Unpublished Disposition, 876 F.2d 896 (9th Cir. 1984)

MEMORANDUM^* 

Marc H. Siegal appeals a judgment against himself, as third-party defendant, in favor of Rose Ferraro, defendant in the underlying action and third-party plaintiff in this action. The district court found Siegal to be 70% responsible for damages charged against Ferraro in the underlying proceeding and ordered that Ferraro recover $268,099 plus interest from him. We affirm.

FACTS

Siegal and his brother, Mitchell Siegal, are partners in Granada Calabasas Ltd., a California limited partnership. On March 15, 1984, Granada Calabasas borrowed $8,400,000 from Great Western Savings, for which the Siegals executed a promissory note. The note was secured by a deed of trust giving Great Western a lien on certain real property in Los Angeles county.

In connection with the loan transaction, Chicago Title Insurance Company issued a written title insurance policy to Great Western showing the deed of trust as a first lien; the policy insured Great Western against loss or damage sustained if the lien was not a first lien. Before issuing the policy, Chicago Title required that the deed of trust and the promissory note be signed by both of the Siegals, and that their signatures be acknowledged before a notary public.

On March 30, 1984, Ferraro, a notary public, was asked by Siegal to execute the certificate of acknowledgment on the two documents. Ferraro had been Siegal's secretary for a number of years. Ferraro saw that the signatures to be acknowledged were those of Siegal and Mitchell Siegal. She stated that Mitchell Siegal was not present and asked if everything was all right. Siegal, who had signed his brother Mitchell's signature, told Ferraro that everything was all right and said there was no problem. Ferraro then executed the certificate of acknowledgement.

On May 1, 1984, Granada Calabasas defaulted on the promissory note; an involuntary petition for bankruptcy was filed against the limited partnership which was later converted to a voluntary Chapter 11 proceeding. Great Western attempted to collect on the promissory note and foreclose on the trust deed, but the bankruptcy trustee fought these actions on the grounds that the signatures of Mitchell Siegal were not really his and because Great Western's lien was not a first lien.

In December of 1985 Great Western and the bankruptcy trustee settled. As part of the settlement, Chicago Title, as Great Western's insurer, paid out $455,000. Chicago Title then brought the underlying action against Ferraro to recover the $455,000 as well as $357,000 it had expended in attorney's fees. Ferrero--represented by Oregon Mutual Insurance Company--then settled with Chicago Title for $362,500. Following that settlement, she pursued her third party claim against Siegal. Ferraro brought this action against Siegal. The district court found that Siegal was 70% responsible for the damages incurred by Great Western.

DISCUSSION

* Siegal argues that the district court abused its discretion by apportioning the damages to Chicago Title. His argument seems to be that some type of strict liability applies: once a notary is found negligent that is the end of the inquiry. Siegal is unable to offer any authority supporting this interpretation of a notary's liability.

In California a Notary Public's conduct is governed by California Civil Code section 1185 and Government Code section 8214. Failure to comply with the terms of these sections constitutes negligence. Allstate Savings & Loan Ass'n v. Lotito, 116 Cal. App. 3d 998, 1004, 172 Cal. Rptr. 535, 538 (1981). Injured parties are entitled to recover from the negligent notary.

In contrast to Siegal's strict characterization of such negligence, however, California courts have treated it as any other type of negligence. See, e.g., Garton v. Title Insur. & Trust Co., 106 Cal. App. 3d 365, 377-78, 165 Cal. Rptr. 449, 455 (1980) ("Not every breach imposes liability, however. In order for liability to be imposed it must be shown that damages were proximately caused by the breach."); Tutelman v. Agricultural Insur. Co., 25 Cal. App. 3d 914, 102 Cal. Rptr. 296 (1972) (treating notary's negligence as one of several proximate causes); White v. Rosenstein, 8 Cal. App. 2d 217, 47 P.2d 358 (1935) (barring recovery on basis of contributory negligence). Of particular salience to this case, California courts have stated in dicta that employers can be responsible for negligent performance of notary public duties by employees, even when the employer did not request that a particular document be acknowledged. E.g., Iselin-Jefferson Financial Co. v. United California Bank, 16 Cal. 3d 886, 889, 549 P.2d 142, 143, 129 Cal. Rptr. 670, 671 (1976); Garton, 106 Cal. App. 3d at 378, 165 Cal. Rptr. at 456.

There is nothing in California law or the law of this circuit that bars Siegal from being held responsible for the share of damage he caused Chicago Title. The district court did not abuse its discretion by doing so.

B

Siegal next argues that the district court erred in awarding a judgment based on damages in excess of $300,000. He bases his argument on an asserted breach by Oregon Mutual of the duty to settle; Oregon Mutual turned down an early settlement offer that was within the $300,000 policy limit. See Comunale v. Traders & General Insur. Co., 50 Cal. 2d 654, 328 P.2d 198 (1958). Siegal argues that as Ferraro's indemnitor he is entitled to stand in Ferraro's shoes and object to Oregon Mutual's bad faith.

