Filed 5/26/15 Mahecha v. Hanover Ins. Group CA4/1 

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COURT OF APPEAL, FOURTH APPELLATE DISTRICT 

DIVISION ONE 

STATE OF CALIFORNIA 

NELSON Y. MAHECHA, 

 Plaintiff and Appellant, 

 v. 

THE HANOVER INSURANCE GROUP, 

INC., 

 Defendant and Respondent. 

 D065325 

 (Super. Ct. No. 37-2013-00057450- 

 CU-IC-CTL) 

 APPEAL from a judgment of the Superior Court of San Diego County, Joel R. 

Wohlfeil, Judge. Affirmed. 

 The Law Office of Michael A. Alfred and Michael A. Alfred for Plaintiff and 

Appellant. 

 Murchison & Cumming and Edmund G. Farrell for Defendant and Respondent. 

 This case involves a judgment creditor's action brought by plaintiff Nelson Y. 

Mahecha against defendant Hanover Insurance Group, Inc. (Hanover) under Insurance 

Code section 11580 (all further undesignated statutory references are to the Insurance 
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Code unless otherwise specified), which authorizes a third party claimant, in certain 

situations, to bring a direct action against a liability insurer on an insurance policy after 

obtaining a judgment against an insured party in a separate action against that party based 

upon "bodily injury, death, or property damage." (§ 11580, subd. (b)(2); Wright v. 

Fireman's Fund Ins. Companies (1992) 11 Cal.App.4th 998, 1014-1015 (Wright).) In a 

prior case, Mahecha sued both Hanover and his former attorney, Roger Stacy, who 

Mahecha believed had legal malpractice liability insurance coverage under a policy 

issued by Hanover, alleging that he was an intended third party beneficiary of the 

insurance contract between Hanover and the attorney and that he had lost his home in a 

foreclosure proceeding as a result of the attorney's malpractice in a related bankruptcy 

proceeding. As pertinent here, the court in that case dismissed without prejudice 

Mahecha's complaint as against Hanover in a demurrer proceeding, concluding that 

Mahecha was not in privity of contract with Hanover and he could not bring a direct 

action against Hanover because he had not obtained a judgment against the defendant 

attorney. Mahecha later obtained a default judgment against the attorney for damages 

exceeding $287,000. 

 Mahecha thereafter brought the section 11580 judgment creditor's action against 

Hanover that is the subject of this appeal, and the court entered a judgment of dismissal 

after sustaining without leave to amend Hanover's general demurrer to Mahecha's 

complaint. In sustaining Hanover's demurrer, the court ruled that this action was barred 

by the doctrine of res judicata, finding that Mahecha was attempting to relitigate the same 

cause of action he had asserted against Hanover in the prior lawsuit. 
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 Mahecha appeals, contending the court "erred in sustaining Hanover's demurrer on 

the grounds that res judicata barred relitigation of the same claims." Hanover responds 

by asserting that the court correctly found Mahecha's claims are barred by the doctrine of 

res judicata, and, assuming for purposes of argument that res judicata does not apply, the 

judgment should be affirmed because Mahecha has not stated, and cannot state, facts 

sufficient to constitute a cause of action under section 11580. Reviewing Mahecha's 

complaint and the record de novo, we conclude Mahecha has failed to state facts 

sufficient to constitute a cause of action under section 11580 because, as Hanover 

correctly points out, Mahecha judicially admitted in the prior action that the subject 

policy issued by Hanover does not cover the relief awarded in the default judgment 

entered in that case against the attorney who purportedly was Hanover's insured. We also 

conclude Mahecha's related claim for breach of implied obligation of good faith and fair 

dealing also fails as a matter of law. Accordingly, we affirm the judgment of dismissal. 

