Bank of America Nat. Trust v. Allstate Ins.Co.
| Decision Date | 01 September 1998 |
| Docket Number | No. CV 97-9190 DDP (VAPx).,CV 97-9190 DDP (VAPx). |
| Court | U.S. District Court — Central District of California |
| Parties | BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, a National Banking Association, Plaintiff, v. ALLSTATE INSURANCE COMPANY, an Illinois corporation; Allstate Property and Casualty Insurance Company, an Illinois corporation, Defendants. |
Robert Louis Fisher, Barton Klugman & Oetting, Los Angeles, CA, for Plaintiff.
Richard B. Wolf, Elise D. Klein, Paul Y. Lee, Solveig K. Bassham, Lewis D'Amato Brisbois & Bisgaard, Los Angeles, CA, for Defendants.
ORDER GRANTING DEFENDANTS ALLSTATE INSURANCE COMPANY'S AND ALLSTATE PROPERTY AND CASUALTY INSURANCE COMPANY'S MOTION FOR SUMMARY JUDGMENT AND DENYING PLAINTIFF BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION'S MOTION FOR SUMMARY JUDGMENT
This matter comes before the Court on the motion for summary judgment brought by Defendants Allstate Insurance Company and Allstate Property and Casualty Insurance Company (collectively "Allstate") and the motion for summary judgment brought by Plaintiff Bank of America National Trust and Savings Association ("Bank of America"). Oral argument was heard on August 10, 1998. After consideration of the parties' oral and written arguments, the Court grants Allstate's motion for summary judgment and denies Bank of America's motion for summary judgment.
Chuk N. and Rosa C. Tang (the "Tangs") owned rental property in which Bank of America had a security interest (the "property"). The property was insured by Allstate. The insurance policy had a Lender's Loss Endorsement that provided that any loss or damage under the policy would be paid to Bank of America.
On November 21, 1993, the property was damaged by fire. Allstate investigated and found that the fire was covered by its policy. Therefore, on January 18, 1995, Allstate issued a draft payable as follows:
CHUK N. TANG & ROSA C. TANG
HWJT
BANK OF AMERICA
PO BX 5696
DIAMOND BAR CA 91765-7696
Allstate delivered the check to the Tangs. The check was presented to Coast Federal, which paid on the check. The parties do not dispute that Bank of America's endorsement on the check was forged. Bank of America was not informed of the fire or the payment under the policy and did not receive any of the proceeds from this check.
In addition to this check, Allstate issued two other settlement checks in connection with this fire. First, it issued a check to Cal West Construction and Chuk N. Tang for work done on the property. Bank of America concedes that this check was properly payable to Cal West Construction and does not contend that it is entitled to any of the proceeds. Allstate also issued a draft in the amount of $12,350, payable to the Tangs for lost rents on the property.
Although the date that Bank of America learned of the fire is unclear, there is some evidence that Bank of America had learned of the fire by Spring of 1994. On April 21, 1994, Bank of America recorded a notice of default on the property. On July 12, 1994, Rosa Tang advised Bank of America that she was working with Allstate to settle the claim regarding the fire. On January 18, 1995, Allstate issued the draft written out to the Tangs and Bank of America that is the primary issue in this lawsuit.
In the meantime, Bank of America referred the claim to its insurance department. On two occasions, Bank of America postponed the foreclosure sale of the property so that it could follow up on its insurance claim before foreclosing on the property. Bank of America's employees and Allstate's employees had several conversations about losses on the property beginning on April 21, 1994.
In April 1997, Kirk Schumacher ("Schumacher"), in-house counsel for Bank of America, contacted Allstate's counsel, Bruce Dennison ("Dennison"), regarding this dispute. The parties have presented differing versions of the conversations that took place between Schumacher and Dennison. Schumacher has declared that Dennison requested that Bank of America not file suit and that they work together to resolve this problem. Schumacher has also declared that Allstate asked Bank of America to be patient while Allstate pursued the Tangs, the depository bank (Coast Federal), and the paying bank. Schumacher also indicated that, despite repeated requests by Bank of America employees, Allstate did not send a copy of the insurance policy to Bank of America. Dennison has declared that, although he encouraged Schumacher to work with him in pursuing Coast Federal, he "made no oral or written statement, implicitly or explicitly, requesting that Bank of America withhold or delay the filing [of] a lawsuit against Allstate."