Siegal's bare allegations that Oregon Mutual breached the duty to settle, however, cannot form the basis of assigning error to the district court. The elements of the duty are well settled. They include the strengths of the case and the defense, the efforts of the insurer to investigate the circumstances, the dynamics and timing of the settlement discussions, the good faith of the insured, and the good faith of the insurer. See Brown v. Guarantee Insur. Co., 155 Cal. App. 2d 679, 689, 319 P.2d 69 (1957).

Siegal has not pointed to any evidence that contradicts the district court's finding that " [s]ettlement at this figure was not unreasonable even in light of an earlier demand at $300,000 as liability and coverage issues were unresolved." Therefore, the district court did not err in basing its damage award on the full $362,500 assessed against Ferraro in the underlying suit.

C

Siegal contests the sufficiency of the evidence. Determination of relative fault or negligence is a factual determination that is reviewed for clear error. See In re White Cloud Charter Boat Co., 813 F.2d 1513, 1517 (9th Cir. 1987).

The district court found that "Siegal was actively and primarily responsible for damages which [Chicago Title] might have recovered from Rose Ferraro"; the court found the amount of negligence attributable to Siegal to be 70%. The district court based these findings on its findings that it was Siegal's idea to obtain the false acknowledgements, that Siegal was in a position of authority over Ferraro, and that Siegal knew Ferraro would rely on his assurance.

Siegal's attack on the evidence is, at best, marginal.¹  It does not leave this court with a firm and definite conviction that a mistake has been made. See United States v. United States Gypsum Co., 333 U.S. 364, 395 (1948). There was no clear error.

D

Siegal complains that the district court barred evidence that was not specified in the pretrial order. Exclusion of evidence not specified in a pretrial order is reviewed for abuse of discretion. See United States v. Lummi Indian Tribe, 841 F.2d 317, 321 (9th Cir. 1988).

Pretrial orders pursuant to Federal Rule of Civil Procedure 16 "play a crucial role in implementing the purposes of the Federal Rules of Civil Procedure 'to secure the just, speedy and inexpensive determination of every action.' " United States v. First Nat'l Bank of Circle, 652 F.2d 882, 886 (9th Cir. 1981) (quoting Fed. R. Civ. P. 1). Against the need to enforce pretrial orders, we must consider the general sense of justice. See generally Malone v. United States Postal Service, 833 F.2d 128 (9th Cir. 1987), cert. denied, 109 S. Ct. 59 (1988).

There is no question that Siegal failed to comply with either the local rules or with Rule 16. He ignored repeated requests by the district court to produce witness and exhibit lists. He failed to attend a single pretrial conference.²  He had no excuse for his failure to comply, and did not ask for a continuance until the day of the trial.

Furthermore, the impact on Siegal's ability to present a defense does not appear to have been great. Siegal indicated to the court that he had no exhibits other than those introduced by Ferraro. He was given a full opportunity to examine Ferraro, who was the only witness to the execution of the documents and acknowledgements at issue. Nor is it clear from the record or his briefs that Siegal actually would have introduced any other witness.

Enforcement of pretrial orders is necessary to preserve the important objectives of pretrial conference. Circle, 652 F.2d at 886. The district court did not abuse its discretion.

E

Finally, Siegal argues that Ferraro is barred from equitable relief because she has unclean hands. The clean hands doctrine derives from the maxim "he who comes into equity must come with clean hands." The doctrine "closes the doors of a court of equity to one tainted with inequitableness or bad faith relative to the matter in which he seeks relief." Precision Instrument Mfg. Co. v. Automotive Maintenance Machinery Co., 324 U.S. 806, 814 (1945).

The district court found Ferraro to be negligent. The court's findings did not include bad faith or deviousness on Ferraro's part. In an earlier consideration of the clean hands doctrine, this court said, " [w]hat is material is not that the plaintiff's hands are dirty, but that he dirtied them in acquiring the right he now asserts, or that the manner of dirtying renders inequitable the assertion of such rights against the defendant." Republic Molding Corp. v. B.W. Photo Utilities, 319 F.2d 347, 349 (9th Cir. 1963). We suggested that " [t]he relative extent of each party's wrong upon the other and upon the public should be taken into account, and an equitable balance struck." Id. at 350.

In this case, Ferraro's negligence merely consists of carelessly relying on the assurances of her longtime employer. Siegal, on the other hand, was found to have deliberately misled Ferraro and purposefully obtained a false certificate of acknowledgement. Siegal's conduct was by far the more culpable; the clean hands doctrine does not apply. Cf. United States v. State of Washington, 761 F.2d 1419, 1421-22 (9th Cir. 1985).

AFFIRMED.