Interinsurance Exchange of Automobile Club v. Superior Court , 257 Cal. Rptr. 37 ( 1989 )

Opinion

TODD, J.

After the trial court overruled its general demurrer based on the doctrine of collateral estoppel, Interinsurance Exchange of the Automobile Club of Southern California (Auto Club) petitions for a writ of mandate seeking to compel the trial court to sustain its demurrer. The subject of the demurrer is the April 5, 1988, complaint of real party in interest Jackie L. Packham against the Auto Club for damages for “Bad Faith Breach of Insurance Contract (i.e., Tortious Breach of the Implied Covenant of Good Faith and Fair Dealing); Violation of Statutory Duties; Constructive Fraud and Fraudulent Deceit.”

We have concluded the issue of the effectiveness of Packham’s assent to a January 1985 release she executed was finally adjudicated in a July 2, 1986, summary judgment which was affirmed on appeal. Her assent was adjudicated to be effective. Thus, the release was an effective bar to her personal injury action against Simone Billuni, who with Packham was insured by the Auto Club. The matters in Packham’s present complaint, including fraud and overreaching, were within the scope of the summary judgment adjudication of the effectiveness of Packham’s assent to the release, the only issue actually litigated in that action. The matters in Packham’s present complaint relate to that adjudicated subject matter and were relevant to that issue so that they could have been raised in the summary judgment adjudication of the matter of her assent. Accordingly, the summary judgment is conclusive of any matter going to the effectiveness of Packham’s assent to the release, whether or not it was urged in the summary judgment. Thus, we grant the petition.

Facts

As a result of a December 1984 rear-end collision between Auto Club’s insureds, Packham and Belluni, Packham went to Auto Club’s office in January 1985 and for a payment of $1080.90 signed a release of Billuni for all claims connected with the collision. Before signing the release, Auto Club representative Mrs. Robinson told Packham she wanted to terminate Packham’s claim so she would not have two open files. Robinson totaled the bills for Packham’s medical treatment to date, added the car rental and other miscellaneous bills, and said she would give Packham $500 more.

There was no discussion on whether Packham was ready to settle. Nonetheless, Packham understood she was talking to Robinson about settling her claim and the settlement offer was greater than she requested or expected. Packham read the release carefully and discussed it with her husband before signing. She knew she was releasing her claim by signing the form and she intended to do so.

One month after Packham signed the release, Auto Club refused to renew her insurance. In September 1985, Packham filed her action for damages for negligence against Billuni. Billuni moved for summary judgment based on the release Packham signed and her deposition testimony. In her deposition, Packham admitted she filed the lawsuit because she was upset with the Auto Club for not renewing her insurance.

Packham opposed Billuni’s motion for summary judgment on grounds she was confused about the reason for her meeting with the Auto Club, confused as to the meaning of the release and its full legal effect, and confused as to what the dollar amount of the settlement represented. She argued she did not in reality assent to the provisions of the release. The trial court granted Billuni’s summary judgment motion and Packham appealed to this court.

In our unpublished opinion we pointed out, “[sjpecific issues of fraud and overreaching were not presented to the trial court.” (Packham v. Billuni, (Jan. 1, 1988) D004961.) On her appeal, however, Packham for the first time raised issues of fraud and overreaching, including assertions that Auto Club breached its duty of good faith and fair dealing to her. In this court’s opinion affirming the summary judgment, we stated, in part: “We cannot consider questions not presented by the record and raised by counsel for the first time on appeal. [Citation.] Because fraud and overreaching were not presented to the trial court as grounds for avoiding the release, those issues are not properly before us.” (Packham v. Billuni, supra, D004961.)

The remittitur was issued from this court on April 4, 1988.

On April 5, 1988, Packham filed the complaint for breach of the covenant of good faith and fair dealing. On August 15, 1988, the trial court overruled Auto Club’s demurrer. The trial court stayed further proceedings and Auto Club filed its petition for writ of mandate on September 6, 1988. On September 19, 1988, we issued an order to show cause.¹

Discussion

The doctrine of res judicata giving certain conclusive effect to a former judgment in a later action seeks to curtail multiple litigation causing vexation and expense to the parties and wasted effort and expense injudicial administration. (7 Witkin, Cal. Procedure (3d ed. 1985) Judgment, § 188, p. 621.) Concerning the aspect of res judicata applicable to this case, “in a new action on a different cause of action, the former judgment is not a complete merger or bar, but is effective as a collateral estoppel, i.e., it is conclusive on issues actually litigated between the parties in the former action.” (7 Witkin, op. cit. supra, § 189, p. 623, original italics; see Corral v. State Farm Mutual Auto. Ins. Co. (1979) 92 Cal.App.3d 1004, 1010 [155 Cal.Rptr. 342].)

“[A] former judgment is not a collateral estoppel on issues which might have been raised but were not; just as clearly, it is a collateral estoppel on issues which were raised, even though some factual matters or legal arguments which could have been presented were not.” (7 Witkin, op. cit. supra, § 257, p. 696, original italics.)

