Miller v. Ellis

• Decision Date: 31 October 2002
• Docket Number: No. A095705.,A095705.
• Citation: 103 Cal.App.4th 373,126 Cal.Rptr.2d 667
• Parties: Lawrence D. MILLER, Plaintiff and Respondent, v. Mitchell D. ELLIS, Defendant and Appellant.
• Court: California Court of Appeals Court of Appeals

126 Cal.Rptr.2d 667

103 Cal.App.4th 373

Lawrence D. MILLER, Plaintiff and Respondent, v. Mitchell D. ELLIS, Defendant and Appellant.

No. A095705.

Court of Appeal, First District, Division 3.

October 31, 2002.

Law Offices of Sullivan & Rizzo and Ralph A. Rizzo, for Plaintiff and Respondent.

Mitchell D. Ellis, in pro. per., for Defendant and Appellant.

McGUINESS, P.J.

Mitchell D. Ellis appeals from a judgment in favor of respondent Lawrence D. Miller on Miller's action for equitable indemnity. The action arises from a previous personal injury lawsuit and ensuing malpractice action by the personal injury plaintiff against attorneys Ellis, Miller, and Joseph Pisano for failing to bring the underlying case to trial within five years. Ellis contends the trial court erred as a matter of law in applying the collateral source rule to this action, in which one of two co-tortfeasors (Miller) is seeking equitable indemnification from the other (Ellis) for sums paid in settlement of the underlying personal injury action by an insurance company. Because the trial court misapplied the collateral source rule and the remedy of equitable indemnification in a way that would result in unjust enrichment, we reverse and remand for modification of the judgment.

FACTUAL AND PROCEDURAL BACKGROUND

After suffering injury in a slip and fall accident in July 1990, Michael Fay retained appellant Ellis to represent him in a personal injury action. On April 9, 1991, Ellis filed suit on behalf of Fay. In 1992, Ellis associated respondent Miller to assist in the litigation of Fay's case.

Miller was the attorney assigned to attend a trial setting conference on Fay's personal injury lawsuit. Miller set the Fay matter for trial on a date that was past the five-year deadline. As a result the Fay case was dismissed for failure to comply with the five-year statute. (Code Civ. Proc, § 583.310.)

Fay filed an action for legal malpractice against Ellis, Miller, and the fictitious firm of "Pisano and Ellis." Miller carried errors and omissions insurance coverage; neither Ellis nor Pisano had such coverage. Miller's malpractice insurance carrier nevertheless in effect provided Ellis and Pisano with a "courtesy defense." Ultimately, the insurer paid Fay $75,000 in settlement of Fay's lawsuit. In exchange, Fay and his attorney executed a global settlement and release prepared by Miller's malpractice insurer's outside counsel.¹ This settlement agreement released not only Miller, but also Ellis, the fictitious firm of "Pisano & Ellis," and "any and all other agents, employees, persons, firms, associations, or corporations ... who are or may ever become liable to the undersigned, of and from any and all claims, demands, damages, actions and causes of action of every kind, known or unknown, arising out of or in any way connected with the occurrence out of which it is claimed that the undersigned suffered damage to person and property and which resulted in the undersigned's legal malpractice claim against the parties released herein ... with respect to their handling of the undersigned's personal injury and worker's compensation actions."

In connection with the settlement of the malpractice action, Miller incurred $13,742.78 in attorney's fees and costs. Of this amount Miller paid only his deductible in the amount of $5,000, while the insurance carrier paid the $8,742.78 remainder. Prior to the settlement of the malpractice action, Miller never advised Ellis or Pisano that he intended to pursue an action for equitable indemnity against them.

On March 2, 2000, Miller filed the instant action against Ellis, Pisano, and the alleged firm of "Pisano & Ellis" for "implied equitable indemnity." In their pretrial briefing, Ellis and Pisano both argued that the global settlement and release was in good faith and constituted a complete defense to Miller's claim for equitable indemnity pursuant to Code of Civil Procedure section 877.

At the conclusion of a two-day court trial, the trial court ruled in favor of Miller in his action for equitable indemnification against Ellis. The trial court found that Miller and Ellis were each 50 percent responsible for their legal malpractice in representing Fay, and should share the resulting damages equally. Based on its understanding and application of the collateral source rule, the trial court entered judgment for Miller ordering that he recover $40,000 from Ellis, or 50 percent of Miller's alleged damages of $75,000 plus the $5,000 deductible. The latter sum constituted the only amount Miller actually paid out of pocket. Although raised as a defense by both Ellis and Pisano, the trial court did not directly address the effect of the global settlement and release in its statement of decision. Instead, the trial court simply found that Miller's insurance carrier "did not tender nor provide a courtesy defense" for Ellis or for "Pisano and Ellis," but "did include their names on the final release documents as a matter of policy to finalize that lawsuit." Implicitly, therefore, the trial court found the global release did not preclude Miller's claim for equitable indemnity against Ellis. On the other hand, the trial court did find that it would be neither equitable nor legally correct to impose liability on Pisano for Ellis's malpractice, because Pisano was not involved in representing Fay in any way and was in neither a partnership nor an unincorporated association with Ellis. The trial court therefore entered judgment in Pisano's favor.

