Court Opinion

ID: 9857137
Source: CourtListenerOpinion
Date Created: 2023-09-24 13:51:09.64242+00
Date Added: 2024-06-11T09:38:03.438115
License: Public Domain

SCHAUER, J.
I concur. It is my view that the issues of law have been, as such, adequately discussed and correctly disposed of in the opinion prepared by Mr. Justice McComb. Nevertheless, because opinion diverges sharply among some of the justices, it appears proper to briefly supplement our discussion.
In the arguments for the dissenting theory, respondents have been termed “wrongdoers.” That term is ordinarily connotive of evil intent as well as illegal act. Under any permissible view of the record the term seems to me to be an unduly harsh epithet to be applied. As appears from the *273opinion of the District Court of Appeal on the first appeal in this case (Industrial Indem. Co. v. Golden State Co. (1953), 117 Cal.App.2d 519, 527 [256 P.2d 677]), the issue of illegality of the Transfer and Assumption Agreement by reason of the then provisions of section 1101 of the Insurance Code was injected into the case by that court. Until then respondents were willing and fully intended to carry out their obligations under that agreement, which would have meant that the subscribers would have received $1,018,589.07, rather than only the $323,300.39 awarded them by the judgment which is now being affirmed. Despite this situation, the president of Company, who is also one of the partners of Attorney, testified that, regardless of the outcome of the case, it was the intention of respondents to pay the subscribers an amount equivalent to that which the subscribers would have received under the Transfer and Assumption Agreement, less costs of litigation. I believe that this further demonstrates the good faith of respondents, already conclusively shown,1 and *274evidences their continuing intention to live up to their own obligations as set forth in the agreement, if that will result in payment of a greater sum to the subscribers than would result under the judgment of the court. Respondents’ unwillingness to accept the benefits of a windfall judgment—a judgment correct within the law but seemingly unjust in an equitable sense—is conduct which impresses me as more deserving of commendation than censure.
We ordinarily expect law and justice to go hand in hand; the state enacts and enforces law to achieve justice. Nevertheless, that the enforcement of law does not always result justly was recognized many generations ago, when the concept of equity was born. As declared in Owens v. McNally (1896), 113 Cal. 444, 450 [45 P. 710, 33 L.R.A. 369], “the law failing by reason of its universality, equity, to promote justice, makes good its imperfections. [Citations.] ” But, regrettably, imperfections sometimes appear which not even the reach of equity can make good.
The principle articulated in section 1101 of the Insurance Code and relied upon by the District Court of Appeal in holding the Transfer and Assumption Agreement to be illegal and void was manifestly intended to promote justice. Its application in this case seems to me, however, to have resulted in a judgment which, understandably, some may feel on its face achieves the contrary, not so much, perhaps, because of the substance of the judgment now under consideration as be*275cause of the inability of the court to enforce an agreement which had been found to be fair and just to all parties but which was held to be technically invalid. The upholding and performing of a fair and just contract would certainly appear to be promotive of justice. But the decision, on the first appeal in this case, that such contract could not be sustained has long since become final and cannot now be disturbed. That decision, in the light of the findings of fact at the first trial, which were held to be supported by the evidence, coupled with the findings in this second trial, which are also supported by the evidence, clearly precludes, under existing law, any relief beyond that granted. Similar applications of the principle (nonenforceability of a fair contract because of statutory illegality) resulting in unjust enrichment of a party have repeatedly divided this court. (See Loving & Evans v. Blick (1949), 33 Cal.2d 603, 615, 617 [204 P.2d 23]; Franklin v. Nat C. Goldstone Agency (1949), 33 Cal.2d 628, 633 [204 P.2d 37]; Fraenkel v. Trescony (1957), 48 Cal.2d 378, 383, 388 [309 P.2d 819].) In this connection it may be noted that under a 1955 amendment to the Insurance Code it appears that such an agreement as that which gave rise to the current controversy may now be legally made and performed, thus indicating that no basic principle of public policy, fairness, or justice was violated when it was executed in 1948. Neither that fact, however, nor even the overruling of the cited cases, could now affect the finality of the decision on the first appeal. I believe that the judgment of the trial court now being affirmed recognizes and correctly applies the law to the facts, which is all that the court under the limitations of the earlier holding could do, and that the carrying out by respondents of their legally unenforceable but nevertheless voluntarily self-recognized and now self-declared obligations under the Transfer and Assumption Agreement, brings this unfortunate litigation to the most desirable conclusion which under existing circumstances can be attained.
Shenk, J., concurred.

It is to be remembered that it is established that the Transfer and Assumption Agreement was entered into in good faith and had the approval of the insurance commissioner. Obviously, in the conduct of respondents, there was no union of act and evil intent. The opinion of the District Court of Appeal on the first appeal (Industrial Indem. Co. v. Golden State Co. (1953), supra, 117 Cal.App.2d 519) carefully notes many significant facts. Pertinent to the discussion, the opinion reads:
“ [P. 526] The court found in nearly all respects for the plaintiffs and against the cross-complainants . . . The judgment declared in substance that past subscribers had no interest in the Exchange and were not entitled to participate in any distribution; that the transfer and assumption agreement was fair and equitable, validly executed and binding on all past and present subscribers of Exchange, and that they had no right to any net worth or assets of Exchange except as provided in said agreement, that said agreement distributed to the subscribers all they were entitled to in the most equitable, reasonable and practical manner and that subscribers had no interest in the business or assets of Company. . . .
“ [P. 527] We have concluded that the original action for declaratory relief should have been denied because the agreement to which it relates is void as violating section 1101 of the Insurance Code, expressly made applicable to reciprocal exchanges by section 1282 of said code. Section 1101 reads insofar as applicable to this ease: ‘An admitted insurer’s officers, directors, trustees and any persons who have authority in the management of the insurer’s funds, shall not, unless otherwise provided in this code: . . . (c) Directly or indirectly purchase, or be interested in the purchase of, any of the assets of the insurer. ’ Section 1106, Insurance Code, reads in part: ‘Any person violating . . . Sections 1101, ... is guilty of a misdemeanor.’
‘ ‘ This exact point was not raised by any of the parties, but was briefed specially at the request of this court. . . .
“ [P. 534] In this case the court below made most elaborate findings *274as to all circumstances on which it based its holding that the cross-defendants have not breached their fiduciary duty. . . .
“ [P. 537] As we have held that the establishing of the circumstances under which the Attorney engaged in workmen’s compensation insurance business of its own and the weighing of these circumstances in relation to the duty of fairness and good faith incumbent on the Attorney as a fiduciary were matters of fact, the decision of which by the trier of facts is as a rule binding on appeal, it seems evident that the findings stated are fatal to the appeal with respect to the claims of subscribers of Exchange to the business of Company unless appellants have shown that they are not supported by the evidence. This they have failed to do. . . .
“ [P. 539] Under these circumstances it is not for us to say that the ultimate findings of the court below are necessarily improper inferences nor can we hold as. a matter of law, contrary to said findings, that the Attorney breached its fiduciary duty to subscribers when it engaged in the writing of workmen’s compensation insurance through the medium of Company or that the buáiness of Company was in equity the property of Exchange. We are the more satisfied that this result is not unjust because the gain by Exchange of all profits of the business of Company without participation in them by any of Company’s insureds would have given the subscribers of the Exchange a windfall wholly out of line with the setup of such Exchange.”