Judge Ronald F. Frank, Case 22STCV17938 2023-05-05 Tentative Ruling

Judge: Ronald F. Frank, Case: 22STCV17938, Date: 2023-05-05 Tentative Ruling

Case Number: 22STCV17938 Hearing Date: May 5, 2023 Dept: 8

Tentative Ruling¿

¿¿

HEARING DATE: May 5, 2023¿¿

¿¿

CASE NUMBER: 22STCV17938

¿¿

CASE NAME: Voyager Indemnity Insurance Company v. Smiley Sean, et al.

.¿¿¿

MOVING PARTY: Defendants, Smiley Sean and Ramsey Sean as surviving heirs of Mark S. Sean, deceased.

¿¿

RESPONDING PARTY: Plaintiff, Voyager Indemnity Insurance Company

¿¿

TRIAL DATE: None set.¿

¿¿

MOTION:¿ (1) Demurrer¿

Tentative Rulings: (1) Defendants’ Demurrer is overruled. Request to Stay denied

I. BACKGROUND¿¿

¿¿

A. Factual¿¿

On June 1, 2022, Plaintiff, Voyager Indemnity Insurance Company (“Plaintiff”) filed this action against Defendants, Smiley Sean and Ramsey Sean as surviving heirs of Mark S. Sean, deceased (collectively “Defendants”). On July 20, 2022, Plaintiff filed a First Amended Complaint (“FAC”) alleging a cause of action for Declaratory Relief.

This action arises out of an auto collision on August 11, 2019, that resulted in the death of Mark Sean. Mark Sean’s surviving heirs are Defendants Smiley and Ramsey Sean. Defendants have filed two underlying lawsuits in this Court against Samantha Herasme and Fair Titling Trust. Neither Herasme nor Fair Titling Trust were parties to this declaratory relief action when it was originally filed, which was an issue raised by the Court’s ruling on the Demurrer to the original Complaint. The FAC added Ms. Herasme, Voyager’s insured, in response to the Court’s basis for sustaining the Demurrer to the original complaint. The first underlying lawsuit was filed by the Defendants’ prior counsel, Charles Koro and Andrew Myers of Brown, Koro & Romag, LLP under case number 20STCV41562, and was initiated on October 29, 2020, and was dismissed on January 25, 2021. (Complaint, ¶ 20, 29.)

The second underlying lawsuit was filed by the Defendants’ current counsel Ernest Algorri and Alex Lopez of DeWitt Algorri & Algorri, LLP, under case number 20STCV48987 (the “Related Action”). The Related Action was initiated about a month before the first lawsuit was dismissed, on December 23, 2020, and is active. (Complaint, ¶ 29.) Both lawsuits bring a single cause of action for wrongful death against Herasme and Fair Titling Trust, although only Herasme has ever been served. Plaintiff Voyager Indemnity Insurance Company (“Voyager”) accepted coverage of Herasme for both lawsuits and is paying for Herasme’s defense. (Complaint, ¶ 18.) The applicable insurance policy (the “Policy”) covering Herasme has a $50,000 policy limit. (Complaint, ¶ 8.)

The Complaint, FAC, and now SAC allege that about month and a half before filing the Related Action, on November 10, 2020, Defendants, through their attorneys at the time (Koro and Myers), sent a policy-limits settlement demand to Voyager, providing less than three days to respond. (Complaint, ¶¶ 21-24.) Plaintiff asserts Voyager timely manifested acceptance of the demand on November 13, 2020—agreeing to the demand’s terms, conditions, and payment amount—and complying with the demand’s numerous requests. However, Plaintiff notes that Voyager was unable to issue a check and ship it from its offices in Florida to Defendants’ counsel in California within the three-day deadline.

Plaintiff notes that sometime after Voyager manifested acceptance of the demand, Defendants found new lawyers (Algori and Lopez). Plaintiff argues that through their new counsel, Defendants unreasonably construed Voyager’s acceptance as a “counter-offer” and “rejected” it. (Complaint, ¶¶ 28-30.) Plaintiff contends that on January 4, 2021, Voyager reiterated its acceptance. (Complaint, ¶ 31.) Plaintiff further contends that on January 5, 2021, the Seans, through their counsel, insisted that “there is NO settlement” and went on to say—despite Voyager’s acceptance—that “your principal’s rejection of our clients’ demand is egregious.” (Complaint, Exhibit 6.) Plaintiff claims that on January 15, 2021, counsel for the Seans revealed the intent of their unreasonable mischaracterization of Voyager’s acceptance. Plaintiff argues that when asked to confirm the Seans “contend that Voyager Indemnity’s $50,000 policy limit is ‘open’ and you will never in the future agree to resolve for the policy limit,” the Seans responded: “My clients are now ready to settle for the actual value of their claim.” (Complaint, Exhibits 7, 8.)

