TROYK v. FARMERS GROUP, INC
Filed 3/10/09; on rehearing
CERTIFIED FOR PARTIAL PUBLICATION*
COURT OF APPEAL, FOURTH APPELLATE DISTRICT
DIVISION ONE
STATE OF CALIFORNIA
| THOMAS E. TROYK, Plaintiff and Respondent, v. FARMERS GROUP, INC. et al., Defendants and Appellants. | D049983 (Super. Ct. No. GIC836844) |
| PREMATIC SERVICE CORPORATION (CALIFORNIA) et al., Movants. | |
STORY CONTINUE FROM PART III….
Based on our independent review of the parties' summary judgment papers, we conclude Troyk has not carried his burden to show there is no triable issue of fact regarding the element of causation for his standing to prosecute his UCL cause of action. Troyk's separate statement of undisputed material facts asserts Farmers required him and the other class members to pay a service charge to obtain a one-month policy. It also asserts he and the other class members paid the premium stated in the declarations page, but the service charge was not specified in any of the policy documents. However, Troyk's separate statement did not assert any purported undisputed fact showing the element of causation, nor did it refer to any evidence showing causation. His separate statement did not contain any asserted fact that he or the other class members would not have paid the monthly service charges had they been disclosed in the policy documents as required by section 381, subdivision (f). Furthermore, his moving papers did not contain or refer to any evidence supporting such an asserted fact. Therefore, Troyk, as the party moving for summary judgment, did not satisfy his initial burden of production to make a prima facie showing of the nonexistence of any triable issue of material fact regarding his UCL cause of action. (Aguilar, supra, 25 Cal.4th at p. 850.) Having failed to satisfy that burden, Troyk was not entitled to summary judgment as a matter of law.
Although Farmers argue in their supplemental brief that the trial court erred by not granting their motion for summary judgment because Troyk cannot show their alleged unfair competition under the UCL caused him to lose money (i.e., pay the monthly service charges), Farmers, like Troyk, did not satisfy their burden to show there is no triable issue of fact on the UCL standing element of causation. Farmers' separate statement of undisputed material facts in support of their motion contained only two asserted statements that arguably relate to the causation element. It asserted that Troyk "voluntarily" paid the insurance premiums and service charges and that he never complained to them (or Prematic) about the amount of the service charges. Those asserted facts do not assert it was undisputed Troyk would have paid the service charges even had Farmers disclosed them as premium in the policy documents as required by section 381, subdivision (f).[1] Because Farmers' separate statement did not contain any asserted fact showing there is no triable issue of fact regarding the element of causation, the trial court properly denied their motion for summary judgment.
At trial, Troyk will, of course, have the burden to prove by a preponderance of the evidence that he has standing under Business and Professions Code section 17204 to prosecute the UCL cause of action on behalf of the class members in this case. (Mervyn's, supra, 39 Cal.4th at pp. 227, 232-233; Buckland, supra, 155 Cal.App.4th at pp. 812-813; Lujan, supra, 504 U.S. at p. 561.) Therefore, he will, in particular, have the burden to prove the causation element for UCL standing.[2] In the event Troyk successfully proves at trial that he has standing to prosecute the UCL cause of action and proves the other elements of that cause of action, the trial court may award the class members appropriate restitution and may also order injunctive relief against Farmers. (Bus. & Prof. Code, §§ 17202, 17203.)
V
Breach of Contract Cause of Action
Farmers also contend the trial court erred by granting Troyk's motion for summary judgment because there are triable issues of material fact on his cause of action for breach of contract. Because we reverse the summary judgment based on a triable issue of fact regarding Troyk's standing to prosecute his UCL cause of action as discussed above, we need not address Farmers' alternative contention of trial court error in finding no triable issue of fact regarding his breach of contract cause of action. Nevertheless, because Troyk's motion for summary judgment sought, in the alternative, summary adjudication of his breach of contract cause of action, we consider the record on appeal to determine whether he satisfied his burden to show there was no triable issue of material fact regarding that cause of action and he is entitled to summary adjudication on that cause of action.