BACKGROUND 

 A. Mahecha's Prior Lawsuit Against Hanover and Its Purported Insured 

 In late 2012 in his underlying lawsuit─Mahecha v. Stacy et al. (Super. Ct. San 

Diego County, 2011, No. 37-2011-00077979-CU-PN-SC) (the prior action)─Mahecha 

obtained a default judgment awarding him damages in the amount of $287,050 against 

Stacy, who allegedly was Hanover's insured, on Mahecha's causes of action against Stacy 

for legal malpractice, intentional misrepresentation, and concealment. In that case, 

Mahecha alleged that Stacy had committed malpractice while representing him in a 

bankruptcy action related to a foreclosure proceeding that resulted in Mahecha's losing 
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his home.1 As pertinent here, Mahecha alleged in his verified amended complaint─in 

support of his intentional misrepresentation and concealment claims─that Stacy "was not 

covered by malpractice insurance" under the professional liability insurance contract 

between Hanover and Stacy, that Stacy had falsely represented that he possessed 

malpractice insurance that would cover any malpractice claim brought against him, and 

that Stacy had concealed that he was not covered by malpractice insurance. 

 In the prior action Mahecha also sued Hanover, alleging several causes of 

action─aiding and abetting breach of fiduciary duty, breach of contract, and breach of 

implied duty of good faith and fair dealing─based on the theory that Mahecha was an 

intended third party beneficiary of the insurance contract between Hanover and Stacy. In 

that case the trial court2 sustained Hanover's general demurrer without leave to amend 

and dismissed "without prejudice" Mahecha's complaint "as against [Hanover]," finding 

that Mahecha was not in privity of contract with Hanover and he could not bring a direct 

action against Hanover because he had not obtained a judgment against Stacy. 

 B. Mahecha's Current Action Against Hanover 

 In July 2013, after he obtained the default judgment against Stacy in the prior 

action, Mahecha sought to recover (among other things) payment of the default judgment 

by bringing the judgment creditor's direct action against Hanover that is the subject of 

this appeal. In his complaint Mahecha asserted two causes of action: (1) A judgment 

 

1 As most of the specific facts underlying the prior action are not pertinent to the 

issues raised in this appeal, we need not summarize them here. 

2 The Honorable William S. Cannon and the Honorable Kenneth J. Medel. 
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creditor's cause of action under section 11580; and (2) breach of the implied obligation of 

good faith and fair dealing under section 790.03, subdivision (h)(5). 

 1. Hanover's general demurrer 

 Hanover responded by demurring to both causes of action asserted in Mahecha's 

complaint. As relevant here, Hanover asserted that Mahecha had not alleged, and could 

not allege, any of the five essential pleading requirements for maintaining an action under 

section 11580 because the underlying default judgment against Stacy was for 

professional, misrepresentation and concealment and was not "based upon bodily injury, 

death or property damage" within the meaning of that section, and because Mahecha 

"ha[d not] alleged that coverage was established in the underlying action." Hanover 

further asserted that Mahecha "ha[d] not plead[ed] facts sufficient to establish third-party 

beneficiary status under [] section 11580 or traditional contract principles." 

 Regarding Mahecha's second cause of action, Hanover argued that the complaint 

failed to state facts sufficient to constitute a cause of action for breach of the implied 

obligation of good faith and fair dealing, which was based on the allegation that Hanover 

had a duty to make a good faith offer to settle Mahecha's claim for payment of the 

judgment against Stacy in the prior action once Hanover had notice of the judgment. 

Hanover further asserted that, "to the extent [Mahecha] relie[d] upon his status as a third 

party beneficiary under [section] 11580 to support his cause of action, this claim falls 

along with his [section] 11580 claim." 

 The court requested supplemental briefing from the parties on "the limited issue of 

whether the doctrine of res judicata bar[red] [Mahecha] from re-litigating the same cause 
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of action adjudicated in [the prior action]." In its supplemental brief, Hanover asserted 

that Mahecha's claims were barred by the doctrine of res judicata because he was 

"improperly attempting to relitigate the same primary rights and obligations that were at 

issue in the underlying action; namely, whether [Mahecha] [was] a third party beneficiary 

to the professional liability policy issued by Hanover to Stacy." Hanover also repeated its 

argument that Mahecha had not stated, and could not state a claim under section 11580 

because that section "[did] not cover the subject malpractice policy"; the underlying 

judgment against Stacy was "not based upon bodily injury, death, or property damage"; 

and the policy "[did] not cover the relief awarded in the judgment" because "by 

[Mahecha's] own prior judicial admission, there [was] no coverage for the relief awarded 

in the judgment." In support of its assertion that Mahecha had judicially admitted that the 

policy did not cover the relief awarded in the judgment against Stacy within the meaning 

of section 11580, Hanover requested that the court take judicial notice of Mahecha's 

allegation in his verified complaint in the prior action that "[t]he true facts were that 

