Court Opinion

ID: 9719887
Source: CourtListenerOpinion
Date Created: 2023-08-26 08:08:00.679618+00
Date Added: 2024-06-11T12:47:25.743358
License: Public Domain

WIENER, J., Dissenting.
Preliminarily, I want to acknowledge there is an intuitive pull in this case to affirm the judgment. That desire is probably motivated by the understandable wish to eliminate a case from our overburdened courts when the allegedly aggrieved party has had the opportunity to seek redress from the person whose culpability initially caused her injuries. As I shall explain, however, I believe there are a number of valid and significant reasons why the law does not permit that result in the circumstances of this case.
The majority appear to recognize the subtleties associated with analyzing when a party will be barred from relitigating a matter. Their opinion reflects an appreciation that this case presents a question of issue preclusion, i.e., we are dealing with the collateral estoppel effect of a prior judgment on an admittedly different cause of action. I agree that where an issue was previously resolved, the losing party will be estopped to relitigate that issue even when a different theory is proffered in the second action which was not raised and resolved in the first. In other words, I would be satisfied here if Packham could have raised a theory as a basis for obtaining judgment on an issue “actually litigated” in the first action against Billuni. Relitigation of that identical theory in this action would be prohibited notwithstanding that it involved a distinct cause of action against a different party, the Auto Club.
The determination of whether collateral estoppel applies requires identification of (1) the issue “actually litigated” in the first action, (2) the *185theory which could have been raised to support a favorable resolution of that issue, and (3) the argument being raised in the second action which is allegedly precluded. The latter two must then be compared to assess whether they are identical.
The majority say that the “issue” in the first action was whether Pack-ham “effectively assented to the release.” (Maj. opn., ante at p. 182.) The “theory” which could have been raised by Packham was whether the release was a product of fraud and overreaching. (Ibid.) With these predicates, the majority perfunctorily conclude, “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” (id. at p. 183) and, accordingly, collateral estoppel applies.
Respectfully, the majority’s perfunctory conclusion answers a nonquestion in the context of this case. Whether the same “factual background” underlies Packham’s arguments in the two cases is irrelevant. The factual background of two cases is always similar when an issue of collateral estoppel arises. (See, e.g., Eichler Homes, Inc. v. Anderson (1970) 9 Cal.App.3d 224 [87 Cal.Rptr. 893].) What is of critical significance is whether Pack-ham’s arguments in this case could have been asserted as a basis for invalidating the release in the first action. If not, the issue actually litigated and resolved in the Packham v. Billuni action cannot estop her from alleging a different cause of action for a different injury based on a breach of different duties.
Although they identify the “issue” in the first action and the “theory” which could have been raised there, the majority do not highlight the arguments Packham seeks to raise in this the second action other than to characterize the suit as a “ ‘bad faith’ action.” (Maj. opn., ante, p. 183.) In this context, it is important to recognize that Packham is suing the Auto Club in its capacity as her insurer. She claims her insurer’s fiduciary duties included obligations of disclosure and advice. Among other things, she asserts the Auto Club should have affirmatively advised her to consult with a lawyer before agreeing to sign the release. In addition, the third and fourth causes of action expressly rely on an insurer’s affirmative obligations to disclose information to its insured.
The critical question we must resolve is one only implicitly addressed in the majority opinion: Could Packham have asserted her insurance company’s breach of its fiduciary duties of advice and disclosure as a basis for challenging the validity of the release in her action against Billuni? Impliedly, the majority answer “yes” to this question. Unfortunately, as with most *186implicit conclusions, this one is unsupported by independent analysis or citation to any authority.
There is no question that in the Packham v. Billuni action, Packham could have challenged the validity of the release she signed based on fraud and overreaching by the Auto Club. This is because the Auto Club was acting in two capacities: as Packham’s insurer and as Billuni’s insurer. As Billuni’s agent, the Auto Club owed a duty to Packham not to procure an agreement by fraud. Billuni, as the principal, could not enforce an agreement procured as a result of her agent’s fraud. Thus, fraud by the Auto Club acting in the capacity of Billuni’s agent was a basis for contesting the release. Having failed to raise it in the first action, Packham is not entitled to relitigate that question.
