 U.S.C. -

John A. Spade, and David A. Mair, Mair, Hogan & Spade,
Agana, Guam, defendants-appellants.

Richard L. Johnson, Klemm, Blair, Sterling & Johnson,
Agana, Guam, for plaintiffs-appellees.

from the United States District Court of Guam.
Before LE, NORRIS and BRUNETTI, Circuit Judges.
POOLE, Circuit Judge:

David, Juanita and Richard Ulloa (hereinafter collectively
"Ulloa") appeal from order of the district court granting motion of
Western Systems, Inc. ("WSI" for an order enforcing ent. We
have jurisdiction under 28 U.S.C. § 1291, and affirm.

The District Court of Guam, sitting as a local court of original
jurisdiction, entered judgment for WSI and Ulloa and various
other defendants on ber 1977. WSI made numerous
pene mi th epee fs 1979 it became

apparent that further attempts at enforcement would be fruitless;
accordingly, WSI focused its collection energies on the remaining

- 53b -

judgment debtors. On July 15, 1986, more than eight years after entry
of judgment, WSI sought further enforcement authorization pursuant
to Guam Code of Civil Procedure ion 685.! That motion was
granted and this appeal timely followed.

Separate action to enforce a judgment Section 685, enacted in 1953,
Originally provided that

[i)n all cases the judgment may be enforced or carried into
execution after the lapse of five (5S) years from the date of its
entry, by leave of the court, upon motion, or by judgment for
that purpose, founded upon supplemental pleadings; but
nothing in this section shall be construed to revive a judgment
for the recovery of money which shall have been barred by
limitation at the time of the taking effect of this Code.

In 1982 the Guam legislature amended section 685 by substituting a
six year time requirement Pub.L. No. 16-120. No other language was
changed. Inexplicably, sections 681 and 336 retained their five year
provisions. The apparent result is a one year gap wherein enforcement
cannot be had by suit, writ or motion.

had run, and section 685 by its terms will not revive a judgment
"barred by limitation", WSI became fore er ineligible for discretionary
process under section 685.

[1,2] Ulloa's anal s is flawed in number of respects. First
and foremost section 681 not a statute of limitations repose; it
merely a limited time within which the judgment creditor m
obtain writ of execution as a matter right. Thereafter, under section
685, issuance of the writ calls for exercise the trial court's discretion.

1 All statutory references are to the Guam
California Codes of Civil Procedure.

- 54b -

Upon the e ration of section 681's five-year period, which execution
is available as a matter right, the judgment has not lapsed or expired
because enforcement of section 685 still available by leave of court, by
motion or by a judgment in the original proceeding based upon

supplemental pleadings. Since "supplemental" pleadings have
relationship to prior pleadings in the same action, proper reading of
section 685 would se to be that the judgment may be enforced that
manner. Second, since section does not cause a judgment to expire,
there is no moribund judgment to "revive" a section 685 is not
offended by subsequent enforcement WSI's motion was not barred by
the language of section 685 either before or after amendment It lows
that the district court properly concluded that the 1982 amendment did
not cause the judgment to expire and its plain terms permitted further
enforcement of judgment reasonably interpreted, the final sentence of
section 685 simply upholds the integrity of section 336; it does not
speak at all to motions to enforce.2 The Califomia court of appeal has
construed identical statutory language as speaking to the date of
Original enactment rather than the date of reenactment. See Creeley v.
Suey Sing Benev. Ass'n, 28 Cal.App.2d 536, 538-39, 83 P.2d 54,
55 (1938). Under this reasoning, the final sentence of section 685
does no more than prohibit the revival of judgments which were
barred when the statute took effect in 1953. We conclude that the
district court properly construed the statute.

[3] Ulloa next contends that even if a section 685 motion was
available to WSI, it was not entitled to relief because it failed to
exercise due dili in attempting to enforce the judgment pursuant
to section 681. concedes, as it must, that the statute contains no
express diligence requirement It insists, however, that such a
requirement should be implied from Califomia legai developments.
This assertion lacks merit.

2 The district court's conclusion is further
supported by controlling case law. It established that California
Cases construe statutory language later adopted by Guam
legislature cut controlling light the Guam provisions. See Roberto
v. Aguon, 519 F.2d 754, 755 (9th Cir.1973). The district court
arrived at the same conclusion without identifying its route.
Despite lack of explanation, it is the result, not reasoning, upon
which an appellate passes judgment. Myers v. United States
Parole Comm'n, 813 F.2¢ 957, 959 (9th Cir. 1987).

