Vandenberg v. Superior Court
| Decision Date | 02 December 1997 |
| Docket Number | Nos. C023922,C024460,s. C023922 |
| Court | California Court of Appeals Court of Appeals |
| Parties | Previously published at 59 Cal.App.4th 898 59 Cal.App.4th 898, 97 Cal. Daily Op. Serv. 9068, 97 Daily Journal D.A.R. 14,606 John B. VANDENBERG et al., Petitioners, v. The SUPERIOR COURT of Sacramento County, Respondent; CENTENNIAL INSURANCE COMPANY et al., Real Parties in Interest. |
Eisen & Johnston Law Corporation, Jay-Allen Eisen, Marian M. Johnston, Douglas R. Thorn, Montague, Cochrane & Viglione, Dennis L. Viglione, Sacramento, for Petitioners.
No appearance for Respondent.
Larson & Burnham, Gary R. Selvin, Bradley M. Zamczyk, Oakland, Bullivant, Houser, Bailey, Pendergrass & Hoffman, James G. Driscoll and Kevin S. Mapes, Gold River, for Real Parties in Interest.
In these consolidated proceedings on petitions for writs of mandate, we are called upon to determine whether a decision on an issue in a private, nonjudicial arbitration proceeding can be used by nonparties to the arbitration to collaterally estop a party to the arbitration from relitigating that issue in subsequent litigation. We conclude that collateral estoppel may not be so used.
Our conclusion is dictated by the nature of arbitration, that is, "... an arbitrator's decision is not generally reviewable for errors of fact or law, whether or not such error appears on the face of the award and causes substantial injustice to the parties." (Moncharsh v. Heily & Blase (1992) 3 Cal.4th 1, 6, 10 Cal.Rptr.2d 183, 832 P.2d 899.) It is fair that the parties to an arbitration are bound by the decision of the arbitrator to the extent they have mutually agreed to bear the risk of error in order to avoid the time and expense of a judicial resolution of their dispute. (Id. at pp. 11-12, 10 Cal.Rptr.2d 183, 832 P.2d 899.) However, the risk of nonreviewable factual and legal error is otherwise abhorrent to our system of judicial dispute resolution. Accordingly, in view of the relaxed standards applicable to an arbitration, and the nonreviewability of an arbitrator's decision, we hold that such a decision may not be given effect beyond that to which the parties to the arbitration agreed.
We also consider whether the defendant insurance companies were entitled to summary adjudication on the theory that their policies did not cover the asserted claims. We will conclude that the insurance defendants were also not entitled to summary adjudication on that ground.
Accordingly, we shall issue peremptory writs of mandate directing the superior court to set aside its orders granting summary adjudication based upon collateral estoppel and lack of coverage.
The underlying litigation involves a parcel of land that for many years was used as an automobile sales and service facility. The land was owned by Eugene and Kathryn Boyd. 1 Prior to 1958, Boyd operated an automobile business on the property. In 1958 Vandenberg 2 leased the land from Boyd and began operating an automobile business thereon. Vandenberg occupied the land under a series of leases from 1958 until 1988. In 1988 Vandenberg discontinued the business and possession of the land reverted to Boyd.
Boyd decided to demolish the buildings and sell the land and in the process removed three underground waste oil tanks. Testing revealed contamination of soils and groundwaters underlying the land. Boyd commenced an action against Vandenberg alleging causes of action for breach of contract, breach of the covenant of good faith and fair dealing, public nuisance, private nuisance, negligence, waste, trespass, strict liability, equitable indemnity, declaratory relief, and injunctive relief.
Over the years Vandenberg had obtained liability insurance coverage from various companies including Phoenix Assurance Company of New York (Phoenix), The Glens Falls Insurance Company (Glens Falls), Continental Insurance Company (Continental), TIG Insurance Corporation (TIG), Centennial Insurance Company (Centennial), and United States Fidelity & Guaranty Company (USF & G). Vandenberg tendered defense of the Boyd action to its insurers, but only one, USF & G, agreed to provide a defense.
During judicially supervised settlement proceedings involving Boyd, Vandenberg and USF & G, the parties reached an agreement to resolve the Boyd litigation. The parties agreed to contribute jointly to the costs of investigating and remediating the contamination, with USF & G bearing the largest share. Boyd agreed to release USF & G from any claims. Vandenberg agreed to release USF & G from claims for bad faith, breach of the contract, and extracontractual damages. However, Boyd reserved for future resolution the right to assert claims based upon a theory of breach of the lease agreements but agreed to dismiss all other claims against Vandenberg. Boyd and Vandenberg agreed to resolve the reserved issues through arbitration or by trial, depending upon their agreement on an arbitrator and schedule for arbitration. USF & G agreed to provide a defense for Vandenberg on the reserved claims while reserving for future resolution any claim for Cumis 3 counsel fees and the ultimate issues of its coverage and indemnity obligations.