[Stacy] was not covered by malpractice insurance because he failed to inform [Hanover] 

that an action was pending against him when he renewed his policy." Mahecha 

apparently also filed a supplemental brief, which Mahecha does not discuss in either his 

appellant's opening brief or his reply brief and a copy of which does not appear in the 

record. 

 After hearing oral arguments by the parties' counsel and taking judicial notice of 

Mahecha's verified complaint in the prior action, the court sustained without leave to 

amend Hanover's general demurrer to his complaint in the current case and ordered the 
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complaint dismissed with prejudice. In sustaining Hanover's demurrer, the court ruled 

that this action was barred by the doctrine of res judicata, finding that Mahecha was 

attempting to relitigate the same cause of action he had asserted against Hanover in the 

prior lawsuit. Mahecha's timely appeal followed. 

STANDARD OF REVIEW 

 "A demurrer tests the legal sufficiency of factual allegations in a complaint." 

(Rakestraw v. California Physicians' Service (2000) 81 Cal.App.4th 39, 42 (Rakestraw).) 

On appeal from a judgment of dismissal entered after a general demurrer has been 

sustained without leave to amend, "this court reviews the complaint de novo to determine 

whether it states a cause of action. [Citation.] We assume the truth of all material facts 

properly pleaded, but not contentions, deductions or conclusions of fact or law. 

[Citation.] The judgment must be affirmed if it is proper on any lawful grounds raised in 

the demurrer." (Folgelstrom v. Lamps Plus, Inc. (2011) 195 Cal.App.4th 986, 989; see 

Rakestraw, supra, at p. 43 ["In reviewing the sufficiency of a complaint against a general 

demurrer . . . this court determines whether the complaint states facts sufficient to 

constitute a cause of action."].) In reviewing the sufficiency of the complaint, "[t]his 

court also considers matters that may be judicially noticed." (Rakestraw, at p. 43.) 

DISCUSSION 

 A. First Cause of Action (§ 11580) 

 We first conclude the court properly sustained without leave to amend Hanover's 

demurrer to the first cause of action alleged in Mahecha's complaint because he has not 

stated, and cannot state, facts sufficient to constitute a judgment creditor's cause of action 
8 

under section 11580 because he judicially admitted in his verified amended complaint in 

his prior action against Hanover and its purported insured, Stacy, that the policy Hanover 

issued to Stacy does not cover the relief awarded in the default judgment Mahecha 

obtained against Stacy─the award of damages in the amount of $287,050─in the prior 

action. 

 We begin our analysis by noting that, "[a]s a general rule, absent an assignment of 

rights or a final judgment, a third party claimant may not bring a direct action against an 

insurance company on the contract because the insurer's duties flow to the insured." 

(Harper v. Wausau Ins. Co. (1997) 56 Cal.App.4th 1079, 1086 (Harper).) 

 However, "[t]here are several exceptions to the general rule which prohibits a third 

party claimant from suing an insurer." (Harper, supra, 56 Cal.App.4th at p. 1086.) 

Under the judgment creditor exception at issue here, "once a party has a final judgment 

against the insured, the claimant becomes a third party beneficiary of the insurance policy 

and may enforce the terms which flow to its benefit pursuant to [] section 11580." 

(Harper, at p. 1086.) Section 11580 provides in part: 

"A policy insuring against losses set forth in subdivision (a) shall not 

be issued or delivered to any person in this state unless it contains 

the provisions set forth in subdivision (b). Such policy, whether or 

not actually containing such provisions, shall be construed as if such 

provisions were embodied therein. 

