Banker Residential Brokerage
Filed 6/3/13 Griffith v. Coldwell Banker Residential Brokerage CA4/3
California
Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or
relying on opinions not certified for publication or ordered published, except
as specified by rule 8.1115(b). This
opinion has not been certified for publication or ordered published for
purposes of rule 8.1115.
IN
THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
FOURTH
APPELLATE DISTRICT
DIVISION
THREE
MARSHALL S. GRIFFITH,
Plaintiff and Appellant,
v.
COLDWELL BANKER RESIDENTIAL
BROKERAGE COMPANY,
Defendant and Respondent.
G047506
(Super. Ct. No. 30-2008-00093810)
O P I N I O N
Appeal
from a judgment of the Superior Court
of
County, Kim Garlin Dunning, Judge. Request for judicial notice. Judgment affirmed. Request
denied.
Hubbard
& Biederman, Robert W. Biederman; Steyer Lowenthal Boodrookas Alvarez &
Smith, Jeffrey H. Lowenthal and Lucas E. Gilmore for Plaintiff and Appellant.
Sussman
Shank, John A. Schwimmer, Patrick Rowe; Klinedinst and Neil R. Gunny for
Defendant and Respondent.
Plaintiff and appellant Marshall S. Griffith,
a real estate agent, worked as an independent contractor in a brokerage office
owned by defendant and respondent Coldwell Banker Residential Brokerage
Company. Plaintiff filed a purported
class action on behalf of all real estate agents in such a relationship with
defendant for unfair competition (Unfair Competition Law (UCL); Bus. &
Prof. Code, §17200 et seq.) based on fraud and unlawful conduct, and for
fraudulent inducement and mistake. The
claim underlying all of these causes of action is that as part of plaintiff’s
independent contractor agreement defendant required him to pay a fee for a
legal assistance program (LAP) that included defense and indemnity
provisions. Plaintiff claims defendant
represented the LAP was errors and omissions insurance and in fact it was,
which defendant was not licensed to sell.
Plaintiff
appeals from a summary judgment in
defendant’s favor, contending the court erred when it found the LAP was not
insurance and that he could not recover on his fraud counts. We hold the court correctly granted summary
judgment and affirm.
Defendant
filed a request that we take judicial notice of a similar case plaintiff’s
counsel filed in
Francisco, now on appeal from a summary judgment in favor of a wholly owned
subsidiary of defendant. It claims that
action is relevant to the one before us and judicial notice is required to
prevent inconsistent results. But that
case is not binding on us and is not pertinent to our analysis or ultimate
decision in the case before us.
Moreover, it is not in the trial court record. We deny the request.
FACTS AND PROCEDURAL HISTORY
In
July 2006 plaintiff signed an Independent Contractor Agreement (agreement )
defining plaintiff as a real estate brokerage company and defendant as a real
estate salesperson. The agreement set
out the parties’ various rights and responsibilities, including plaintiff’s
duty to “use his . . . best efforts to list and sell
residential real estate for the mutual benefit of [defendant, plaintiff] and
the general public . . . .â€
Defendant was to “make available to [plaintiff] all current listings of
the office with which [plaintiff] [was] associated†and “also make available to
[plaintiff] . . . names of prospective
purchasers . . . .†Concurrently,
the parties also executed commission schedule addenda and Appendix I, a “Claims
Management – Legal Assistance Programâ€
for which he was required to pay a fee.
Plaintiff
left the company in March 2008 after about 20 months. During his tenure he had
fewer than 10 clients, closed no sales, and earned less than $1,000. No legal claim was ever asserted against him.
The
operative complaint is the third amended complaint for fraudulent and unlawful
business practices under the UCL, fraudulent inducement, and mistake. As to the fraudulent business practices
(first cause of action), plaintiff alleges defendant misrepresented the LAP was
errors and omissions insurance and the misrepresentation would cause a
reasonable person to believe it “possessed all the attributes of licensed,
admitted insurance.†Plaintiff allegedly
relied on defendant’s misrepresentation and paid the required fee. The complaint also pleads plaintiff lost
money or property because he would not have entered into the LAP or paid the
fee had he known the true facts. He
could have purchased errors and omissions insurance from a third party. The common law fraudulent inducement claim
(third cause of action) is based on the same allegations.