B. Procedural¿¿

On April 6, 2023, Defendants filed a demurrer to the FAC. On April 24, 2023, Plaintiff filed an opposition. On April 28, 2023, Defendants filed a reply brief.

¿II. MOVING PARTY’S GROUNDS FOR THE DEMURRER

Defendants demur to the SAC on the grounds Defendants argue: (1) the SAC fails to state whether an action is founded upon a contract, and, if so, fails to state whether the contract or agreement was written, oral, or implied; (2) Indispensable parties to this declaratory relief action involving an insurance coverage dispute between an automobile insurance company and its insured remain missing; specifically from any of the charging allegations in the SAC, namely Plaintiff’s insured: Defendant, Samantha N. Herasme; (3) The SAC is uncertain and fails for unintelligibility, is ambiguous, and self-contradicting; and (4) An insurer is not permitted to avoid its duty to defend by seeking declaratory relief based on facts in dispute in the underlying action that could affect the outcome of the underlying action. On issue (4), the Demurrer also argues that it should stay the coverage action if factual issues must be resolved in an underlying action.

III. ANALYSIS¿¿

¿¿

A. Demurrer

¿¿

A demurrer can be used only to challenge defects that appear on the face of the pleading under attack or from matters outside the pleading that are judicially noticeable. (Blank v. Kirwan (1985) 39 Cal.3d 311, 318.) “To survive a demurrer, the complaint need only allege facts sufficient to state a cause of action; each evidentiary fact that might eventually form part of the plaintiff’s proof need not be alleged.” (C.A. v. William S. Hart Union High School Dist. (2012) 53 Cal.4th 861, 872.) For the purpose of testing the sufficiency of the cause of action, the demurrer admits the truth of all material facts properly pleaded. (Aubry v. Tri-City Hospital Dist. (1992) 2 Cal.4th 962, 966-967.) A demurrer “does not admit contentions, deductions or conclusions of fact or law.” (Daar v. Yellow Cab Co. (1967) 67 Cal.2d 695, 713.)¿¿¿¿

¿¿¿

Uncertainty as to Contract

A pleading is uncertain if it is ambiguous or unintelligible. (Code Civ. Proc., § 430.10, subd. (f).) A demurrer for uncertainty may lie if the failure to label the parties and claims renders the complaint so confusing defendant cannot tell what he or she is supposed to respond to.¿ (Williams v. Beechnut Nutrition Corp. (1986) 185 Cal.App.3d 135, 139, fn. 2.) However, “[a] demurrer for uncertainty is strictly construed, even where a complaint is in some respects uncertain, because ambiguities can be clarified under modern discovery procedures.” (Khoury v. Maly's of California, Inc. (1993) 14 Cal.App.4th 612, 616.)¿¿¿

Here, Defendants argue that the SAC fails to specify whether any agreement is based upon an oral or written contract, or implied contract. Defendants note that Voyager seeks declaratory relief on the basis of a supposed agreement between the Seans and Ms. Herasme. However, Defendants also assert that Code of Civil Procedure section 430.10 (g) provides that the party against whom a complaint has been filed may object by demurrer on grounds that “it cannot be ascertained from the pleading whether the contract is written, is oral, or is implied by conduct.” Here, Defendants contend that Voyager appears to plead a contract case - namely, a settlement agreement - but fails to specify the nature of the contract. Moreover, Defendants argue it fails to make reference to a single integrated agreement on which this action may lie. Without specific pleading as to the nature of the agreement, Defendants argue the SAC fails.

In opposition, Plaintiff argues that this argument is procedurally defective under Code of Civil Procedure section 430.41(b) as it could have been raised in prior demurrers. Pursuant to Code of Civil Procedure section 430.41(b), a party demurring to a pleading that has been amended after a demurrer to an earlier version of the pleading was sustained shall not demur to any portion of the amended complaint, cross-complaint, or answer on grounds that could have been raised by demurrer to the earlier version of the complaint, cross-complaint, or answer. Plaintiff argues that he only difference between the FAC and SAC is the addition of Voyager’s insured, Herasme. Because of this, Plaintiff contends that the argument could have been raised in the demurrer to the FAC. Additionally, Plaintiff asserts that this argument fails because it mischaracterizes the SAC as though it “appears to plead a contract case” when the SAC does not contain a cause of action for breach of contract. Rather, Plaintiff contends that it seeks declaratory relief that a contract was formed when Voyager accepted the Seans’ demand. Further, Plaintiff notes that even if this action was “founded upon a contract,” the SAC’s allegations make clear that the basis for existence of a contract is established in the writings of the Seans and Voyagers. (SAC, ¶¶ 22- 36, 43, 45.)