Boyd and Vandenberg agreed upon retired federal Judge Raul Ramirez to serve as arbitrator to resolve the reserved issues between them. The arbitrator heard evidence and argument and decided in favor of Boyd and against Vandenberg. In announcing his decision, the arbitrator chose to explain "some of the whys and why-nots" of the decision. He indicated a belief that at least the primary The decision of the arbitrator was confirmed in a judgment and as a result Vandenberg was required to pay in excess of $4 million to Boyd. All of the implicated insurance companies refused to indemnify Vandenberg.
sources of the contamination were the underground waste oil tanks and that the causes of contamination included improper installation, maintenance and use of the tanks. In this proceeding the insurance companies point out that at least some of the insurance policies at issue included a standard pollution exclusion which provides that damages caused by a pollutant or contaminant are not covered unless the discharge is sudden and accidental. (See Shell Oil Co. v. Winterthur Swiss Ins. Co. (1993) 12 Cal.App.4th 715, 751-756, 15 Cal.Rptr.2d 815; 39 Cal.Jur.3d (rev.) Insurance Contracts, § 474, pp. 136-137.) The arbitrator's oral statements reflected a view that at least the primary discharge of contaminants was not "sudden and accidental."
Vandenberg commenced the underlying litigation against its insurers, Phoenix, Centennial, USF & G, Continental, Glens Falls, and TIG alleging various causes of action arising out of the failure to defend, settle, and/or indemnify in the Boyd action. These proceedings on petitions for writs of mandate arose out of orders for summary adjudication granted by the trial court in this underlying litigation.
In the first instance, Centennial, joined by USF & G, moved for an order on summary adjudication arguing in part that the decision of the arbitrator in the Boyd litigation precluded litigation in this proceeding of issues regarding the source and causation of the contamination of the land and thus it had no duty of defend or indemnify Vanderberg. 4 The trial court granted the motion for summary adjudication, holding that the arbitrator's decision would be given collateral estoppel effect to establish the source and causation of the contamination and thereby to bring the damages within the insurance pollution exclusion. On Vandenberg's petition, in case No. C023922, we issued an alternative writ of mandate to consider the propriety of this decision.
In the second motion for summary adjudication, USF & G, joined by Phoenix, Continental, and Glens Falls, moved for summary adjudication on the ground that the arbitrator intended to and did award damages for breach of lease, which is a contractual cause of action that is not covered by a general liability insurance policy. The court agreed and granted summary adjudication on that basis to all moving parties. On Vandenberg's petition in case No. C024460, we issued an alternative writ of mandate to consider the propriety of this decision as well. On our own motion we consolidated the cases for purposes of oral argument and decision. 5
The term res judicata is often used to describe a broad area of litigation preclusion, but may also be used in the more restricted sense of claim preclusion or bar. (Branson v. Sun-Diamond Growers (1994) 24 Cal.App.4th 327, 339-340, 29 Cal.Rptr.2d 314.) The claim preclusion aspect of res judicata serves to foster finality by precluding maintenance of a second action between the same parties or parties in privity with them on the same cause of action. (Id. at p. 340, 29 Cal.Rptr.2d 314.) Essentially, when a plaintiff obtains a judgment his or her cause of action is merged into and superseded The collateral estoppel or issue preclusion aspect of res judicata does not operate as a complete bar to subsequent litigation. Rather, under collateral estoppel, issues that have been fully and fairly litigated and determined between the parties are regarded as conclusively determined in subsequent litigation. (Passanisi v. Merit-McBride Realtors, Inc., supra, 190 Cal.App.3d at p. 1510, 236 Cal.Rptr. 59; Harman v. Mono General Hospital (1982) 131 Cal.App.3d 607, 614-615, 182 Cal.Rptr. 570.) The resolved issue may or may not be determinative in subsequent litigation, depending upon its importance to the cause of action, but where collateral estoppel applies the parties will not be permitted to relitigate the previously determined issue. (Branson v. Sun-Diamond Growers, supra, 24 Cal.App.4th at p. 346, 29 Cal.Rptr.2d 314.)
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Vandenberg v. Sacramento County Superior Court
...INSURANCE COMPANY et al., Real Parties in Interest. No. S067115. Supreme Court of California. March 25, 1998. Prior report: Cal.App., 69 Cal.Rptr.2d 511. Petitions for review The issues to be briefed and argued before this court shall be limited to 1) Whether a general liability insurance p......