- 55b -

Guam section 685 is virtually identical to the 1895 version of
Califomia's section 685. The California legislature amended its statute
in 1933 to require a demonstration of diligence by providing that the
movant must include an affidavit explaining his failure to proceed in
compliance with section 681.3 Ulloa contends that the California
model is highly persuasive that a diligence requirement was intended
by the Guam legislature in 1953.

In our view, the Califommia experience proves the contrary.
The Guam legislature's 1953 decision to adopt the 1895 version rather
than the 1933 version of the California statute constitutes an implicit re-
jection of the 1933 amendment. Even when amending the statute with
almost thirty years of hindsight, the Guam legislature eschewed
Califomia's due diligence language. Thus the 1982 amendment of
section 685 may more —— be considered a reiteration of the 1953
rejection of California's due diligence requirement. The extension of
the Roberto rule of construction advanced by Ulloa would effectively
hold the Guam legislature hostage to the enactments of its Califomia
counterpart. That rule cannot be applied to impose requirements that
the Guam legislature has implicitly rejected. We will not so extend
Roberto. The district court's apparent conclusion‘ that diligence is not
required under section 685 was correct.

Ulloa misses two further points to impeach that conclusion.
First it argues that California case law between 1895 and 1933 read a
due diligence requirement into the 1895 version of the statute. Second,
it argues that the Guam legislature could not have intended to confer
unbounded discretion upon the local trial courts in authorizing
execution because section 685 is meant to be only a limited exception
to section 681. Moreover, it argues that subjecting judgment debtors
to such latitude contravenes basic considerations of fairness.

3 In 1982 Califomia substantially revised its
Statutory scheme for enforcement of judgments. See California
Code of Civil Procedure §§ 683.010-683.320.

4 Again, the reasoning of the district court is not set
out with precision or clarity. However, our review of its
Memorandum Order convinces us that the court concluded that an
affidavit demonstrating diligence is not required by the statute.

- 56b -

These contentions are unpersuasive. The California decisions
construing the section 685 of 1895 vintage impose no requirement of
due diligence, or other standard of vigor. Butcher v. Brouwer, 21
Cal.2d 354, 357, 132 P.2d 206, 206 (1942). See, eg., Creditors
Adjustment Co. v. Newman, 185 Cal. 509, 197 P. 334 (1921);
Weldon vy. Rogers, 159 Cal. 700, 115 P. 464 (1911); Harlan v.
Harlan, 154 Cal. 341, 98 P. 32 (1908); Bredfield v. Hannon, 151
Cal. 497, 91 P. 334 (1907); Doehia v. Phillips, 151 Cal. 488, 91 P.
330 (1907). Indeed, the 1933 amendment was animated by the legisla-
ture's desire to curb the trial court's discretion to grant the writ See 5
B. Witkin, California Procedure , at 3554 (2d ed. 1971). Thus,
pre-1933 Califomia case law fortifies rather than undermines the
district court's conclusion.

As to the second point, we see nothing unreasonable in the
entrustment of broad discretion to the trial court to grant the writ under
section 685. In any case we are convinced that this is what the
legislature intended; it is not our province to question its wisdom. We
hold that the district court correctly concluded that due diligence is not
required under section 685. We find it necessary to reach the court's
alternate holding that due diligence was in fact demonstrated by WSI.

[4] Ulloa's final contention is that the service of notice of
WSI's motion was defective. WSI served the notice of motion on
Herman Skipper, Ulloa's former attorney. However, at the time
Skipper remained Ulloa's attomey of record. Under Federal Rule of
Civil Procedure 5(b), notice served upon a party's attomey of record
is adequate.5 We hold that Ulloa received sufficient notice of WSI's
motion.

Since the district court correctly construed the Guam statute,
we AFFIRM.

) It is undisputed that Ulloa received adequate
actual notice to respond to the motion.

ST al eA aia ay EP ee POT ae Ane ene Oe, ee I, ee OES Se IEE, AOE PER UNI 3 - 2

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386011_1525%3A2. Public record. Not legal advice.