Roberts et al. v. Sentry Life Ins.
| Decision Date | 22 November 1999 |
| Citation | 76 Cal.App.4th 375,90 Cal.Rptr.2d 408 |
| Court | California Court of Appeals Court of Appeals |
| Parties | (Cal.App. 2 Dist. 1999) ALAN ROBERTS et al., Plaintiffs and Appellants, v. SENTRY LIFE INSURANCE et al, Defendants and Respondents. B125515 Filed |
APPEAL from a judgment of the Superior Court for the County of Los Angeles, Kenneth R. Freeman, Judge. Affirmed.
Simke Chodos, David Manning Chodos, Richard A. Fond, and James Robertson Martin, for Plaintiffs and Appellants.
Engstrom, Lipscomb & Lack and Paul W. Engstrom, for Defendant and Respondent Sentry Life Insurance Company.
Dewey Ballantine and Richard J. Burdge, Jr., for Defendants and Respondents Alan M. Albright, Robert W. Fischer, Jr., Byron O. Smith, P.C., Alan Wayte, P.C., and Gary A. York.
Tuttle & Taylor and Diann H. Kim for Defendant and Respondent John H. Brinsley, P.C..
Hinshaw & Culbertson, Ronald E. Mallen and Paul E. Vallone, for certain former Adams, Duque & Hazeltine partners,1 Defendants and Respondents.
Lynn M. Aylward-Bingman for Defendant and Respondent Terrance L. Bingman.
Jerald R. Cochran in pro. per., for Defendant and Respondent.
Bruce A Beckman in pro. per., for Defendant and Respondent.
Mitchell L. Lathrop, in pro. per., for Defendant and Respondent.
J. Joseph Connolly, in pro. per., for Defendant and Respondent.
Anna M. Martin for Defendant and Respondent Joseph M. Rimac.
Wilson B. Copes, in pro. per., for Defendant and Respondent.
Rex Heeseman, in pro.per., for Defendant and Respondent.
Frederick W. Lambert, in pro. per., for Defendant and Respondent.
Robert H. Roe, in pro. per., for Defendant and Respondent.
Sue J. Stott, in pro. per., for Defendant and Respondent.
Dale A. Welke, in pro. per., for Defendant and Respondent.
CERTIFIED FOR PUBLICATION
In an action alleging malicious prosecution of an earlier suit, evidence that the trial court in the earlier suit denied a defense summary judgment motion establishes that there was probable cause to bring the earlier suit.
Appellants Alan Roberts, a doctor, and Alan Roberts M.D., Inc., Roberts' wholly owned personal corporation, were previously sued in federal court by respondent Sentry Life Insurance Company, represented by Adams, Duque & Hazeltine, a now-defunct law firm whose partners also are respondents in this appeal. Sentry asserted both contract and tort claims, the latter for fraud and breach of the covenant of good faith and fair dealing.
After Roberts won the federal court suit, he brought this action in superior court claiming that respondents maliciously prosecuted their federal tort claims.
Respondents moved for summary judgment. The evidence submitted to the trial court is summarized as follows.
In 1978 Sentry insured Roberts under two group disability policies for American Medical Association members. The policies obliged Sentry to pay Roberts $3,000 per month when totally disabled, but this payment was to be reduced by 50% of compensation earned if Roberts returned to work.
Roberts became disabled in 1979 as a result of "severe situational stress" and started collecting $3,000 monthly. In August 1980 Roberts resumed work.
In September and October 1980 Roberts told Sentry that his corporation paid him salary, but he was presently receiving no salary because the corporation did not earn enough money to pay its expenses. Roberts's September 8, 1980 letter to Sentry said it would be "several months before there will be sufficient collections to meet the expenses of the office, let alone pay me a salary." On December 22, 1980 Roberts' accountant Kalvin wrote Sentry advising that Roberts was paid $19,205 in salary on October 30, 1980, for work done in August through October. Kalvin said that no salary was paid in August and September because insufficient funds were collected.
Sentry offered evidence, drawn from the accounting journals of Roberts' corporation showing corporate receipts, expenses, and payments to Roberts for the last five months of 1980 as follows:
Month Receipts Expenses(Exclude Salary to Dr. R) Salary
August $7,431 $0 $0
September 18,085 16,420 0
October 26,265 15,552 87,999
November 38,874 14,750 962
December 33,351 21,921 962
In January 1981 Roberts caused corporation to adopt a resolution providing that his salary would be paid not monthly but by lump sum each October. The resolution's purpose was to let Roberts continue to get disability benefits.