"(a) Unless it contains such provisions, the following policies of 

insurance shall not be thus issued or delivered: [¶] . . . 

"(2) Against loss of or damage to property caused by draught 

animals or any vehicle, and for which the insured is liable . . . . 
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"(b) Such policy shall not be thus issued or delivered to any person 

in this state unless it contains all the following provisions: [¶] . . . 

"(2) A provision that whenever judgment is secured against the 

insured . . . in an action based upon bodily injury, death, or property 

damage, then an action may be brought against the insurer on the 

policy and subject to its terms and limitations, by such judgment 

creditor to recover on the judgment." (Italics added.) 

 In Wright, supra, 11 Cal.App.4th at pages 1014-1015, this court explained that 

"[s]ection 11580 requires a policy issued or delivered in this state which covers liability 

for injuries to a person or covers liability for loss of or damage to property caused by a 

vehicle or draught animal[3] (§ 11580, subds. (a)(1)(2)), to include a provision that 

whenever judgment is secured against the insured in an action based upon bodily injury, 

death, or property damage, the judgment creditor may sue the insurer on the policy, 

subject to its terms and limitations, to recover on the judgment (§ 11580, subd. (b)(2)). 

Under the section, if the policy does not actually contain the required provision, it is 

construed as if it did so. A direct action under section 11580 is a contractual action on 

the policy to satisfy a judgment up to policy limits." (Italics added, footnote omitted; see 

Hand v. Farmers Ins. Exchange (1994) 23 Cal.App.4th 1847, 1858 (Hand) ["once having 

secured a final judgment for damages, the plaintiff becomes a third party beneficiary of 

the policy, entitled to recover on the judgment on the policy"].) 

 

3 Despite the archaic phrase "caused by a vehicle or draught animal" in subdivision 

(a)(2) of section 11580, the "loss of or damage to property" that will support a judgment 

creditor's direct action against an insurer is not limited to loss of or damage to property 

caused by a draught animal or any vehicle. (People ex rel. City of Willits v. Certain 

Underwriters at Lloyd's of London (2002) 97 Cal.App.4th 1125, 1131-1132.) 
10 

 This court also explained in Wright that, under section 11580, a third party 

claimant bringing a direct action as a judgment creditor against an insurer "should 

therefore plead and prove 1) it obtained a judgment for bodily injury, death, or property 

damage, 2) the judgment was against a person insured under a policy that insures against 

loss or damage resulting from liability for personal injury or insures against loss of or 

damage to property caused by a vehicle or draught animal,[4] 3) the liability insurance 

policy was issued by the defendant insurer, 4) the policy covers the relief awarded in the 

judgment, [and] 5) the policy either contains a clause that authorizes the claimant to bring 

an action directly against the insurer or the policy was issued or delivered in California 

and insures against loss or damage resulting from liability for personal injury or insures 

against loss of or damage to property caused by a vehicle or draught animal." (Wright, 

supra, 11 Cal.App.4th at p. 1015.) 

 Thus, one of the essential elements that a third party judgment creditor must plead 

to state a direct action claim against an insurer under section 11580 is that the policy in 

question covers the relief awarded in the judgment the plaintiff judgment creditor secured 

against the defendant insurer's insured. (Wright, supra, 11 Cal.App.4th at p. 1015; 

People ex rel. City of Willits v. Certain Underwriters at Lloyd's of London, supra, 97 

Cal.App.4th at p. 1130, fn. 2.) 

 Here, Hanover argues the court's order sustaining without leave to amend its 

demurrer to Mahecha's section 11580 claim must be affirmed because, "[b]y [Mahecha's] 

 

4 See footnote 3, ante. 
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own prior judicial admission, there is no coverage for the relief awarded in the judgment 

[against Stacy]," and thus he cannot state a claim under that section. We agree. 

