Court Opinion

ID: 9547451
Source: CourtListenerOpinion
Date Created: 2023-08-07 17:47:36.53721+00
Date Added: 2024-06-11T15:17:46.409611
License: Public Domain

*821LUCAS, J.
I respectfully dissent. In my view, the trial court properly denied petitioner’s request for attorney fees.
The American rule has long been that each party to litigation should bear his own attorney fees. (E.g., Fleischmann Corp. v. Maier Brewing (1967) 386 U.S. 714, 717-718 [18 L.Ed.2d 475, 478, 87 S.Ct. 1404].) The California Legislature first adopted this rule in 1851. (Stats. 1851, ch. 5, § 494, p. 128.)
The current statute on the subject reads, “Except as attorney’s fees are specifically provided for by statute, the measure and mode of compensation of attorneys is left to the agreement, express or implied, of the parties . . . .” (Code Civ. Proc., § 1021 [hereinafter section 1021].)
Although this court may have an inherent equitable power to award attorney fees in certain cases, we have “moved cautiously in expanding the nonstatutory bases on which awards of attorney’s fees may be predicated.” (Bauguess v. Paine (1978) 22 Cal.3d 626, 636 [150 Cal.Rptr. 461, 586 P.2d 942].) We have acknowledged limited exceptions only “when overriding considerations of justice seemed to compel such a result.” (Fleishmann Corp., supra, 386 U.S. at p. 718 [18 L.Ed.2d at p. 479].) “Three of these exceptions, discussed at length in Serrano v. Priest (1977) 20 Cal.3d 25, 34-47 [141 Cal.Rptr. 315, 569 P.2d 1303], base recovery of attorney fees to the prevailing party on the fact that the litigation has conferred benefits on others. Thus, if the litigation has succeeded in creating or preserving a common fund for the benefit of a number of persons, the plaintiff may be awarded attorney fees out of that fund. (Estate of Stauffer (1939) 53 Cal.2d 124, 131-132 [346 P.2d 748].) Likewise, if a judgment confers a substantial benefit on a defendant, such as in a corporate derivative action, the defendant may be required to pay the attorney fees incurred by the plaintiff. (See, e.g., Fletcher v. A. J. Industries, Inc. (1968) 266 Cal.App.2d 313, 323-325 [72 Cal.Rptr. 146].) Finally, under the ‘private attorney general’ concept attorney fees may be awarded to those who by litigation secure benefits for a broad class of persons by effectuating a strong public policy. (Serrano v. Priest, supra, 20 Cal.3d 25, 42-47.)” (Gray v. Don Miller & Associates, Inc. (1984) 35 Cal.3d 498, 505 [198 Cal.Rptr. 551, 674 P.2d 253].) Petitioner does not contend that his request for attorney fees comes within any of these exceptions.
A fourth exception is the “third-party tort” situation. “A person who through the tort of another has been required to act in the protection of his interests by bringing or defending an action against a third person is entitled to recover compensation for the reasonably necessary loss of time, attorney’s fees, and other expenditures thereby suffered or incurred. [Cita*822tions.]” (Italics added, Prentice v. North Amer. Title Guar. Corp. (1963) 59 Cal.2d 618, 620 [30 Cal.Rptr. 821, 381 P.2d 645].) Likewise, petitioner does not claim his request for attorney fees comes within this exception.
Petitioner suggests, however, that section 1021 would not preclude recovery of attorney fees as damages incurred “independently” of the litigation in which the right to damages is established. According to petitioner, the “third-party tort” exception is only one example of the broader “collateral litigation” exception. Other examples include recovery of attorney fees occasioned by false imprisonment (Nelson v. Kellogg (1912) 162 Cal. 621-623 [123 P. 1115]) or by malicious prosecution (Bertero v. National General Corp. (1974) 13 Cal.3d 43, 59 [118 Cal.Rptr. 184, 529 P.2d 608, 65 A.L.R.3d 878]). Thus, petitioner asserts that in general a party should be allowed to recover attorney fees for legal services independently incurred, and that any limitations on this rule (e.g., Davis v. Air Technical Industries, Inc. (1978) 22 Cal.3d 1, 5-8 [148 Cal.Rptr. 419, 582 P.2d 1010]) are the exceptions.
But in fact section 1021 applies with equal force to collateral litigation. In each of the examples mentioned above, it was not the fact of collateral litigation per se that led to the award. Attorney fees are given in false imprisonment or malicious prosecution suits not because collateral litigation is involved, but as sanctions against the abuse of process those two torts represent. Likewise, in the third party tort exception, it is the presence of the third party, not the existence of collateral litigation, that is the important factor. It is one thing for a tortfeasor to force the victim to sue him; in such a case the victim must bear his own attorney fees. But it is quite another thing for the tortfeasor to inject the victim into litigation with another person. Even so, the tortfeasor is not liable for attorney fees expended in the suit against the third party unless his tort was the proximate cause of the expense.
In Davis v. Air Technical Industries, Inc., supra, 22 Cal.3d 1, we held that defendant seller in a products liability suit could not recover attorney fees from defendant manufacturer, although ultimately all fault was laid at the manufacturer’s feet. We reasoned that even though the manufacturer’s tort (faulty design) was responsible for bringing the seller into litigation with the buyer, the seller could not recover attorney fees he had incurred exclusively to defend against allegations of his own negligence. (22 Cal.3d at pp. 6-7.)
Furthermore, even if there were some general exception for collateral litigation, the present type of case would not appear to qualify. It is contended that we can find collateral litigation in the fact that the insured has *823two causes of action against the insurance company: one for breach of contract and one for violation of the duty of good faith and fair dealing. The contract suit is regarded as if it were a prior suit and the tort suit as if it were a later suit; since the insurer’s tort is what caused it to deny benefits, the suit to recover benefits was occasioned by the tort and therefore in the tort suit the insured should be allowed to recover the attorney fees he expended in the contract suit.
