Hulsey v. Koehler

John and June Hulsey (the Hulseys) (plaintiffs) agreed to sell the Golden Oaks Mobile Estates in Oroville, California, to Judith P. Koehler (defendant). The escrow instructions included a $30,000 disparity from the purchase agreement in Koehler’s favor that was not discovered by the Hulseys until sometime after the escrow closed. Koehler refused to sign an amended escrow instruction and new promissory note, and instead sued the Hulsey’s for fraud and misrepresentation in the sale of the mobile-home park. The Hulseys cross-complained for intentional interference with business relations, but they did not include a crossclaim for $30,000 discrepancy. Verdicts were entered for the Hulseys on Koehler’s complaint and for Koehler on the Hulseys’ cross-complaint. When Koehler later failed to pay the $30,000 due on the new promissory note, the Hulseys sued her for declaratory relief, reformation, and specific performance. Koehler’s answer to the complaint alleged two affirmative defenses: (1) failure to state a cause of action; and (2) full performance. More than three years later, on the eve of trial, Koehler moved for leave to amend her answer to add the affirmative defense of the Hulseys’ waiver of their claim because they failed to plead it as a compulsory crossclaim in the earlier action between the parties as required by California’s code of civil procedure, § 426.30. The trial court denied Koehler’s motion for leave to amend as untimely. Koehler appealed and argued that the compulsory crossclaim rule is an extension of collateral estoppel and therefore is not required to be specially pleaded.