The
claim for unfair business practices
in violation of the UCL (second cause of action) alleges defendant sold
insurance without being licensed, in violation of the Insurance Code. Similarly, the mistake claim (fourth cause of
action) pleads that because plaintiff mistakenly believed the LAP complied with
Insurance Code regulations, he entered into the LAP and paid the fee.
Defendant
filed a motion for summary judgment/motion for summary adjudication, which the
court granted as to each cause of action.
As to the second and fourth causes of action for unlawful conduct under
the UCL and mistake, the court found the LAP was not insurance based on four
separate, independent grounds discussed below.
It also ruled plaintiff lacked standing under the UCL.
As
to the first and third causes of action for fraudulent conduct under the UCL
and common law fraud, the court determined as a matter of law that plaintiff
had no private right of action under the UCL, nor did he have standing. Further, as to the fraud cause of action, the
court found no triable issue of material fact that defendant made a material
misrepresentation or that plaintiff relied on it. As an independent ground it also found no
triable material issue that plaintiff suffered damages as a proximate result of
any alleged misrepresentation.
Additional
facts are set out in the discussion.
DISCUSSION
1. Introduction
A
defendant moving for summary judgment bears the burden of demonstrating one of
the elements of the cause of action “cannot be established, or that there is a
complete defense . . . .†(Code Civ.
Proc ., § 437c, subd. (p)(2); see also Aguilar
v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 850.) Once this burden is met, the onus shifts to
the plaintiff to provide sufficient evidence to demonstrate a triable issue of
material fact exists. (
“[I]f all the papers submitted show that there is no triable issue as to
any material fact and that the moving party is entitled to a judgment as a
matter of law†summary judgment “shall be granted.†(Code Civ. Proc., § 437c, subd. (c).)
2. Second and Fourth Causes of Action for
Unlawful Business Practice in Violation of the UCL and Mistake
The
second and fourth causes of action are premised on the allegation the defense
and indemnity provisions contained in the LAP are insurance. The trial court found they are not. We agree.
Insurance
is defined as “a contract whereby one undertakes to indemnify another against
loss, damage, or liability arising from a contingent or unknown event.†(Ins. Code, § 22.) “Case law has construed the statute as
requiring two elements: ‘(1) a risk of
loss to which one party is subject and a shifting of that risk to another
party; and (2) distribution of risk among similarly situated persons.’ [Citation.]â€
(Truta v. Avis Rent A Car System,
Inc. (1987) 193 Cal.App.3d 802, 812 (Truta),
overruled by statute on another ground as set out in Schnall v. Hertz Corp. (2000) 78 Cal.App.4th 1144, 1155, fn.
5.) But an agreement is not an insurance
contract merely because these two elements are present. (Ibid.) “‘A statute designed to regulate the business
of insurance . . . is not intended to apply to all
organizations having some element of risk assumption or distribution in their
operations. The question of whether an
arrangement is one of insurance may turn, not on whether a risk is involved or
assumed, but on whether that or something else to which it is related in the
particular plan is its principal object
and purpose.’ [Citation.]†(Truta,
italics added.)
Second Cause of Action for Unlawful Business Practice
The
second cause of action alleges defendant engaged in the unlawful business
practice of selling insurance under the LAP without being properly
licensed. The court ruled, among other
things, there was no triable issue of material fact as to the “‘principal
object and purpose’†of the parties’ relationship. It found the undisputed material facts showed
the relationship was one of real estate broker and agent, not “furnishing of
indemnity†and the LAP was merely incidental to that relationship.