The fact that different forms of relief are sought in the two lawsuits is irrelevant, for if the rule were otherwise, “litigation finally would end only when a party ran out of counsel whose knowledge and imagination could conceive of different theories of relief based upon the same factual background.” (Kronkright v. Gardner (1973) 31 Cal.App.3d 214, 216 [107 Cal.Rptr. 270].) Sutphin v. Speik (1940) 15 Cal.2d 195, 202 [99 P.2d 652], discusses and explains the distinction between issues litigated and legal theories, as follows: “Next is the question, under what circumstances is a matter to be deemed decided by the prior judgment? Obviously, if it is actually raised by proper pleadings and treated as an issue in the cause, it is conclusively determined by the first judgment. But the rule goes further. If the matter was within the scope of the action, related to the subject-matter and relevant to the issues, so that it could have been raised, the jugdment is conclusive on it despite the fact that it was not in fact expressly pleaded or otherwise urged. The reason for this is manifest. A party cannot by negligence or design withhold issues and litigate them in consecutive actions. Hence the rule is that the prior judgment is res judicata on matters which were raised or could have been raised, on matters litigated or litigable. In Price v. Sixth District, [1927] 201 Cal. 502, 511 [258 Pac. 387], this court said: ‘But an issue may not be thus split into pieces. If it has been determined in a former action, it is binding notwithstanding the parties litigant may have omitted to urge for or against it matters which, if urged, would have produced an opposite result. . . This principle also operates to demand of a defendant that all of its defenses to the cause of action urged by the plaintiff be asserted under the penalty of forever losing the right to thereafter so urge them.’ ” (Italics added.)

The issue actually litigated in the first action resulting in a summary judgment on the merits (see State Farm etc. Ins. Co. v. Salazar (1957) 155 Cal.App.2d Supp. 861, 865 [318 P.2d 210]; 7 Witkin, op. cit. supra, § 219, pp. 655-656) was whether Packham effectively assented to the release. Her claimed confusion as to the reason for her meeting with the Auto Club, the meaning of the settlement agreement and its full legal effect and as to what the dollar amount of the settlement represented were the particular grounds she urged in the trial court in order to reach a favorable result on the issue.

As this court pointed out in its opinion on her appeal from the adverse summary judgment, Packham did not urge in the trial court her legal theories of fraud and overreaching which, if accepted, could have produced a favorable result for Packham in the first action resulting in the summary judgment. Instead, Packham urged the fraud and overreaching theories for vitiating her assent for the first time on appeal, and for that reason this court did not consider those theories.

The fact Packham urged the fraud and over- reaching theories on her appeal from the adverse summary judgment demonstrates she could have raised those matters in the adjudication of the summary judgment motion.² There is no question that the factual background for the fraud and overreaching allegations is the same as that for Packham’s complaint for breach of the covenant of good faith and fair dealing.

We conclude that as a result of the final adjudication of the issue of the effectiveness of Packham’s assent to the release based on a factual background in which Packham could have urged theories of fraud and overreaching as bases for vitiating her assent, Packham is precluded from asserting her cause of action for breach of the covenant of good faith and fair dealing based on the same factual background. The finally adjudicated effective assent under these circumstances of factual background identity and opportunity to assert fraud and overreaching forecloses a “bad faith” action.

The fact that this case involves actual final adjudication of the issue of the effectiveness of Packham’s assent under circumstances of opportunity to assert the fraud and overreaching theories based on the identical facts, serves to distinguish this case from cases on which Packham relies. In Vega v. Western Employers Ins. Co. (1985) 170 Cal.App.3d 922 [216 Cal.Rptr. 592] (disapproved in Moradi-Shalal v. Fireman's Fund Ins. Companies (1988) 46 Cal.3d 287, 310-311 [250 Cal.Rptr. 116, 758 P.2d 58]), the issue of the effectiveness of the release was not finally adjudicated in a first action. The same is true of Corral v. State Farm Mutual Auto. Ins. Co., supra, 92 Cal.App.3d 1004, where after an arbitration award in favor of the insurer but allegedly procured by fraud the insured was permitted to sue later for “bad faith.” (Cf. Rios v. Allstate Ins. Co. (1977) 68 Cal.App.3d 811 [137 Cal.Rptr. 441].)

We point out that with respect to the matter of privity, which normally is an issue only with respect to the party against whom the bar of collateral estoppel is sought to be applied, the Auto Club, through its representative Mrs. Robinson, was the direct participant in the events underlying all aspects of this case. Moreover, it is clear from the record that the Auto Club defended the release by litigating as Billuni’s agent the issue of the effectiveness of Packham’s assent through the summary judgment motion and appeal. This fact establishes sufficient privity of interest in the Auto Club to apply principles of collateral estoppel at this time.

Finally, the matter of an amended pleading which Packham proffers is not properly before us in this writ proceeding. That is a matter for other, separate litigation.

Disposition

Let a writ of mandate issue commanding the superior court to vacate its order overruling the Auto Club’s general demurrer and instead issue an order sustaining the demurrer without leave to amend and dismissing the action.

Kremer, P. J., concurred.

1 The factual context of this case is unique, i.e., one insurance carrier with legal duties to both the plaintiff (Packham) and the defendant (Billuni) in the underlying personal injury action. If Packham had been insured by a different carrier, an action against that carrier could not have been foreclosed in a case upholding the validity of the release in favor of Billuni and his carrier. Such is not the case before us.

2 Concerning the language in the opinion of this court on the appeal from the summary judgment referring to the fraud and overreaching theories as “issues,” Packham suggests that language is dispositive of the concern in this case as to what “issue” was determined in the summary judgment motion and appeal. The court was not considering the issue we now consider, and thus its language choice is not dispositive. (McDowell & Craig v. City of Santa Fe Springs (1960) 54 Cal.2d 33, 38 [4 Cal.Rptr. 176, 351 P.2d 344], “language used in any opinion is to be understood in the light of the facts and the issue then before the court. . . . [C]ases are not authority for propositions not considered.”)