But this analysis appears to mistake the nature of the bad faith tort. When an insurance company withholds payments in bad faith its actions amount to both a breach of contract and a tort, but two separate breaches of duty are not involved. The single duty breached—the covenant of good faith and fair dealing— ‘ ‘ springs from the contractual relationship between the parties.” (Johansen v. California State Auto. Assn. Inter-Ins. Bureau (1975) 15 Cal.3d 9, 18 [123 Cal.Rptr. 288, 538 P.2d 744].) The plaintiff may bring suit on both contract and tort theories, but ultimately he must elect which remedy to pursue. (See Crisci v. Security Ins. Co. (1967) 66 Cal.2d 425, 432 [58 Cal.Rptr. 13, 426 P.2d 173].) There simply is no collateral suit from which attorney fees may be recovered.
The analysis of the Court of Appeal in Mustachio v. Ohio Farmers Ins. Co. (1975) 44 Cal.App.3d 358 [118 Cal.Rptr. 581], is similarly flawed. Focusing on the fact that the insurer’s breach of the duty of good faith constitutes a tort, the court concluded that plaintiff insured was entitled to attorney fees because his employment of an attorney was proximately caused by the insurer’s tort. (P. 363.) Admittedly, plaintiff’s employment of an attorney was a foreseeable consequence of defendant insurer’s breach, but this logic would apply to any tort suit to which a collateral cause of action is attached, effectively allowing the exception to swallow the American rule on attorney fees.1
The Mustachio opinion failed to follow the logic of the proposed collateral litigation exception to its end. Rather, the court argued that there is something special about an insurance contract that requires its bad faith breach by an insurer to be treated differently from any other tort suit. The relationship between an insured and his insurer may involve a fiduciary relationship (see Egan v. Mutual of Omaha Ins. Co. (1979) 24 Cal.3d 809, 820 [169 Cal.Rptr. 691, 620 P.2d 141]), but we have recently held that tortious breach of such a relationship is not a sufficient basis for creating an exception to section 1021. (Gray v. Don Miller & Associates, Inc., supra, 35 Cal.3d at pp. 506-507.)
*824The mere fact that an insurance contract is bought to secure peace of mind (see Mustachio at p. 363) is not a sufficient reason to create an exception to section 1021. In Crisci, we discussed the peace of mind of the insured as a basis for granting the type of damages most appropriate to compensate an insured for the disturbance of his tranquility: damages for emotional distress. (See Crisci v. Security Ins. Co., supra, 66 Cal.2d at pp. 432-434.) Such damages alone should be enough to compensate for an insured’s loss of peace of mind.
Even if emotional distress damages are insufficient, an insured may seek numerous additional items of damage in an action for bad faith breach of contract that he could not obtain for simple breach of contract. He may recover for awards against him in excess of the policy limits if the insurer has refused in bad faith to settle within the policy limits. (Crisci, supra, 66 Cal.2d at p. 430.) He may recover all economic loss proximately caused. (Fletcher v. Western National Life Ins. Co. (1970) 10 Cal.App.3d 376, 401-402 [89 Cal.Rptr. 78, 47 A.L.R.3d 286].) If he can prove oppression, fraud or malice, he may recover punitive damages. (Egan v. Mutual of Omaha Ins. Co., supra, 24 Cal.3d at pp. 819-821.) Given the numerous types of damages that the plaintiff may recover for a tortious breach of his insurance contract, any or all of which can and often do exceed the policy limits, I can see no persuasive need to create an exception to the general rule that each party must bear his own attorney fees.
The Mustachio opinion implies that tortious breach of an insurance contract is such a serious abuse that attorney fees must be awarded as well: “If the insurer, instead of bargaining with the insured in good faith, tortiously violates its covenant of good faith and fair dealing and thereby makes it reasonable for the insured to seek the protection of counsel, plain justice demands that the insurer be financially responsible for an expense which but for its tortious conduct would not have been incurred. [Fn. omitted.]” (44 Cal.App.3d at p. 364.)
But it must be remembered that an insured need not establish the level of misconduct shown by the insurance company in Mustachio in order to recover on a bad faith tort. He must prove only that the insurance company acted negligently, i.e., that a “prudent insurer” would have paid the claim. (See Egan v. Mutual of Omaha Ins. Co., supra, 24 Cal.3d at p. 818.) Mere breach of the duty of good faith is “not meant to connote the absence or presence of positive misconduct of a malicious or immoral nature . . . .” (Neal v. Farmers Ins. Exchange (1978) 21 Cal.3d 910, 921-922, fn. 5 [148 Cal.Rptr. 389, 582 P.2d 980].) Such negligence on the part of the insurer is enough to warrant an award of damages for emotional distress, economic loss, and the like because of the special nature of the insurance contract, *825but it is not such an abuse of process as to justify an award of attorney fees. The argument is more convincing when the insurer has acted with malice, but in that case punitive damages may be awarded; when punitive damages are not justified, I can see little reason for an award of attorney fees.
For the reasons stated, I would deny the peremptory writ.

Although Mustachio discusses only attorney fees incurred by reason of defendant’s tort, the analysis appears equally applicable to breach of contract situations because a contract plaintiif is entitled to recover “all . . . detriment proximately caused.” (Civ. Code, § 3300.)