Plaintiff
claims the court erred in relying on Transportation
Guar. Co. v. Jellins (1946) 29 Cal.2d 242 in support of this ruling,
arguing the indemnity agreements in that case were dissimilar. This may be true but is beside the
point. Jellins is important for its black letter law, not the terms of the
indemnity agreements. “‘[I]t was not the
purpose of the insurance statutes to regulate all arrangements for assumption
or distribution of risk. That view would
cause them to engulf practically all contracts . . . . The fallacy is in looking only at the risk
element . . . . The question turns, not on
whether risk is involved or assumed, but on whether that or something else to
which it is related in the particular plan is its principal object and
purpose.’†(Id. at p. 249.)
Plaintiff
further maintains the court “misapplied the standard†of the principal object
and purpose test in finding the LAP was secondary to the agreement. He points to language in a ruling by a different
trial judge on the demurrer to the first amended complaint, which concluded the
contrary. But as stated in that ruling,
it dealt only with the demurrer and was not dispositive of any further motions: “The determination of ultimate legal and
factual issues presented by this lawsuit is not the proper focus of a
demurrer. That decision is for another
day.â€
In
addition, plaintiff argues the trial court ignored Sweatman v. Department of Veterans Affairs (2001) 25 Cal.4th 62 in
finding the LAP was ancillary to the agreement.
In Sweatman, veterans who
wanted a home loan were required to buy a home protection plan providing
coverage to pay off the loan balance in the event of disability. The appellate court relied on
to the loan and thus did not constitute insurance. Although the Supreme Court affirmed the
ruling it rejected the rationale, distinguishing the facts in
(Id. at pp. 73-74.) It noted coverage in Truta was optional whereas the plan in Sweatman was mandatory. (
application, “including medical disclosures, subject to investigation and
review.†(Id. at pp. 73-74.) Approval
for the plan was also distinct from loan approval. (Id.
at p. 73.) Finally, the plan was “a
spreading of risk within insurance concepts†not a “‘tangential risk
allocation’†as in Truta. (Id.
at p. 74.)
Plaintiff
asserts the LAP is comparable to the Sweatman
plan because it is mandatory, is distinct from the agreement because it has
certain conflicting terms, such as jurisdiction and venue, that supersede the
agreement, survive termination of the agreement, and do more than allocate a
tangential risk.
Preliminarily,
we note the discussion about Truta in
Sweatman was dicta, since the
insurance based on the fact the Insurance Code did not regulate the Cal-Vet
coverage at issue. (Sweatman v. Department of Veterans Affairs, supra, 25 Cal.4th at p. 74.)
Thus, Sweatman did not involve
an analysis under the “principal object and purpose†test.
Further, the plan in
the LAP. It was a completely separate
contract relying on different factors for approval and requiring a substantial
application, and coverage could potentially be declined. Here defendant required no application nor
separate approval for the LAP. Despite
plaintiff’s claims the LAP was a “self-contained†contract that survived
termination of the agreement, the agreement and the LAP itself belie that
assertion. The agreement requires both
parties to comply with the LAP, which is attached and made a part of the
agreement. Although the 2007 version of
the LAP states its terms supersede any inconsistent terms in the agreement, it
also states the LAP “is a part†of the agreement. Thus, by its own terms the LAP was not
separate from the agreement. It had no
meaning outside the context of the agreement but was part of the agreement as a
whole.
And as defendant points out, there
were several mandatory provisions in both the agreement and the LAP, including,
in the LAP, plaintiff’s contribution toward costs of defense cooperation in
connection with any claims, and indemnification of defendant in certain
instances.
Brokerage Company (S.D.Cal., Dec. 21, 2009, Civ. No. 08cv817-L(AJB)) 2009
WL 5195969 is helpful to our analysis.
There the plaintiff filed a similar suit against defendant, alleging
causes of action including violation of the UCL. It was based on the same claim the LAP was
insurance, which the defendant had sold without being licensed. The court granted a motion to dismiss the UCL
claim count, finding the LAP was not insurance.
(Id. at p. *4.) It ruled that even if risk shifting and
distribution of loss were present, it was not insurance when analyzed under the
principal object and purpose test. (
sale of real estate. (
claim the LAP was mandatory, stating, “Whether the risk allocation provision is
mandatory or optional is not determinative of the contract’s principal object
and purpose. [Citation.]†(Ibid.) We find this reasoning persuasive.
