McKEE v. NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH PA (1993)

ORDER MODIFYING OPINION

(March 8, 1993)

It is ordered that the opinion filed herein on Februrary 26, 1993, be hereby modified to delete reference to the opinion as being published and insert the words “NOT TO BE PUBLISHED.”

This order does not effect a change in the judgment.

INTRODUCTION

Defendant National Union Fire Insurance Company of Pittsburgh, PA appeals from a judgment in favor of plaintiff Dwayne McKee.

STATEMENT OF FACTS/PROCEDURAL BACKGROUND

Plaintiff was severely injured in 1985 when, as a 14–year–old, he was shot by 13–year–old Jeffrey Townsend.   The two were playing at a residence in Canoga Park where Jeffrey lived with his parents, David and Marilyn Townsend.   The gun belonged to David Townsend.   Title to the residence was held in the name of Anafuel Corporation of America (Anafuel).   Anafuel and the Townsends had homeowner's and renter's insurance coverage through State Farm in the amount of $100,000.   Anafuel also had a general liability policy from defendant with $1 million coverage.

Plaintiff sued the Townsends and Anafuel.   During the course of the litigation, he offered to settle for the limits of the two insurance policies.   State Farm agreed to settle but defendant did not.   Pursuant to the settlement, plaintiff received $200,000 from State Farm and was assigned all rights the Townsends and Anafuel might have against defendant;  plaintiff agreed not to execute against the Townsends and Anafuel on any judgment he might receive and promised instead to look solely to defendant for payment.

The trial court found liability on the part of the Townsends on a negligence theory and found Anafuel liable as David Townsend's alter ego.   Judgment was entered in favor of plaintiff on June 14, 1990 in the amount of $8,496,841.

Anafuel filed a notice of appeal from the judgment.   On September 30, 1992, this court affirmed the judgment.  (McKee v. Anafuel (Sep. 30, 1992) B051463, unpublished opn.)   Anafuel thereafter filed a petition for review with the Supreme Court;  review recently was denied.

Plaintiff filed this action on February 26, 1991 as a judgment creditor to collect on the judgment against Anafuel.   Plaintiff alleged he had tried to collect on the judgment but defendant refused to pay any portion of it.   Additionally, during the pendency of the appeal of McKee v. Anafuel, no stay of execution was requested and defendant had given no undertaking to stay execution on the judgment.   Defendant denied the allegations of the complaint and asserted a number of affirmative defenses, including a claim this action was premature, in that the underlying action was still pending on appeal and plaintiff therefore had failed to obtain a final judgment against Anafuel, a prerequisite to the action pursuant to Insurance Code section 11580, subdivision (b)(2).

At trial, the parties stipulated to the following facts:  Defendant had issued a general liability insurance policy to Anafuel which was in full force and effect at the time of the accident at issue in the underlying case, McKee v. Anafuel.   Defendant provided a defense to Anafuel in the underlying case without a reservation of rights.   Up until the time judgment was entered in the underlying case, there was no coverage dispute.   Aside from the fact the judgment in the underlying case exceeded the policy limits, the judgment was otherwise within the coverage defendant provided to Anafuel.   Additionally, defendant had no defense to coverage other than the fact the judgment in the underlying action exceeded the policy limits.

With these stipulations, the parties agreed the only issue left to be determined was whether the action was, in fact, premature.   The trial court found it was not and ordered judgment in favor of plaintiff and against defendant in the amount of $1 million, the limits of Anafuel's policy from defendant, plus costs and interest.

CONTENTIONS

I

Defendant contends the trial court erred in granting judgment to plaintiff, in that this action was brought prematurely:

1. Under the language of Insurance Code section 11580, subdivision (b)(2), plaintiff must first have obtained a final judgment against its insured, Anafuel, before it could bring this action against defendant;  and

2. Even if Insurance Code section 11580, subdivision (b)(2), allowed plaintiff to bring this action, plaintiff was not permitted to do so under the terms and conditions of defendant's insurance policy.

II

Defendant further contends it cannot be found liable on the policy when the liability of its insured, Anafuel, was premised on an alter ego theory.