Ellis and Miller filed separate appeals from the judgment. We have separately affirmed the trial court's judgment for Pisano in Miller's appeal thereof. In this appeal, we address Ellis's appeal of the trial court's judgment in favor of Miller.

DISCUSSION

The issue on this appeal is whether the trial court erred in its interpretation and application of the collateral source rule to permit respondent Miller to pursue appellant Ellis for equitable indemnification and hold him responsible for 50 percent of the full amount paid by Miller's insurance carrier to Fay on Miller's behalf. For the reasons which follow, and under the particular facts of this case, we conclude that the trial court misinterpreted and misapplied the collateral source rule as well as the doctrine of equitable indemnification. We must therefore reverse the judgment in Miller's favor insofar as it orders Ellis to pay Miller half of the amount the insurance carrier paid in settlement of the malpractice lawsuit.

Normally, an appellate court will review a trial court's apportionment of fault under the substantial evidence standard, giving as great deference to the fact finder's determination of negligence as to its resolution of any other conflict in the evidence. (Rosh v. Cave Imaging Systems, Inc. (1994) 26 Cal.App.4th 1225, 1233-1234, 32 Cal.Rptr.2d 136.) In this case, however, appellant Ellis does not dispute the trial court's factual findings. Neither does he contest the trial court's legal conclusion that Miller and Ellis were "equally responsible" for their professional negligence toward Fay. Instead, Ellis challenges only the trial court's express legal conclusion that because Miller paid premiums to his insurance carrier in order to obtain the benefit of the insurer's payment to settle Fay's personal injury lawsuit, Miller "suffered damages" including that amount and was entitled to be indemnified for 50 percent thereof by his co-tortfeasor, Ellis. When there is no conflicting evidence on an issue, as here, the ultimate conclusion to be drawn from the evidence is a question of law. In the absence of any controverted factual evidence on this appeal, therefore, we are presented with a pure question of law for which the appropriate review is de novo. (Saathoff v. City of San Diego (1995) 35 Cal.App.4th 697, 700, 41 Cal.Rptr.2d 352; Board of Education v. Jack M. (1977) 19 Cal.3d 691, 698-699, fn. 3, 139 Cal.Rptr. 700, 566 P.2d 602.)

The collateral source rule "provides that if an injured party received some compensation for his injuries from a source wholly independent of the tortfeasor, such payment should not be deducted from the damages which the plaintiff would otherwise collect from the tortfeasor." (Hrnjak v. Graymar, Inc. (1971) 4 Cal.3d 725, 729, 94 Cal.Rptr. 623, 484 P.2d 599; see also Helfend v. Southern Cal. Rapid Transit Dist. (1970) 2 Cal.3d 1, 6, 84 Cal.Rptr. 173, 465 P.2d 61 [where "an injured party receives some compensation for his injuries from a source wholly independent of the tortfeasor, such payment should not be deducted from the damages which the plaintiff would otherwise collect from the tortfeasor"]; Anheuser-Busch v. Starley (1946) 28 Cal.2d 347, 349, 170 P.2d 448["[w]here a person suffers personal injury or property damage by reason of the wrongful act of another, an action against the wrongdoer for damages suffered is not precluded nor is the amount of the damages reduced by the receipt by him of payment for his loss from a source wholly independent of the wrongdoer"]; Jones v. California Casualty Indent. Exch. (1970) 91 Cal.Rptr. 726, 13 Cal.App.3d Supp. 1, 4["[s]tated simply, the collateral source rule provides that if a plaintiff receives some compensation for his injuries from a source wholly independent of the tortfeasor, such payment should not be deducted from the damages which the plaintiff would otherwise collect from the tortfeasor"]; Cornblum, California Insurance Law Dictionary and Desk Reference (West Group 2001) § 115.1, p. 207; Croskey et al., Cal. Practice Guide: Insurance Litigation (The Rutter Group 2001) ¶¶ 9:37 to 9:38.1, pp. 9-9 to 9-10.)

As repeatedly reaffirmed by the California appellate courts, the collateral source rule represents "a policy judgment in favor of encouraging citizens to purchase and maintain insurance for personal injuries and other eventualities." (Helfend v. Southern Cal. Rapid Transit Dist, supra, 2 Cal.3d at p. 10, 84 Cal.Rptr. 173, 465...