As Troyk notes, one court stated (albeit arguably in oversimplified language): "To be entitled to damages for breach of contract, a plaintiff must plead and prove (1) a contract, (2) plaintiff's performance or excuse for nonperformance, (3) defendant's breach, and (4) damage to plaintiff. [Citations.]" (Walsh v. West Valley Mission Community College Dist. (1998) 66 Cal.App.4th 1532, 1545.) Implicit in the element of damage is that the defendant's breach caused the plaintiff's damage. Civil Code section 3300 generally requires proof of causation: "For the breach of an obligation arising from contract, the measure of damages . . . is the amount which will compensate the party aggrieved for all the detriment proximately caused thereby, or which, in the ordinary course of things, would be likely to result therefrom."[3] (Italics added.) "An essential element of a claim for breach of contract are damages resulting from the breach. [Citation.] Causation of damages in contract cases requires that the damages be proximately caused by the defendant's breach. [Citations.]" (St. Paul Fire & Marine Ins. Co. v. American Dynasty Surplus Lines Ins. Co. (2002) 101 Cal.App.4th 1038, 1060; see also Vu v. California Commerce Club, Inc. (1997) 58 Cal.App.4th 229, 233.) Regarding the element of causation, CACI No. 303 requires proof the plaintiff "was harmed by" a defendant's breach of contract. In Haley v. Casa Del Rey Homeowners Assn., supra, 153 Cal.App.4th 863, the court upheld as proper the trial court's instruction on the element of causation: "[T]hat the failure of the defendants was a substantial factor in causing damage to the plaintiffs." (Id. at p. 871, italics added.)
In the circumstances of this case, we conclude Troyk did not satisfy his burden to show he was entitled to summary adjudication of his breach of contract cause of action because his motion papers did not show there was no triable issue on the element of causation of damages. Regarding Troyk's breach of contract cause of action, his separate statement of undisputed material facts did not, as with his UCL cause of action discussed above, assert any fact that Farmers' breach of contract caused his (and the class members') damages. Troyk's separate statement asserts that Farmers required him and the other class members to pay a service charge to obtain a one-month policy. It also asserts he and the other class members paid the premium stated in, and complied with all terms of, the insurance policy. However, Troyk's separate statement did not assert any purported undisputed fact showing the element of causation, and did not refer to any evidence showing causation. His separate statement did not contain any asserted fact that he or the other class members would not have paid the monthly service charges had they been disclosed in the policy documents as required by section 381, subdivision (f). Furthermore, his moving papers did not contain or refer to any evidence supporting that asserted fact. Therefore, Troyk, as the party moving for summary adjudication on his breach of contract cause of action, did not satisfy his initial burden of production to make a prima facie showing of the nonexistence of any triable issue of material fact. (Aguilar, supra, 25 Cal.4th at p. 850.) Having failed to satisfy that burden, Troyk was not entitled to summary adjudication as a matter of law on his breach of contract cause of action.
VI
Constitutional Right to Due Process
Farmers contend the judgment violates their federal constitutional right to due process of law. However, because we reverse the summary judgment, we do not address, as premature, the question whether any future award of restitution may violate Farmers' federal constitutional right to due process of law.
Nevertheless, we are unpersuaded by Farmers' argument that their right to due process was violated because they did not have "fair notice" of section 381, subdivision (f)'s meaning prior to the judgment and the trial court's new interpretation of that statute could not be retroactively applied. The trial court's (and now our) interpretation of the term "premium," as used in section 381, subdivision (f), is based on the clear and unambiguous meaning of that term. Farmers cannot reasonably argue they could never have predicted the trial court, and now this court, would interpret section 381, subdivision (f), in this manner. Furthermore, because section 381, subdivision (f), was originally enacted in 1935, Farmers cannot reasonably contend that statute is being "retroactively" applied to insurance policies issued and service charges imposed during the class period that began on October 6, 2000.
VII
Summary Judgment and Summary Adjudication
Because Troyk did not satisfy his burden to show there are no triable issues of material fact and he is entitled to judgment as a matter of law, the trial court erred by granting his motion for summary judgment. (Code Civ. Proc., § 437c, subds. (c), (p)(1); Aguilar, supra, 25 Cal.4th at pp. 843, 855.) As discussed above, there exists a triable issue of fact regarding the element of causation on Troyk's standing to prosecute the UCL cause of action (as well as on the breach of contract cause of action). Furthermore, because Farmers did not satisfy their burden to show there are no triable issues of material fact and they are entitled to judgment as a matter of law, the trial court did not err in denying their motion for summary judgment.
In granting Troyk's motion for summary judgment, the trial court implicitly rejected Farmers' affirmative defenses. In effect, the court found there were no triable issues of material fact regarding those defenses. Because Troyk alternatively moved for summary adjudication of Farmers' affirmative defenses, the court implicitly found Troyk was entitled to summary adjudication on those defenses. Farmers have not presented any substantive arguments on appeal that persuade us there are any triable issues of material fact on their affirmative defenses. Accordingly, although we reverse the summary judgment, Troyk is entitled to summary adjudication of Farmers' seven affirmative defenses (i.e., for failure to state a cause of action, rights governed by agreements, acts or omissions of others, laches, waiver and estoppel, adequate remedy at law, and statutes of limitations). (Code Civ. Proc., § 437c, subd. (f).)