DISCUSSION

I

Defendant contends the trial court erred in granting judgment to plaintiff, in that this action was brought prematurely:

1. Under the language of Insurance Code section 11580, subdivision (b)(2), plaintiff must first have obtained a final judgment against its insured, Anafuel, before it could bring this action against defendant;  and

2. Even if Insurance Code section 11580, subdivision (b)(2), allowed plaintiff to bring this action, plaintiff was not permitted to do so under the terms and conditions of defendant's insurance policy.   We disagree.

Insurance Code section 11580, subdivision (b)(2) (hereinafter section 11580(b)(2)), provides a liability insurance policy may not be issued unless it contains “[a] provision that whenever judgment is secured against the insured ․ in an action based upon bodily injury, death, or property damage, then an action may be brought against the insurer on the policy and subject to its terms and limitations, by such judgment creditor to recover on the judgment.”   Defendant argues “judgment,” as used in the section, means a final judgment, one upheld after any appeals in the case, rather than a judgment entered by the trial court but subject to any pending appeals.

In the construction of statutes, the primary goal of the court is to ascertain and give effect to the intent of the Legislature.  (Code Civ. Proc., § 1859;  Kimmel v. Goland (1990) 51 Cal.3d 202, 208.)   The court looks first to the language of the statute;  if clear and unambiguous, the court will give effect to its plain meaning.  (Id. at pp. 208–209;  see also Rojo v. Kliger (1990) 52 Cal.3d 65, 73.)   Additionally, in construing a statute the role of the court “is simply to ascertain and declare what is in terms or in substance contained therein, not to insert what has been omitted, or to omit what has been inserted;  and where there are several provisions or particulars, such a construction is, if possible, to be adopted as will give effect to all.”  (Code Civ. Proc., § 1858;  see People v. White (1954) 122 Cal.App.2d 551, 554.)

Where the court must construe the statute, it “ ‘turns first to the words themselves for the answer.’  [Citation.]”  (Moyer v. Workmen's Comp. Appeals Bd. (1973) 10 Cal.3d 222, 230.)   The words used should be given their usual, ordinary meanings and, if possible, each word and phrase should be given significance.  (Id. at pp. 230–231.)   The words used “must be construed in context, and statutes must be harmonized, both internally and with each other, to the extent possible.”  (California Mfrs. Assn. v. Public Utilities Com. (1979) 24 Cal.3d 836, 844.)   Thus, where a word or phrase has been given a particular meaning in one part of the law, it should be given the same meaning in other parts of the law.  (Stillwell v. State Bar (1946) 29 Cal.2d 119, 123;  City of Sacramento v. State of California (1984) 156 Cal.App.3d 182, 197.)

This court previously construed the word “judgment” as used in Code of Civil Procedure section 877.   In Southern Cal. White Trucks v. Teresinski (1987) 190 Cal.App.3d 1393, 1405, this court stated:  “While ‘judgment’ is defined by [Code of Civil Procedure] section 577 as ‘the final determination of the rights of the parties in an action or proceeding,’ the term is ‘meaningless unless qualified by context, i.e., a judgment may be final, but modifiable at the trial level, or final for the purpose of appeal.’   [Citation.]  The finality of the judgment is determined by the circumstances present at the time it is entered;  it is not determined on the basis of hindsight after further proceedings have established it did or did not provide the proper relief to the parties.  [Citation.]  Thus, the judgment of the trial court is a ‘judgment’ within the meaning of section 577 [citation];  the possibility of further challenge does not render it any less a ‘judgment.’ ”

A similar construction of “judgment” in section 11580(b)(2) to mean trial court judgment would be both internally consistent and consistent with other parts of the law.  (Stillwell v. State Bar, supra, 29 Cal.2d at p. 123;  City of Sacramento v. State of California, supra, 156 Cal.App.3d at p. 197.)  Section 11580(b)(2) provides “that whenever judgment is secured ․, then an action may be brought against the insurer on the policy ․ by such judgment creditor to recover on the judgment.”   There is no provision for delaying the action pending appeal of the judgment.

