Allstate Ins. Co. v. Mel Rapton, Inc.

• Decision Date: 25 January 2000
• Docket Number: No. C023438.,C023438.
• Citation: 77 Cal.App.4th 901,92 Cal.Rptr.2d 151
• Court: California Court of Appeals Court of Appeals
• Parties: ALLSTATE INSURANCE COMPANY, Plaintiff and Appellant, v. MEL RAPTON, INC., et al., Defendants and Respondents.

92 Cal.Rptr.2d 151

77 Cal.App.4th 901

ALLSTATE INSURANCE COMPANY, Plaintiff and Appellant, v. MEL RAPTON, INC., et al., Defendants and Respondents.

No. C023438.

Court of Appeal, Third District.

January 25, 2000.

Bolinger, Morse & Sloan, William B. Sloan and Kenneth W. Bolinger, Pleasant Hill, for Plaintiff and Appellant.

Lossing & Elston, Kevin J. Gray and Nathaniel D. McKitterick, San Francisco, for Defendants and Respondents.

SCOTLAND, P.J.

This appeal involves a common situation. A person whose car is damaged by someone else's negligence tenders a claim to her insurance company. The company pays off, but its policy does not cover all of the damages. Hence, the policy holder files a small claims action against the tortfeasor to recover uninsured losses.

After the policy holder in this case obtained a small claims judgment in her favor, her insurance company brought a subrogation action against the tortfeasor to recover what the insurance company had paid to the policy holder to cover losses she suffered as a result of the tortfeasor's negligence.

The question tendered is whether the policy holder's small claims judgment against the tortfeasor bars the insurance company from pursuing its subrogation action because the latter action is precluded by the res judicata effect of the rule against splitting a cause of action. As we shall explain, the trial court correctly determined that the insurance company's action is barred.

FACTS AND PROCEDURAL

BACKGROUND

A fire that started in Katie Gallagher's Honda Accord destroyed the interior of the car and its contents. Gallagher had purchased the car from defendant Mel Rapton, Inc., doing business as Mel Rapton Honda (Mel Rapton). At the time of the fire, Gallagher held a policy of casualty insurance on the car, issued by plaintiff Allstate Insurance Company (Allstate).

After examining the car, Allstate concluded the fire started in the cigarette lighter. Mel Rapton had repaired the lighter shortly before the fire.

Allstate determined the car was a total loss and paid Gallagher $14,568.93. Allstate then notified Mel Rapton and its insurer Farmers Insurance Group (Farmers) that, in Allstate's view, Mel Rapton was responsible for Gallagher's loss. Allstate also told Farmers that Gallagher had subrogated to Allstate her claim against Mel Rapton, by virtue of Allstate having paid Gallagher in accordance with her policy-Pursuant to its subrogation claim, Allstate demanded that Farmers reimburse Allstate the sum it had paid to Gallagher. In its reply, Farmers denied any responsibility for the loss.

Thereafter, Gallagher sought reimbursement from Mel Rapton for losses not covered by her insurance policy with Allstate. In her demand letter, she stated the payment she received from Allstate did not compensate her for (1) pain and suffering or the loss of her insurance deductible, (2) her down payment on the car or the principal and interest payments she had made on the car loan, (3) amounts she had paid for car accessories, including floormats, a dashmat, and tinted windows, and (4) personal items lost in the fire, including a concert ticket and cassette tapes.

When Mel Rapton failed to respond to her demands, Gallagher brought a small claims action against it. After a hearing in small claims court, judgment was entered in Gallagher's favor against Mel Rapton in the amount of $386.

More than a year later, Allstate filed in the municipal court a "Complaint in Subrogation for Property Damage" against Mel Rapton and American Honda Corporation, alleging the cigarette lighter in Gallagher's car was negligently serviced by Mel Rapton or was negligently designed by American Honda Corporation. Allstate sought damages of $13,156.93, the sum it paid Gallagher minus the salvage value of the car. American Honda Corporation reached a settlement with Allstate and was dismissed from the action.

Mel Rapton moved for summary judgment on the ground that Allstate's action is barred by the principles of res judicata and the rule against splitting causes of action. Mel Rapton argued that, because Allstate's claim derives solely from the subrogation of Gallagher's rights against Mel Rapton, Gallagher's small claims court action against Mel Rapton for property damage bars Allstate from later suing Mel Rapton for damages arising from the same incident. It also argued that, because Gallagher's small claims action and Allstate's municipal court complaint are based upon the same cause of action, Allstate's complaint represents an improper attempt to split the cause of action into two proceedings.

In opposition, Allstate argued that Mel Rapton had waived the right to object on the ground of res judicata because, even before Gallagher filed her small claims action, Mel Rapton was aware that Allstate held a subrogation claim, and failed to object that Allstate had not been joined in the small claims action. Moreover, Allstate argued, the doctrine of res judicata applies only to issues that actually could have been litigated in a prior proceeding, and Allstate's subrogation claim could not have been litigated in Gallagher's small claims action because assignees of claims have no access to small claims court.