In
challenging the finding the LAP was incidental to the purpose of the agreement,
plaintiff additionally argues the court erred in failing to apply factors set
out in Automotive Funding Group, Inc. v.
Garamendi (2003) 114 Cal.App.4th 846, including whether the LAP program is
mandatory or generates a profit for the indemnitor (id. at pp. 855-856). But
factors are required in an analysis of the principal object and purpose
test. Rather, the appellant there raised
these elements as arguments and the court needed to address them. A party’s contentions do not somehow become
law merely because raised. And no
published case has relied on these factors.
Plaintiff
also devotes several pages to discussing the two elements of the definition of
insurance set out in case law, i.e., shift of risk of loss and distribution of
that risk. (Truta, supra, 193
Cal.App.4th at p. 812.) He asserts the
court erred by failing to address whether the risk shifting and distribution
aspects of the LAP were what insurance regulations are enacted to
regulate. But these arguments are made
outside the context of and without discussing the principal object and purpose
test, which is controlling.
Plaintiff
challenges the three independent grounds on which the court relied: 1) under Business and Professions Code
section 10032, subdivision (a), defendant, as the broker, would be jointly and
severally liable for any of plaintiff’s misconduct; 2) the LAP was “a
contractual allocation in advance of risks and responsibilities between [the
parties], which provides certainty as to their respective rights and
obligations†in advance of any legal claim being filed; and 3) plaintiff lacked
standing under the UCL because he was not injured and lost no money or property
due to the alleged unfair competition, i.e., defendant’s failure to register
with the California Insurance Commissioner.
Because we affirm on the principal object and purpose test, we have no
need to discuss these alternative rulings.
There
is no triable material issue
fact. The LAP was not an insurance
policy and plaintiff cannot prevail on the second cause of action alleging
defendant engaged in unfair competition by unlawfully selling insurance without
being licensed.
Fourth Cause of Action for Mistake
The
fourth cause of action, pleaded “in the alternative,†was based on plaintiff’s
alleged mistake in believing the LAP complied with Insurance Code regulations,
causing him to enter into the LAP and pay the fee to defendant. Plaintiff acknowledges this cause of action
rises or falls with the second cause of action.
Thus, we affirm the summary judgment as to this cause of action as well.
3. First and Third Causes of Action for
Fraud-Based Claims
Plaintiff alleges when
he signed the LAP, he relied on defendant’s representation it was errors and
omissions insurance and as a result “believed [it] possessed all the attributes
of licen[s]ed insurance coverage,†including that defendant “was
licensed to . . . sell insurance,†“was subject to
financial solvency regulation,†“maintained reserves†required under the
Insurance Code, and “participated in a state insurance guaranty fund.†If he had known such was not true, he would
never have entered into the LAP or paid the fee.
In the first cause of
action plaintiff pleads defendant engaged in the fraudulent business practice
of representing the LAP was errors and omissions insurance but concealing it
was not a registered insurance company and did not meet the requirements
necessary to qualify as such a company.
This conduct induced plaintiff to enter into the agreement and the
LAP. The third cause of action for
common law fraudulent inducement is based on these same allegations.
The court found, as a
matter of law, there was no private right of action under the UCL for the
fraudulent business practices claim, citing Insurance Code section 790.03,
subdivision (b), Moradi-Shalal v.
Fireman’s Fund Ins. Companies (1988) 46 Cal.3d 287 (Moradi-Shalal), and Maler v.
Superior Court (1990) 220 Cal.App.3d 1592.
We find this rationale persuasive.