As I see it, however, the Packham v. Auto Club action makes no attempt to relitigate the fraud question. Instead, Packham asserts that the Auto Club violated a different and enhanced set of duties it owed to her as her insurer. It is well established that an insurer owes broader duties to its own insured than it does to a third party claimant. (See Spindle v. Chubb/Pacific Indemnity Group (1979) 89 Cal.App.3d 706, 712 [152 Cal.Rptr. 776]; cf. Moradi-Shalal v. Fireman’s Fund Ins. Companies (1988) 46 Cal.3d 287 [250 Cal.Rptr. 116, 758 P.2d 58].) Certainly an insurer is not a fiduciary as to third party claimants. It has no obligation to advise a claimant to retain an attorney, as Packham alleges here. (Cf. Ins. Code, § 790.03, subd. (14) which only prohibits an insurance company from directly advising a claimant not to obtain an attorney.)
Although the majority opinion is far from clear on the point, it may be saying that Packham could have sought to invalidate the release based on her own insurer’s breach of its fiduciary duties, at least in the context where it had an inherent conflict of interest because it represented both the tortfeasor and the claimant as insureds. That the Auto Club’s breach of duties owing solely to Packham without any fault on the part of Billuni should work to Billuni’s detriment seems unwarranted. (Cf. Kim v. Orellana (1983) 145 Cal.App.3d 1024 [193 Cal.Rptr. 827], holding that the only remedy for malpractice by defendant’s counsel in a civil case was a separate malpractice action, not reversal of the underlying judgment.)
I have been unable to locate any case on point. It seems to me, however, that the situation is quite similar to that in which a lawyer assists in negotiations and drafts a contract on behalf of two parties with adverse interests. If one of the parties later claims he was improperly advised by the lawyer, can the contract be rescinded or is the complaining party limited to a malprac*187tice action against the lawyer? This was the issue facing the court in Croce v. Kurnit (S.D.N.Y. 1982) 565 F.Supp. 884. There, the lawyer-defendant who was a principal to the transaction as well as counsel for other defendants drafted a proposed agreement and explained its terms to the plaintiff but failed to advise her she should consult an independent attorney. The court concluded that rescission of the resulting agreement was inappropriate unless the breach of fiduciary duty was “so fundamental as to defeat the intent or purpose of the contract.” (Id. at p. 894.) Finding no such fundamental breach, it held that the plaintiff was limited to seeking damages from the lawyer-defendant for breach of his fiduciary duty. (Accord Federal Deposit Ins. Corp. v. Kuang Hsung Chuang (S.D.N.Y. 1988) 690 F.Supp. 192, 196-197.) In this case, the insurance company is certainly no more directly involved (and arguably less so) than the lawyer-defendant in Croce.
A California court reached a similar conclusion in Moxley v. Robertson (1959) 169 Cal.App.2d 72 [336 P.2d 992]. Two coplaintiffs in Moxley were represented by a single attorney. On appeal from an adverse judgment awarding damages to the defendant, one of the plaintiffs contended that a conflict of interest prevented the attorney from adequately representing him and thus deprived him of a fair trial. The court refused to reverse the judgment. Although implicitly acknowledging that some conflicts of interest might be so fundamental as to taint the entire judgment, the court held that complaints about the character of a lawyer’s advice did not meet that standard. “Appellant’s argument in the final analysis is that he was ill advised and that he would have been wise to have refused to join his coplaintiff in the action. The character and quality of the advice he received is not an issue before this court.” (Id. at p. 75.)
Similarly here, the character and quality of the advice Packham received from her insurer prior to signing the release was simply not an issue before the court in the first action to determine the validity of the release as against Billuni. Where Billuni was in no way involved, the Auto Club’s breach of its separate and independent duties to Packham as its insured (not as a third party claimant) was not so fundamental as to allow Packham to raise it in her action against Billuni. She was limited to doing exactly what she did: bringing an independent action for damages against the Auto Club.
In the final analysis, collateral estoppel is a doctrine designed to foster judicial economy, not to be used as a trap sprung on unsuspecting litigants. As Professor Austin Scott explained in his seminal article, “In its limited application, [collateral estoppel] is based upon a sound public policy. Care must be exercised in its application to see that it works no injustice.” (Scott, *188Collateral Estoppel By Judgment (1942) 56 Harv.L.Rev. 1, 29.) Especially where a party attempts to invoke the doctrine as to a theory which concededly was not litigated in an earlier action, we must be particularly certain that it could have been raised. Here, I am comfortable in saying that Pack-ham could not have raised her insurer’s breach of independent fiduciary duties as a means of defeating the validity of the release given to Billuni. But even if there is some doubt, it seems to me we clearly must err on the side of giving Packham her day in court. (See Graves v. Hebbron (1899) 125 Cal. 400, 406 [58 P. 12]; Eichler Homes, Inc. v. Anderson, supra, 9 Cal.App.3d at p. 234.)