Additionally, pursuant to the Enforcement of Judgments Law (Code Civ. Proc., § 680.010 et seq.), a “ ‘[j]udgment’ means a judgment ․ entered in a court of this state.”  (Id., § 680.230.) A “ ‘[j]udgment creditor’ means the person in whose favor a judgment is rendered or, if there is an assignee of record, means the assignee of record.”  (Id., § 680.240.) “Except as otherwise provided by statute or in the judgment, a judgment is enforceable ․ upon entry.”  (Id., § 683.010.) The Code of Civil Procedure further provides a money judgment entered by the trial court is enforceable even if an appeal is pending, “unless an undertaking is given.”  (Id., § 917.1, subd. (a).)

Thus, the general law is that a judgment entered in the trial court is enforceable upon its entry by the judgment creditor, although enforcement may be stayed by the giving of an undertaking.   If “judgment” in section 11580(b)(2) is construed to mean a judgment in the trial court, the section provides, consistent with the general law, the judgment is enforceable upon its entry.

Defendant relies on several cases to support its claim “judgment” as used in section 11580(b)(2) means a final judgment following any appeals.   Defendant quotes Mathews Cadillac, Inc. v. Phoenix of Hartford Ins. Co. (1979) 90 Cal.App.3d 393, 397 for the proposition:  “Where the terms of the indemnity contract, or law of the state, require a judgment against the bankrupt (indemnitee) before direct action against the insurer, no liability accrues as an enforceable claim against the insurer until recovery of a final judgment against the bankrupt.  [Citations.]”  In Mathews, dismissal of the action against defendant insurer was upheld, but not because an appeal was pending against the bankrupt insured.   It was upheld because no judgment was ever entered against the insured.  (Id. at pp. 395, 399.)

Defendant also quotes Fireman's Fund Ins. Co. v. City of Turlock (1985) 170 Cal.App.3d 988, 1004, which states:  “Until such time as a final judgment was entered in favor of City and against Watson, no cause of action could be maintained by City against [the insurer] on the policy [pursuant to section 11580(b)(2) ].  [Citations.]   Here, City is attempting to reach Watson's insurance policy without having first secured a final judgment against Watson.   That it cannot do.”   As in Mathews, no judgment, in fact, had been entered against the insured, Watson;  “[i]ndeed, the record fails to indicate that City has even made a claim against Watson․”  (Ibid.)

Laguna Pub. Co. v. Employers Reinsurance Corp. (D.C.Cal.1985) 617 F.Supp. 271 similarly uses the term “final judgment,” but in that case, too, there was no judgment at all entered against the insured, in that it had been set aside.  (At p. 272.)  Chamberlin v. City of Los Angeles (1949) 92 Cal.App.2d 330 also uses the term “final judgment” but involves an action brought against the insured and insurer simultaneously;  having not first obtained a judgment against the insured, plaintiff could not maintain an action against the insurer.  (At pp. 332–333.)

In Malmgren v. Southwestern Auto. Ins. Co. (1932) 126 Cal.App. 135, the court noted plaintiff's “right of action, if any, against [the insurer] for the principal sum of the judgment and costs arose as soon as the judgment became final.”  (At p. 139.)   It also noted no appeal was taken from the judgment against the insured, and the judgment thereafter became final.  (Id. at p. 138.)   The case did not discuss the effect an appeal would have had on plaintiff's ability to bring an action against the insurer.

In short, none of the foregoing cases cited by defendant holds or supports the proposition an action pursuant to section 11580(b)(2) may not be brought until a trial court judgment has been made final by the resolution of any appeals taken therefrom.   In these cases, there was no judgment at all, not a judgment which was the subject of a pending appeal.

Caminetti v. Guaranty Union Life Ins. Co. (1943) 22 Cal.2d 759, 766 notes that “appeals do not automatically stay enforcement of [an] order.   But they do suspend the force of the order as a conclusive determination of the rights of the parties.  [Citation.]  This is so, since finality is not accorded a judgment until affirmance in the event of an appeal.”   However, as noted in Southern Cal. White Trucks v. Teresinski, supra, 190 Cal.App.3d at page 1405, finality is a fluid concept.   A judgment may be final for purposes of appeal, yet not final in the sense of a “conclusive determination of the rights of the parties” (Caminetti, supra, at p. 766), until the appeal has been resolved.   In any event, as Caminetti notes, a judgment which has been appealed nonetheless may be enforced;  section 11580(b)(2) deals with enforcement of a judgment, and Caminetti does not support a conclusion enforcement must wait until the appeal has been resolved.

