Wilson v. Household Finance Corp.

• Decision Date: 12 May 1982
• Citation: 182 Cal.Rptr. 590,131 Cal.App.3d 649
• Parties: Joseph WILSON, Sr., and Charline F. Wilson, husband and wife, Plaintiffs and Appellants, v. HOUSEHOLD FINANCE CORPORATION, a corporation, Defendant and Respondent. Civ. 62113.
• Court: California Court of Appeals Court of Appeals

Page 590

182 Cal.Rptr. 590

131 Cal.App.3d 649

Joseph WILSON, Sr., and Charline F. Wilson, husband and wife, Plaintiffs and Appellants, v. HOUSEHOLD FINANCE CORPORATION, a corporation, Defendant and Respondent.

Civ. 62113.

Court of Appeal, Second District, Division 5, California.

May 12, 1982.

[131 Cal.App.3d 651] Lawrence M. Schulner, Camarillo, for plaintiffs and appellants.

Styskal, Wiese & Melchione and John A. Hendry, North Hollywood, for defendant and respondent.

ASHBY, Associate Justice.

Plaintiffs Joseph and Charline Wilson filed a second amended complaint against defendants Household Finance Corporation and West Coast Life Insurance Company for breach of an insurer's duty of good faith fair dealing with the insured and breach of fiduciary duty. The demurrer of respondent Household Finance Corporation (HFC) was sustained without leave to amend.

Plaintiffs purport to appeal from the order sustaining the demurrer. That is not an appealable order; appeal lies only from a subsequent order of dismissal. However, since the order sustained the demurrer without leave to amend, it is obvious that the court intended a final ruling, and respondent was entitled to the entry of an order of dismissal. The matter has been fully briefed by both sides, and we perceive no prejudice to respondent in considering the merits now. It would be a waste of judicial resources to require dismissal of the appeal, to be followed by the entry of an order of dismissal in the trial court and another appeal. In such circumstances it has been held the appellate court may modify the order to make it a judgment and construe the notice of appeal to apply to that judgment. (E.g., Nystrom v. First Nat. Bank of Fresno, 81 Cal.App.3d 759, 763, 768, 146 Cal.Rptr. 711; 6 Witkin, Cal.Procedure (2d ed., 1981 supp. to vol. 6) Appeal, §§ 49, 337, pp. 13, 54-55.)

We therefore modify the order sustaining the demurrer to the second amended complaint by adding a paragraph dismissing the action and construe the notice of appeal to be from the order of dismissal. On the merits we conclude the order of dismissal should be reversed.

The second amended complaint sets forth three causes of action, for breach of duty of good faith and fair dealing, breach of fiduciary duty, and breach of an insurer's statutory duties pursuant to Insurance Code section 790.03.

On March 31, 1970, plaintiffs borrowed money from HFC. At the time of the agreement, HFC, acting as agent for West Coast Life Insurance Company, "issued" a group creditor's disability insurance certificate pursuant to the California Personal Property Broker's Law. ¹ The insurance certificate provided that if the borrower Plaintiff Joseph Wilson made payments on the loan each and every month until February 1, 1971, when, due to permanent disability, he was unable to continue making payments. Plaintiff notified West Coast Life Insurance, through its agent HFC, on February 1, 1971, in compliance with the requirements of the insurance certificate, that he was permanently disabled and unable to make payments on the loan.

(plaintiff) becomes totally disabled, then under certain conditions the company (West Coast Life Insurance Company) would pay benefits each month to the creditor (HFC) to be applied by the creditor to reduce or extinguish the unpaid indebtedness of the borrower in the amount of the borrower's monthly installment payment. The certificate provided that any claim under this coverage should be submitted through the creditor's office to which the borrower's payments are made.

"Defendants" failed to make payments as required under the disability provisions of the policy. Plaintiffs did not know of defendants' failure to make payments until January 11, 1980, upon receipt of notice from the Small Claims Division of the Ventura County Municipal Court of a pending action by HFC to recover payments due on the promissory note.

DISCUSSION

The question presented by this appeal is whether a cause of action has been stated against HFC. ² The first and third causes of action relate specifically to breach of an insurer's duty of good faith and fair dealing and breach of an insurer's statutory duties pursuant to Insurance Code section 790.03. Although the complaint attempts to lump the two defendants together in this regard, we do not agree with plaintiffs' contention that HFC had the duties of an insurer.

Personal property brokers such as HFC are authorized by Financial Code section 22458.1 to "provide" credit life and credit disability insurance to a borrower, subject to the provisions of the Insurance Code which strictly regulate this practice. (Ins.Code, § 779.1 et seq.; Cal.Admin.Code, tit. 10, § 2248 et seq.) But this does not mean that the creditor is in the business of insurance. (See Ins.Code, §§ 790, 790.01, 790.02.) ³ HFC did not obligate itself to pay the claim and was not an insurer. The demurrer was properly sustained insofar as the second amended complaint attempted to impose on HFC the obligations of an insurer.

However, in the second cause of action plaintiffs attempted to state a claim for relief against HFC for breach of fiduciary duty. HFC contends that it was merely an agent of the insurance company and that HFC, as an individual, owed no separate duty to plaintiffs. (See Gruenberg v. Aetna Ins. Co., 9 Cal.3d 566, 576, 108 Cal.Rptr. 480, 510 P.2d 1032; Egan v. Mutual of Omaha Ins. Co., 24 Cal.3d 809, 824, 169 Cal.Rptr. 691, 620 P.2d 141; Hale v. Farmers Ins. Exch., 42 Cal.App.3d 681, 702, 117 Cal.Rptr. 146; Iversen v. Superior Court, 57 Cal.App.3d 168, 171-172, 127 Cal.Rptr. 49; Austero v. National Cas. Co., 62 Cal.App.3d 511, 515-516, 133 Cal.Rptr. 107; cf. Younan v. Equifax Inc., 111 Cal.App.3d 498, 509-511, 169 Cal.Rptr. 478.) HFC contends that it had no independent duty toward plaintiffs to act upon the claim and did not stand in a fiduciary relationship with plaintiffs. We disagree.

HFC's position in this transaction is not at all like that of the ordinary insurance agent who has no interest beyond earning commissions. Besides having sold the policy to plaintiffs, HFC is also a major beneficiary. The insurance is of mutual benefit to plaintiffs and HFC. It assures that HFC will receive payment, and that plaintiffs' obligations will be satisfied, in the event of plaintiff Joseph Wilson's disability. The policy provides that benefits will be paid directly to HFC, who has the...