VIII
Prematic's Appeal
Prematic filed a notice of appeal challenging both the judgment and the postjudgment order denying its motion to set aside or vacate the judgment. Troyk filed a motion to dismiss Prematic's appeal, arguing Prematic does not have standing to appeal.
A
Code of Civil Procedure section 902 provides "[a]ny party aggrieved may appeal" from an adverse judgment. (Italics added.) Absent standing to appeal under that statute, we have no jurisdiction to consider the appeal and must dismiss it. (In re Marriage of Tushinsky (1988) 203 Cal.App.3d 136, 143-144.) "The test is twofold--one must be both a party of record to the action and aggrieved to have standing to appeal." (Shaw v. Hughes Aircraft Co. (2000) 83 Cal.App.4th 1336, 1342.) "It is generally held, however, that only parties of record may appeal; consequently one who is denied the right to intervene in an action ordinarily may not appeal from a judgment subsequently entered in the case. [Citations.] Instead, he may appeal from the order denying intervention. [Citation.]"[4] (County of Alameda v. Carleson (1971) 5 Cal.3d 730, 736.) "Nevertheless, one who is legally 'aggrieved' by a judgment may become a party of record and obtain a right to appeal by moving to vacate the judgment pursuant to Code of Civil Procedure section 663. [Citations.]" (County of Alameda, at pp. 736-737.) A party is considered aggrieved if the party's rights or interests are injuriously affected by the judgment. (Id. at p. 737.) Furthermore, the party's "interest ' "must be immediate, pecuniary, and substantial and not nominal or a remote consequence of the judgment." ' [Citation.]" (Ibid.) In County of Alameda, the California Supreme Court concluded the nonparty was legally aggrieved because the judgment terminated its members' welfare benefits and therefore had an immediate, pecuniary, and substantial effect on their rights. (Id. at pp. 736-737.) Furthermore, the court concluded that because the nonparty's motion to vacate the judgment under Code of Civil Procedure section 663 (which motion asserted erroneous conclusions of law by the trial court) was stricken by the trial court, that nonparty became a party of record and "had standing to appeal from the judgment in that case, and that consequently this court has jurisdiction to determine the substantive issues raised in its appeal." (County of Alameda, supra, at pp. 737-738.)
Where a nonparty has not filed a Code of Civil Procedure section 663 motion to vacate the judgment and therefore ordinarily would not have standing to appeal, an exception to the "party of record" requirement nevertheless "exists in cases where a judgment or order has a res judicata effect on a nonparty."[5] (Marsh v. Mountain Zephyr, Inc. (1996) 43 Cal.App.4th 289, 295.) Alternatively stated, a nonparty may appeal a judgment if the judgment is binding on him or her and the judgment's injurious effect is immediate, pecuniary, and substantial. (Ibid.)
B
Troyk argues that because Prematic was not legally aggrieved by the judgment, it does not have standing to appeal. In so arguing, Troyk apparently concedes that Prematic became a "party of record" for purposes of Code of Civil Procedure section 902 by filing its motion to set aside or vacate the judgment. (County of Alameda v. Carleson, supra, 5 Cal.3d at pp. 737-738.) In denying that motion, the trial court concluded: "Prematic is an aggrieved party under [Code of Civil Procedure section] 663." Therefore, although Troyk concedes Prematic meets the first test for standing to appeal (i.e., it is a party), he challenges the trial court's conclusion that Prematic met the second test for standing (i.e., it is aggrieved). Troyk argues we should independently review the record and conclude Prematic was not aggrieved for purposes of standing to appeal.
Based on our independent review of the record, we conclude Prematic is aggrieved and has standing to appeal the judgment. Prematic argues, and we agree, that the trial court's conclusion that the service charges are premium, as used in section 381, subdivision (f), could preclude it from collecting and retaining service charges in the future. Because Prematic is not an insurer licensed in California or Nevada (nor an attorney-in-fact for an insurer), we presume, without deciding, it is precluded from collecting and retaining insurance premiums.[6] Were Prematic to do so, it presumably would be conducting the business of insurance. Therefore, were we to affirm the trial court's judgment (which we do not) or uphold the trial court's interpretation and application of section 381, subdivision (f) (which we do), Prematic's current mode of business, including its use of the Prematic Agreement and its collection and retention of the service charges, could be significantly impacted, if not entirely terminated.[7] Accordingly, we conclude Prematic could be injuriously affected by the judgment and its interest is immediate, pecuniary and substantial, and not nominal or a remote consequence of the judgment.[8] (County of Alameda v. Carleson, supra, 5 Cal.3d at p. 737.) We conclude Prematic is an aggrieved party with standing to appeal the judgment. Therefore, we deny Troyk's motion to dismiss Prematic's appeal.