 "The admission of fact in a pleading is a 'judicial admission.'" (Valerio v. Andrew 

Youngquist Construction (2002) 103 Cal.App.4th 1264, 1271 (Valerio).) "'"A judicial 

admission in a pleading . . . is not merely evidence of a fact; it is a conclusive concession 

of the truth of a matter which has the effect of removing it from the issues. . . ."'" (Addy 

v. Bliss & Glennon (1996) 44 Cal.App.4th 205, 218 (Addy).) "[A] trial court may not 

ignore a judicial admission in a pleading, but must conclusively deem it true as against 

the pleader." (Thurman v. Bayshore Transit Management, Inc. (2012) 203 Cal.App.4th 

1112, 1155.) 

 We take judicial notice of Mahecha's original verified complaint in Mahecha prior 

action against Hanover and Stacy. (Evid. Code, §§ 452, subd. (d), 459, subd. (a); 

Rakestraw, supra, 81 Cal.App.4th at p. 43 [in reviewing the legal sufficiency of a 

complaint, the reviewing court considers matters that may be judicially noticed].) In 

paragraph No. 38 of that pleading Mahecha alleged that "[t]he true facts were that [Stacy] 

was not covered by malpractice insurance because he failed to inform [Hanover] that an 

action was pending against him when he renewed his policy." (Italics added.) We also 

take judicial notice of the verified amended complaint Mahecha later filed in that same 

action, in which he twice repeated the same allegation that Stacy "was not covered by 

malpractice insurance" under the policy Hanover issued to Stacy. 

 The foregoing admissions of fact are judicial admissions by Mahecha that the 

policy Hanover issued to its purported insured, Stacy, provided no coverage. (Valerio, 
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supra, 103 Cal.App.4th at p. 1271; Addy, supra, 44 Cal.App.4th at p. 218.) Thus, in the 

present case, Mahecha cannot state a claim against Hanover under section 11580 because 

the policy in question does not cover the relief awarded in the default judgment Mahecha 

obtained against Stacy in the prior action. (See Wright, supra, 11 Cal.App.4th at p. 1015 

[judgment creditor who brings a direct action against an insurer under section 11580 must 

"plead and prove . . . the policy covers the relief awarded in the judgment"].) 

 In light of our foregoing conclusions, we need not reach Mahecha's contention that 

the court "erred in sustaining Hanover's demurrer on the grounds that res judicata barred 

relitigation of the same claims." (Folgelstrom v. Lamps Plus, Inc., supra, 195 

Cal.App.4th at p. 989 ["The judgment must be affirmed if it is proper on any lawful 

grounds raised in the demurrer."].) 

 B. Second Cause of Action for Breach of Implied Obligation of Good Faith and 

Fair Dealing

 We also conclude Mahecha's related second cause of action for breach of implied 

obligation of good faith and fair dealing also fails as a matter of law. As already noted, 

this cause of action is based on Mahecha's allegations that Hanover had a duty to make a 

good faith offer to settle Mahecha's claim for payment of the judgment against Stacy in 

the prior action once Hanover had notice of the judgment. The Court of Appeal has 

explained that a third party claimant who has secured a final judgment for damages 

against the insured "becomes a third party beneficiary of the policy, entitled to recover on 

the judgment on the policy" (Hand, supra, 23 Cal.App.4th at p. 1858), and the judgment 

creditor plaintiff "also become(s) a beneficiary of the covenant of good faith" (ibid.) such 
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that the insurer's "duty to exercise good faith in not withholding adjudicated damages 

necessarily is owing to the plaintiff also." (Ibid.) However, as is obvious, that duty to 

exercise good faith in not withholding adjudicated damages is contingent on the existence 

of coverage under the policy in question. Here, as already discussed, Mahecha has 

judicially admitted that the policy does not cover the relief awarded in the default 

judgment against Stacy. 

 For all of the foregoing reasons, we affirm the judgment of dismissal. 

DISPOSITION 

 The judgment is affirmed. The Hanover Insurance Group, Inc. shall recover its 

costs on appeal. 

NARES, J. 

WE CONCUR: 

McCONNELL, P. J. 

O'ROURKE, J.