At the hearing on the motion, Allstate asserted it had no notice or knowledge of Gallagher's small claims court action before judgment was entered in that proceeding, and thus could not have intervened or otherwise attempted to have its claim litigated with Gallagher's action.

The trial court granted Mel Rapton's motion for summary judgment, ruling that Allstate's municipal court action represented an impermissible effort to split a cause of action. Judgment was entered in Mel Rapton's favor.

Allstate appealed to the appellate department of the superior court (Code Civ. Proc., § 77, subd. (e)), which reversed the judgment and certified the transfer of the case to this court because the case "presents the opportunity to consider whether an exception to the merger principle of res judicata and the rule against splitting a cause of action should be recognized in this situation."

We transferred the case for hearing and decision. (Code Civ. Proc., § 911; Cal. Rules of Court, rules 62, 63.)¹

DISCUSSION

As the facts of this case are not in dispute, there is no triable issue of material fact. The parties simply disagree as to whether Allstate's complaint is barred by the doctrine of res judicata.

The defense of res judicata is properly raised by a motion for summary judgment and is a ground upon which to grant summary judgment. (Rohrbasser v. Lederer (1986) 179 Cal.App.3d 290, 296, 224 Cal.Rptr. 791.) Whether the defense applies under the facts of this case poses a question of law which we consider de novo on appeal. (Id. at pp. 296, 300, 224 Cal. Rptr. 791.)

Mel Rapton contends the judgment entered in Gallagher's small claims action precludes Allstate's subsequent action which arises from the same fire. We agree for reasons that follow.

"It is elementary that `[t]he doctrine of res judicata gives certain conclusive effect to a former judgment in subsequent litigation involving the same controversy. It seeks to curtail multiple litigation causing vexation and expense to the parties and wasted effort and expense in judicial administration.'" (Nakash v. Superior Court (1987) 196 Cal. App.3d 59, 67, 241 Cal.Rptr. 578, quoting 7 Witkin, Cal. Procedure (3d ed. 1985) Judgment § 188, p. 621, italics omitted.) Generally speaking, a valid final judgment in favor of a plaintiff merges any claim of the same cause of action in the judgment, and precludes the plaintiff from maintaining any later suit on the same cause of action. (Hatch v. Bank of America (1960) 182 Cal.App.2d 206, 210-211, 5 Cal.Rptr. 875.) This aspect of res judicata applies to judgments rendered by the small claims court. (Perez v. City of San Bruno (1980) 27 Cal.3d 875, 884, 168 Cal.Rptr. 114, 616 P.2d 1287; Sanderson v. Niemann (1941) 17 Cal.2d 563, 573, 110 P.2d 1025.)

The rule against a plaintiff splitting a single cause of action so as to make it the basis of several suits is, in part, an application of the doctrine of res judicata. (People v. Damon (1996) 51 Cal.App.4th 958, 974, 59 Cal.Rptr.2d 504; Boccardo v. Safeway Stores, Inc. (1982) 134 Cal.App.3d 1037, 1043, 184 Cal.Rptr. 903; Ferraro v. Southern Cal. Gas Co. (1980) 102 Cal. App.3d 33, 41, 162 Cal.Rptr. 238.) In determining whether a cause of action has been split, the relief sought by the injured party should not be confused with the cause of action; "[t]he violation of one primary right constitutes a single cause of action, though it may entitle the injured party to many forms of relief...." (Wulfjen v. Dolton (1944) 24 Cal.2d 891, 895-896, 151 P.2d 846; accord People v. Damon, supra, at p. 974, 59 Cal. Rptr.2d 504.)

Mel Rapton's argument that Gallagher and Allstate have improperly attempted to split a single cause of action arising from damage to Gallagher's car stems from the fact that, upon paying Gallagher $14,568.93 in insurance proceeds, Allstate became subrogated in the amount of that payment. (Cf. Ferraro v. Southern Cal. Gas Co., supra, 102 Cal. App.3d at p. 41, 162 Cal.Rptr. 238.) Pursuant to the subrogation doctrine, when an insurer has paid an insured the amount of a loss caused by a third party, the insurer may step into the shoes of the insured and pursue the insured's rights and remedies against the third party tortfeasor. (Rossmoor Sanitation, Inc. v. Pylon, Inc. (1975) 13 Cal.3d 622, 633-634, 119 Cal. Rptr. 449, 532 P.2d 97; Fireman's Fund Ins. Co. v. Maryland Casualty Co. (1994) 21 Cal.App.4th 1586, 1595-1596, 26 Cal. Rptr.2d 762.)

When, as often happens, the insured is only partially compensated by the insurer for a loss (because of deductibles, policy limits, and exclusions), operation of the subrogation doctrine "results in two or more parties having a right of action for recovery of damages based upon the same underlying cause of...