C
Turning to the merits of Prematic's appeal, we note that Prematic, for the most part, raises the same contentions raised by Farmers on appeal. Because we addressed those contentions above, we incorporate herein, without repeating, our discussion of those contentions above. Prematic essentially raises only two new contentions on appeal: (1) the trial court violated its constitutional right to due process when the court apparently declared the Prematic Agreement and Prematic's service charges to be illegal; and (2) the judgment impairs its contracts in violation of the California Constitution.
Although we need not address Prematic's contentions because we reverse the judgment on another ground, we nevertheless discuss them to provide guidance to the trial court and parties in further proceedings in this case. We reject Prematic's due process contention because it is based on a faulty premise. The trial court's order granting Troyk's motion for summary judgment did not declare that the Prematic Agreement and Prematic's service charges were illegal. Rather, its order stated: "It is undisputed that [Troyk] was not aware the 'service charges' were illegal until just before he filed this lawsuit." That statement only notes, in effect, Troyk did not learn until the time of his action that the service charges were premium, as used in section 381, subdivision (f), and therefore were required to be stated in the policy. Absent the policy's statement of the service charges as included in premium, FIE could not lawfully require those service charges to be paid. Contrary to Prematic's assertion, the court's order did not declare illegal either the Prematic Agreement or Prematic's conduct in collecting FIE's stated premiums and the service charges and forwarding those stated premiums, less the service charges, to FIE. Therefore, the trial court did not deny Prematic its constitutional due process right to notice and an opportunity to be heard on that issue.
We also reject Prematic's assertion that the judgment impairs its contracts in violation of the California Constitution. Article I, section 9, of the California Constitution provides: "A . . . law impairing the obligation of contracts may not be passed." That constitutional prohibition applies to both legislative acts and court decisions. "Neither the court nor the Legislature may impair the obligation of a valid contract [citation] and a court cannot lawfully disregard the provisions of such contracts or deny to either party his rights thereunder. [Citations.]" (Bradley v. Superior Court (1957) 48 Cal.2d 509, 519.) Prematic argues its rights and obligations under the Prematic Agreement are unconstitutionally impaired by the trial court's interpretation of the term "premium," as used in section 381, subdivision (f), as including the service charges it collects and retains pursuant to the Prematic Agreement. However, Prematic, as a party to the Prematic Agreement, is presumed to have known of section 381, subdivision (f), enacted in 1935, at the time it entered into that agreement with the class members during the class period (from October 6, 2000, through August 26, 2005) and therefore that statute is deemed to be a part of the Prematic Agreement. (White v. Davis (2002) 108 Cal.App.4th 197, 230-231; White v. Davis (2003) 30 Cal.4th 528, 549; City of Torrance v. Workers' Comp. Appeals Bd. (1982) 32 Cal.3d 371, 378 [parties are presumed to know all applicable laws in existence at time contract is made, which laws form a part of the contract].)
In this case, the trial court concluded, and we conclude, the clear and unambiguous meaning of the term "premium," as used in section 381, subdivision (f), includes the service charges FIE required the class members to pay to Prematic pursuant to the Prematic Agreement. This interpretation, as a matter of law, on a question of first impression by the trial court (and now this court) as to the plain meaning of a statute in existence since 1935 cannot be considered a "new" law or court decision, or a substantial change from an existing law or court decision, such that the court's interpretation of that 1935 statute unconstitutionally "impairs" the Prematic Agreements executed on or after October 6, 2000.[9] Accordingly, although we reverse the judgment on other grounds as discussed above, we nevertheless conclude it did not (and presumably any future judgment would not) impair Prematic's contracts in violation of article I, section 9, of the California Constitution.[10]
DISPOSITION
The judgment is reversed and the matter is remanded with directions that the trial court: (1) vacate its order granting Troyk's motion for summary judgment; and (2) issue a new order denying Troyk's motion for summary judgment, Farmers' motion for summary judgment, and Troyk's motion for summary adjudication of his UCL and breach of contract causes of action, but granting Troyk's motion for summary adjudication of Farmers' affirmative defenses. The parties shall bear their own costs of appeal.