In their reply brief, Defendants argue that Code of Civil Procedure section 430.10(g) is simple: If, “[i]n an action founded upon a contract, it cannot be ascertained from the pleading whether the contract is written, is oral, or is implied by conduct,” then the party against whom the complaint has been filed may object by demurrer. Additionally, they argue that if it is true that the SAC makes clear the basis for existence of a contract is established in the writings, than Plaintiff should be required to amend the pleading to state Voyager’s claims upon a written agreement and nothing else.

Indispensable Party

Defendants’ demurrer again asserts that the amended fails to properly allege indispensable parties to this action. Although Plaintiff has since added Samantha Herasme to the SAC, which is what the Court’s order sustaining the Demurrer to the original Complaint required, Defendants now assert that the SAC fails to specify which, if any, of the charging allegations are brought against her. A pleading is uncertain if it is ambiguous or unintelligible. (Code Civ. Proc., § 430.10, subd. (f).) A demurrer for uncertainty may lie if the failure to label the parties and claims renders the complaint so confusing defendant cannot tell what he or she is supposed to respond to. (Williams v. Beechnut Nutrition Corp. (1986) 185 Cal.App.3d 135, 139, fn. 2.) However, “[a] demurrer for uncertainty is strictly construed, even where a complaint is in some respects uncertain, because ambiguities can be clarified under modern discovery procedures.” (Khoury v. Maly's of California, Inc. (1993) 14 Cal.App.4th 612, 616.)

Each cause of action must specifically state the party or parties to whom the cause of action is directed. (California Rules of Court, Rule 2.112(4).) On review of the SAC, Defendants contends that they cannot find any mention of an allegation against Herasme. Both causes of action for declaratory relief seem to be alleged against the Sean Defendants. The Sean Defendants assert that a Declaratory relief action is to determine the legal rights and duties of the respective parties, and without notice of which particular charges are alleged against which particular Defendants, the SAC is vague and does not meet the pleading standard required.

In opposition, Plaintiff argues that this argument is not supported by a cursory reading of the SAC’s opening paragraph and prayer, both of which reference Herasme. Plaintiff notes that the opening paragraph of the SAC states that it “seeks a judicial declaration establishing certain duties owed by Defendants and/or Voyager with respect to the underlying civil action.” (SAC, ¶ 1). Plaintiff also notes that “Defendants” is not a defined term in the SAC, hence, it clearly references each of the defendants in this action, including the Seans and Defendant Samantha Herasme. (SAC, at 1:22-25 (the defendants are abbreviated as “the Seans” and “Herasme”; there is no definition for “Defendants”).) Lastly, Plaintiff asserts that the word “Herasme” appears in the SAC’s prayer twice, under both alternatively-sought forms of declaratory relief. (SAC at 11:7 and 11:12 (the SAC seeks a declaration that “Voyager’s duty to indemnify Herasme with respect to the Underlying Action is subject to the Policy’s Liability Coverage Limit of Insurance”).) The Court also notes that ¶40 of the SAC alleges a risk of uncovered damages to its insured, Ms. Herasme, and ¶49 of the SAC alleges a controversy exists as to whether Voyager’s duty to indemnify Herasme does or does not remain subject to the policy limits amount. There are issues that the prayer indicates Plaintiff is seeking to have determined by declaratory judgment.

This Court’s prior ruling to sustain the demurrer to the FAC was on hinged on the issue that indispensable parties to this declaratory relief action involving an insurance coverage dispute between an automobile insurance company and its insured driver are missing, namely the insureds of the Plaintiff – Samantha N. Herasme. Since then, Plaintiff has added Herasme to the SAC. While Defendants contend that Plaintiff failed to allege which Defendants each allegation is being alleged against, the SAC seeks declaratory judgment and is not so uncertain as to sustain a demurrer. As noted by Plaintiff, the SAC informs the Sean Defendants which allegations remain as to which Defendant, the Court is not confused by the SAC nor does the Court finds the allegations uncertain. It is certain that the Plaintiff seeks declaratory relief as against all Defendants as to its policy obligations and as to the purported acceptance of the policy-limits demand, including by having adding Herasme into portions of the SAC and the prayer. A demurrer for uncertainty may lie if the failure to label the parties and claims renders the complaint so confusing defendant cannot tell what he or she is supposed to respond to.¿ (Williams v. Beechnut Nutrition Corp. (1986) 185 Cal.App.3d 135, 139, fn. 2.) The Court finds otherwise here. As such, the Demurrer for indispensable parties is overruled.