In April 1997, Allstate attempted to recover the funds from Coast Federal. In so doing, Allstate submitted the endorsed check to Coast Federal. Coast Federal refused Allstate's claim, indicating:
As between the Tangs and Bank of America, the instrument is ambiguous as to whether it is payable "alternatively" or "not alternatively" as described under Section 3[-]110(d) of the California Uniform Commercial Code. Further, the instrument was properly negotiated by the Tangs alone.
Allstate again sought payment from Coast Federal, this time contending that the Tangs' signatures were forged. During this period, up through October 1997, Allstate requested that Bank of America not file suit. On November 7, 1997, Bank of America filed its complaint.
Summary judgment is appropriate where "there is no genuine issue as to any material fact and ... the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c). A genuine issue exists if "the evidence is such that a reasonable jury could return a verdict for the nonmoving party," and material facts are those "that might affect the outcome of the suit under the governing law." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). Thus, the "mere existence of a scintilla of evidence" in support of the nonmoving party's claim is insufficient to defeat summary judgment. Id. at 252, 106 S.Ct. 2505. In determining a motion for summary judgment, all reasonable inferences from the evidence must be drawn in favor of the nonmoving party. See id. at 242, 106 S.Ct. 2505.
Allstate argues that it is entitled to summary judgment because Bank of America did not file this action within the applicable statute of limitations. Alternatively, Allstate argues that it is entitled to summary judgment because the check in question was properly payable jointly to the Tangs and Bank of America, and delivered to the Tangs, who were acting as Bank of America's agents. Additionally, Allstate argues that because it acted reasonably and did not breach any duties under the insurance policy, it is entitled to summary judgment as to Bank of America's claims for breach of the implied covenant of good faith and fair dealing.
Bank of America's complaint was filed on November 7, 1997. Allstate argues that this action is barred by the statute of limitations because the complaint was filed more than one year from the time that Bank of America knew or should have known of its loss.
The Tangs' insurance policy contains a provision setting a one-year statute of limitations, providing:
Any suit or action must be brought within one year from the date of loss.
(1) Applicable law
It is well settled that a one-year statute of limitations is considered to be reasonable in California. See Prudential-LMI Comm. Ins. v. Superior Court, 51 Cal.3d 674, 274 Cal.Rptr. 387, 798 P.2d 1230, 1236 (Cal.1990). Further, the one-year statute contained in the policy at issue has been adopted by the California Legislature as a provision in its form fire insurance policy. See Cal.Ins.Code § 2071 (West 1993) ().
Bank of America argues that a statute of limitations contained in an insurance policy do not apply to bad faith actions. While California courts have consistently held that a policy's statute of limitations applies to all claims under the policy, courts are split as to whether the policy's limitations provisions apply to bad faith actions. See Frazier v. Metropolitan Life Ins. Co., 169 Cal.App.3d 90, 214 Cal.Rptr. 883, 890 (Cal.Ct. App.1985) but see Prieto v. State Farm Fire & Cas. Co., 225 Cal.App.3d 1188, 275 Cal. Rptr. 362, 365-66 (Cal.Ct.App.1990). Some courts have held that the limitations period does not apply to claims based on breach of the implied covenant of good faith and fair dealing. These courts have reasoned that the duty of good faith and fair dealing "is not strictly a contractual obligation." Frazier, 214 Cal.Rptr. at 891 (quoting Murphy v. Allstate Ins. Co., 83 Cal.App.3d 38, 147 Cal. Rptr. 565, 574 (Cal.Ct.App.1978). Therefore, courts have noted that
..." Hence the policy time limitation, even if reasonable, does not bar this action based upon the hybrid contractual nature of the implied covenant of good faith and fair dealing. Frazier, 214 Cal.Rptr. at 891 (quoting Murphy, 147 Cal.Rptr. at 574).
Other courts have taken the view that the statute of limitations in the policy applies to a claim for breach of the implied covenant of good faith and fair dealing...
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