CERTIFIED FOR PARTIAL PUBLICATION
McDONALD, J.
WE CONCUR:
NARES, Acting P. J.
HALLER, J.
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* Pursuant to California Rules of Court, rule 8.1110, this opinion is certified for publication with the exception of part VIII.
[1] In support of those asserted facts, Farmers' separate statement cites certain excerpts from Troyk's deposition. As reflected in those excerpts, Troyk testified he paid the service charges every month and believed the amount was reasonable (i.e., it "didn't bother" him). Therefore, even had Farmers' separate statement asserted there was no causation, their cited evidence would have been insufficient to support that asserted fact and show there is no triable issue whether Troyk lost money because of Farmers' section 381, subdivision (f) violation.
[2] To the extent Troyk personally lacks standing because of the lack of causation in his particular circumstances, he presumably could no longer adequately represent the other class members. In that event, the trial court should consider any motion that may be filed by Troyk or counsel for the class members for leave to amend the complaint to substitute in Troyk's place as the class representative another class member who potentially can prove he or she has the requisite standing to prosecute the UCL cause of action on behalf of the class members. (See, e.g., Branick v. Downey Savings & Loan Assn. (2006) 39 Cal.4th 235, 243 ["[C]ourts have permitted plaintiffs who have been determined to lack standing, or who have lost standing after the complaint was filed, to substitute as plaintiffs the true real parties in interest. [Citations.] Amendments for this purpose are liberally allowed [Citations.]".) In the event the instant class action complaint is dismissed for lack of a class member who has standing to prosecute the UCL cause of action and serve as the class representative, the California Attorney General or a district attorney may nevertheless prosecute a UCL action against Farmers for violation of section 381, subdivision (f). (Bus. & Prof. Code, § 17204.)
[3] In the event a defendant's breach of contract did not cause harm to the plaintiffs, the trier of fact may nevertheless award the plaintiffs nominal damages. (Civ. Code, § 3360 ["When a breach of duty has caused no appreciable detriment to the party affected, he may yet recover nominal damages."]; CACI No. 360 ["If you decide that [name of defendant] breached the contract but also that [name of plaintiff] was not harmed by the breach, you may still award [him/her/it] nominal damages such as one dollar."]; 1 Witkin, Summary of Cal. Law (10th ed. 2005) Contracts, § 878, pp. 965-966.)
[4] In this case, Prematic did not appeal from the trial court's order denying its motion to intervene.
[5] "The doctrine of res judicata prevents persons and their privies from relitigating in a subsequent proceeding claims that were or should have been adjudicated in a prior proceeding. [Citation.]" (People v. Stark (2005) 131 Cal.App.4th 184, 200-201.)
[6] Although, as Troyk notes, Prematic does not cite any specific statute or other authority in support of its assertion that a noninsurer cannot retain insurance premiums, we believe it is inherent that in the highly regulated business of insurance in California and Nevada only licensed insurers are permitted to charge and retain insurance premiums. Although insurers may hire noninsurer third parties (e.g., billing and collection companies) to perform billing and collection services for them, those third parties presumably may not actually charge and retain insurance premiums themselves.
[7] It may be true, as Troyk argues, that Prematic may nevertheless remain in the business of collecting premiums and forwarding them to FIE. However, to continue to do so, Prematic presumably will be required to cease entering into the Prematic Agreement with insureds pursuant to which it receives and retains the service charges (i.e., premium), but presumably will instead be required to forward any service charges (properly disclosed in policies) to FIE. Furthermore, although Prematic presumably would be able to receive compensation from FIE for those services, the amount of such compensation it may so receive likely will be less than the amount of service charges it has charged and retained in the past for the same services.
[8] In so concluding, we need not, and do not, address the merits of Prematic's other assertions of immediate, pecuniary, and substantial harm from the judgment (e.g., possible liability to insureds because of res judicata or to FIE and FGI for indemnification).
[9] Likewise, the trial court's interpretation cannot be considered to unconstitutionally impair the future performance by the parties of the Prematic Agreement.
[10] Also, contrary to Prematic's implied assertion, the trial court's judgment did not order "disgorgement" by Prematic of all service charges it received from the class members pursuant to the Prematic Agreement. Rather, the judgment awarded restitution by FIE and FGI of the service charges required to be paid by the class members without disclosure of those service charges as premium as required by section 381, subdivision (f).