Defendant additionally contends that even if section 11580(b)(2) allowed plaintiff to bring this action, plaintiff was not permitted to do so under the terms and conditions of defendant's insurance policy, which did not allow it to do so.¹  Defendant claims—without any citation to the record to support the claim—its policy provides:  “5. Action against company:  No action shall lie against the company unless, as a condition precedent thereto, there shall have been full compliance with all of the terms of this policy, nor until the amount of the insured's obligation to pay shall have been finally determined either by judgment against the insured after actual trial or by written agreement of the insured, the claimant and the company.  (Emphasis added.)”

Even if defendant's contention were not waived by its failure to support it with citations to the record (People v. Dougherty (1982) 138 Cal.App.3d 278, 282–283), as with section 11580(b)(2) the language of the provision does not support defendant's contention.   It contains no mention of appeal and, in fact, refers to a “judgment ․ after actual trial.”   As previously discussed, a “judgment ․ after actual trial” is a final determination of liability for purposes of enforcement of the judgment.  (Code Civ. Proc., § 917.1, subd. (a);  see also Southern Cal. White Trucks v. Teresinski, supra, 190 Cal.App.3d at p. 1405.)

Moreover, as plaintiff points out, “The substantive law of this state cannot be enlarged, circumvented, defeated, or modified by any provision which the insurer may have elected to place in its contract in derogation of or in conflict therewith.”  (Malmgren v. Southwestern A. Ins. Co. (1927) 201 Cal. 29, 33;  see also Cal–Farm Ins. Companies v. Fireman's Fund American Ins. Companies (1972) 25 Cal.App.3d 1063, 1069–1070.)   Thus, to the extent defendant's insurance policy conflicts with section 11580(b)(2), the statute prevails.  (Ibid.)

Based on the foregoing discussion, we construe “judgment” in the context of section 11580(b)(2) to mean a trial court judgment, enforceable by a judgment creditor after its entry.   Inasmuch as defendant does not claim it gave the necessary undertaking to stay enforcement of the judgment (Code Civ. Proc., § 917.1, subd. (a)), the trial court correctly ruled this action against defendant could proceed despite the pendency of an appeal in the underlying case.

II

Defendant further contends it cannot be found liable on the policy when the liability of its insured, Anafuel, was premised on an alter ego theory.   The contention lacks merit.

In the underlying case, Anafuel relied on United States Fire Ins. Co. v. National Union Fire Ins. Co. (1980) 107 Cal.App.3d 456 to support its contention it was not the alter ego of David Townsend.  (McKee v. Anafuel Corporation of America (Sep. 30, 1992) B051463, typed opn. p. 13.)   On appeal, this court found the United case inapposite, in that it involved insurance carrier liability while the case before it did not.  (Id. at pp. 14–15.)   On appeal in the instant case, defendant contends United does apply to its situation and precludes liability on its part.

However, as plaintiff points out, defendant stipulated in the trial court “that defendant, National Union, provided a defense to Anafuel Corporation without a reservation of rights in the underlying case ․, that up until the time judgment was entered in the underlying case there was no coverage dispute ․, that aside from the fact that the judgment in the underlying case exceeded the policy limits, basically half a million dollars, the judgment was otherwise within the coverage provided by National Union to Anafuel ․, [and] that there was no defense to coverage other than the fact that the judgment in the underlying action exceeded the policy limits.”   Having stipulated to coverage below, the issue has been removed from the case and defendant has no basis for its contention on appeal that there was, in fact, no coverage.  (See 1 Witkin, Cal. Evidence (3d ed.   1986) The Hearsay Rule, § 648, pp. 633–634.)   Accordingly, we decline to address this contention.

The judgment is affirmed.

THE COURT*

ARANDA, J.,** concurs. VOGEL, J., concurs in result only.