From June 1980 through April 1986 Roberts' corporation received revenues totalling $3.928 million (about $660,000 per year) from patients seen by Roberts. During those years the corporation paid Roberts only in October (1980, $87,999; 1981, $398,000; 1982, 1983, 1984, $400,000; 1985, $428,088. Additional revenues were paid into investment accounts held by the corporation.
Each month except October from 1981 through 1985 Roberts claimed disability benefits, stating that he had received no salary. Sentry paid these claims. Each October Roberts told Sentry that he was not entitled to a payment, because half his earned compensation exceeded $3,000. Roberts refused to tell Sentry the amount of the salary received each October, or the amount of the corporation's accumulated earnings, claiming he was not obliged to do so.
In late 1983 Sentry found a sworn declaration filed by Roberts in his divorce case stating that he was earning $33,333 per month.
In April 1984 Sentry brought the federal suit to recover the payments to Roberts. Sentry's legal theories included breach of contract, money had and received, money paid by mistake, breach of the covenant of good faith and fair dealing, and fraud. Sentry also requested declaratory relief.
In July 1987 the federal district court (Judge Alice-Marie Stotler) granted Sentry's partial summary judgment motion, finding that Roberts' corporation was his alter ego, and that Sentry's contract claims were meritorious. The court ordered a refund of all disability payments made by Sentry after December 1980.
In December 1987 the court heard a motion by Roberts and his corporation for partial summary judgment on the fraud claim. Roberts argued that the claim was time-barred, and also defective on the merits. Sentry opposed with, among other evidence, the declaration testimony of Mr. Bossenbroek concerning reliance on Roberts' alleged fraud. Bossenbroek testified that: Sentry learned early in its lawsuit that Roberts's corporation had income exceeding expenses, but was paying Roberts only each October; before suit Roberts refused to tell Sentry the amounts of his salary or corporate income and expenses; had the information been revealed, Sentry would have considered the corporation's earnings to be Roberts's, reducing his disability payment to zero. (Italics added.)
Also before the court was evidence that Sentry paid Roberts full benefits after suing, continuing until the court ordered Roberts to refund past payments, and resuming when (see below) the Ninth Circuit reversed the refund order. Roberts contended that these continuing payments were motivated by Sentry's fear of a bad faith suit, and that for this reason Sentry would have continued paying Roberts even had Sentry known in 1981 of corporation's large earnings and Roberts's large salary. This showed, Roberts argued, that Sentry did not rely on the alleged falsehoods and non-disclosure.
The federal court denied Roberts' summary judgment motion, finding that Sentry with reasonable diligence could not have discovered its potential fraud claims earlier, and that
Thereafter the court tried the fraud and bad faith claims, resolving these in Roberts' favor.
Roberts appealed from the order finding corporation to be his alter ego, and requiring refund of the disability payments. Respondents did not appeal from dismissal of their fraud and bad faith claims. The Ninth Circuit reversed the trial court's summary determination that Roberts and his corporation were alter egos. The district court then reversed itself and ruled against Sentry on the contract claims. The Ninth Circuit affirmed this decision.
In opposing summary judgment in the superior court, Roberts relied heavily on Bossenbroek's 1998 deposition testimony in the malicious prosecution case. Roberts claimed the deposition testimony showed that Bossenbroek's 1987 declaration was materially false. The questions and answers crucial for this appeal were as follows:
Q. And what you wanted the [federal] court to conclude from your [declaration] testimony was if you had known what [Roberts'] true income was, you wouldn't have paid him the benefits; isn't that true?
A. I don't recall whether that is exactly true, no.
Q. What do you recall you meant when you testified that Sentry paid the benefits . . . because Sentry believed Dr. Roberts had misled or concealed things from Sentry?
A. Well my recollection is that the issue would have been brought to a head earlier, and exactly what we would have done had we been aware of the entire situation, I'm not sure.
Q. What would you have done--I'm sorry, I interrupted you.
A. I'm sorry. I just don't recollect much of it, so I'm not sure I can adequately answer your question." (Italics added.)
The superior court granted summary judgment in favor of Sentry and the partners of Adams Duque, and dismissed the malicious prosecution suit.
This appeal...
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