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DKN Holdings LLC v. Faerber S218597 2015 DJDAR 8075 California Supreme Court

Landlord may sue remaining parties who were jointly and severally liable on contract obligation in separate action even if landlord had already obtained judgment against an obligor.

Wade Faerber, Matthew Neel and Roy Caputo leased a retail space from DKN Holdings LLC by signing a standard form, indicating that the parties “shall have joint and several responsibility” to comply with the lease terms. Caputo sued DKN for breach of contract and other claims (the Caputo action). In response, DKN cross-complained against Caputo, Faerber and Neel for rent and money owed but served Caputo alone. Consequently, Faerber and Neel (together, Faerber) were dismissed as cross-defendants. Following a bench trial, the court denied Caputo relief and awarded DKN over $2.8 million on its cross-complaint; judgment was subsequently entered. Next, DKN sued Faerber for breach of the lease. Faerber demurred, arguing that DKN’s claim was precluded by the Caputo action. The trial court sustained the demurrer and entered judgment in Faerber’s favor, which the Court of Appeal affirmed.

Reversed and remanded. Parties who are jointly and severally liable on an obligation may be sued in separate actions. Moreover, pursuant to this court’s decision in Williams v. Reed, the plaintiff “does not lose the right to the several liability of a several obligor until the obligation is fully satisfied,” regardless of whether the plaintiff has obtained a judgment against other severally liable obligors. Here, Farber, Caputo, and Neel were jointly and severally liable on the lease. As such, DKN had separate claims against each of them and was entitled to pursue the claims in separate actions. Thus, the appellate court clearly erred in disallowing DKN to proceed with the Faerber lawsuit and in rejecting the joint and several liability principles discussed in Williams. This court also found the Court of Appeal’s analysis erroneous with respect to the preclusive effect of the prior judgment and the primary rights doctrine because joint and several liability does not implicate that doctrine. Accordingly, this court overturned the judgment.