Under Insurance Code
section 790.03, subdivision (b), “[m]aking or
disseminating . . . any statement containing any assertion,
representation, or statement with respect to the business of
insurance . . . which is untrue, deceptive, or
misleading . . . .†is defined as unfair competition in
“the business of insurance.â€
supra, 46 Cal.3d 287 held that there was no private right of action under
the Unfair Insurance Practices Act (Ins. Code, § 790 et seq.; UIPA) of
which section 790.03 is a part. (
Cal.App.3d 1592 held a plaintiff could not “circumvent [Moradi-Shalal’s] ban [on private rights of action] by bootstrapping
an alleged violation of [Insurance Code section 790.03] onto Business and
Professions Code section 17200 so as to state a cause of
action . . . .†(
Plaintiff maintains
Court (1995) 10 Cal.4th 257 overruled the holdings in these cases and
allowed a claim under the UCL and the Cartwright Act (Bus. & Prof. Code,
§ 16700 et seq.). Although it is
correct Manufacturers
Act was not exempted by the UIPA, the case did not extend to claims under the
UCL. (Manufacturers Life Ins. Co. v. Superior Court, supra, 10 Cal.4th at p. 263.)
As
an independent ground for granting summary judgment on the UCL cause of action
the trial court found there were no triable issues of fact that any of
defendant’s alleged misrepresentations were material or that plaintiff relied
on them. It cited to the following
testimony by plaintiff at his deposition:
At the time he investigated defendant before entering into the
agreement, plaintiff did not believe defendant was an insurance company; he had
never heard of the California Insurance Guarantee Association; he never
believed defendant was licensed by the California Insurance Commissioner to
sell insurance; and plaintiff had no understanding of the requirements for
licensed insurance companies such as financial solvency or reserves or ever
spoke to defendant about them. Further,
plaintiff did not know what made a licensed insurance company any different
from one that was unlicensed. Additional
facts are plaintiff’s testimony he was never concerned defendant might not be
able to meet its financial obligation under LAP. The first time he was believed the LAP
violated regulations because it was not registered was when he spoke with his
lawyer after he left the company.
In contradiction,
plaintiff cites to other portions of his testimony he claims show the
representations were material. When he
first discussed the possibility of contracting with defendant, he spoke to one
of defendant’s representative, Patti Anches.
She told him to become a sales agent he “had to pay for [his] E&O
insurance.†He did not remember if she
said who would provide the coverage or any other details of his conversation on
this topic. He identified a credit card
authorization he signed, which he understood to be payment for E&O
insurance, but had no memory of signing it.
He further stated the only other time the term E&O was used by
defendant was at one or two associate meetings when someone said the cost was
going up. He also testified he
understood what it meant for an insurance company to be licensed, that it was
regulated by the state, but had no idea of the requirements.
The
testimony cited by plaintiff creates no triable issue as to the materiality of
the alleged misrepresentation. Nothing
he stated supports the allegations in the complaint.
Plaintiff additionally
points to his declaration in opposition to the motion for summary judgment,
where he stated he relied on Anches’s representation the LAP was errors and
omissions insurance and he would not have contracted with defendant otherwise
because he was a new agent and wanted to be protected. It was “critical†that the insurance be
issued by a licensed company.
But these statements
contradict his deposition testimony
he never believed defendant was licensed and did not even know the difference
between being licensed or not licensed or the requirements for licensed
companies. His deposition testimony
controls and he cannot create a triable issue with a contradictory
declaration. (Archdale v. American Internat. Specialty Lines Ins. Co. (2007) 154
Cal.App.4th 449, 473 [“self-serving declarations contradict[ing] credible
[deposition testimony that] purport to impeach that party’s own prior sworn
testimony . . . should be disregardedâ€].)
Thus,
the trial court was correct in finding there is no triable issue of fact the
alleged misrepresentations were not material to plaintiff. This conclusion supports affirmance of the
judgment as to both fraud-based causes of action.
Another independent
ground for the grant of summary judgment was plaintiff’s lack of standing under
the UCL because he provided no facts showing he was damaged by loss of property
or money as a result of the alleged misrepresentations. This also shows no proximate cause as to the
common law fraud cause of action. Again,
we need not discuss this issue since the other grounds are dispositive.
DISPOSITION
The judgment is
affirmed. The request for judicial
notice is denied. Defendant is entitled
to costs on appeal.
THOMPSON,
J.
WE CONCUR:
BEDSWORTH, ACTING P. J.
MOORE, J.
name="_ftn1" title=""> [1] Plaintiff executed a new LAP in 2007. It was not identical but was essentially the
same.