Uncertainty as to Exhibits

Defendants argue the SAC is fatally and incurably flawed and thus fails because specific language in Exhibit 3 to the FAC shows no settlement that that, allegedly, supersedes Voyager’s general allegations to the contrary. Defendants note the allegations of offer and acceptance are pleaded via incorporation by reference to SAC Exhibits “2” and “3,” respectively. However, Defendants argue that the problem is that SAC Exhibit 3, Voyager’s purported “acceptance,” includes specific contradictory language showing there is no acceptance. Plaintiff’s also note Voyager’s general pleading omits Exhibit 3’s specific language that Voyager was “not able to issue a check on such short notice and without an agreed settlement.” (See, SAC Exhibit 3, p. 3.) Defendants argue Exhibit 3’s specific language (“without an agreed settlement”) takes precedence over the general language of the pleading (“[Voyager] accepted the Seans’ Nov. 10 Settlement Demand”).

Defendants also note other specific language further shows there was no settlement. Defendants point to SAC Exhibit 3, the purported “agreement,” plainly rejects the terms of the settlement offer. Specifically, the Nov. 13 letter states “we cannot issue a check”. Secondarily, Defendants contend the purported “acceptance” proposed adding separate conditions for an agreement: namely, that the Seans’ attorney “provide[] us with a completed CMS form, which is required” and prior execution of a settlement release. Defendants argue that this specific language (“cannot issue a check;” “provide . . . a completed CMS form”) facially contradicts the general allegation that there was a settlement. At best, Defendants argue that Voyager has pleaded a counteroffer - and thus, on the pleadings, no agreement.

In opposition, Plaintiff argues that this argument is procedurally defective under Code of Civil Procedure section 430.41(b) as it could have been raised in prior demurrers. Pursuant to Code of Civil Procedure section 430.41(b), a party demurring to a pleading that has been amended after a demurrer to an earlier version of the pleading was sustained shall not demur to any portion of the amended complaint, cross-complaint, or answer on grounds that could have been raised by demurrer to the earlier version of the complaint, cross-complaint, or answer. Plaintiff argues that since the only difference between the FAC and SAC is the addition of Voyager’s insured, Herasme. Because of this, Plaintiff contends that the argument could have been raised in the demurrer to the FAC. Additionally, Plaintiff asserts that this argument fails because the two sentences do not conflict with Voyager’s acceptance of any “reasonable” settlement offer contained the Seans’ November 10 demand. Plaintiff asserts that Defendants’ argument fails for three main reasons: (1) Voyager’s inability to issue and deliver a check across the country same-day does not conflict with its manifestations of acceptance; (2) if acceptance truly required issuing a check before clearing liens, then the demand was not reasonable as a matter of law; and (3) the certificate attached to Voyager’s policy is not defective.

This Court’s prior ruling to sustain the demurrer to the FAC was on hinged on the issue that indispensable parties to this declaratory relief action involving an insurance coverage dispute between an automobile insurance company and its insured driver are missing, namely the insureds of the Plaintiff – Samantha N. Herasme. Since then, Plaintiff has added Herasme to the SAC. Because the Sean Defendants did not previously raise the issue of the alleged contradictory language in Exhibit 3, Defendants are barred from bringing this issue now. Further, even if the Court were to consider this third point of the demurrer on the merits, the Court would overrule it at this time. The issues raised by this third point are legitimate issues to be raised at the summary judgment phase but in the Court’s view, the question of construction of the language of various documents and whether they conflict or are reasonable are issues for dispositive motion or trial, not the pleading phase. Thus, the demurrer on this ground is overruled.

Staying the Instant Action

Defendants assert that in the alternative, this Court should stay the instant action for Declaratory relief to allow the parties to adjudicate the overlapping issue of settlement in the underlying matter. Defendants argue that an insurer is not permitted to avoid its duty to defend by seeking declaratory relief based on facts in dispute in the underlying action that could affect the outcome of the underlying action. Defendants argue that if the factual issues to be resolved in the declaratory relief action overlap with those to be resolved in the underlying litigation, the trial court must stay the coverage action. Defendants further argue that staying the instant case to resolve the issue of settlement is well reasoned. It allows the insurer to remain aligned with its insured rather than seeking declaratory relief against her. The liability insurer may owe a defense in the underlying action even if the facts ultimately determined in that action show there was a settlement (and thus no coverage).

In opposition, Plaintiff argues that this revived request for a stay violates rules for a Motion for Reconsideration. Plaintiff contends the request for a stay simply revisits arguments that were raised, and rejected, in the Seans’ demurrer to the FAC, and fails to comply with Section 1008(b) as it does not identify “what application was made before, when and to what judge, what order or decisions were made, and what new or different facts, circumstances, or law are claimed to be shown.” (Cal. Code Civ. Proc. §1008(b).) Plaintiff notes that the request does not reference any new facts, and that the only fact offered in support of a stay is Herasme’s answer in the underlying matter, which predates this action. Plaintiff cites to State Farm Mut. Auto. Ins. Co. v. Flynt, to note that the California Supreme Court in that case illustrated a situation where the action could proceed to judgment. In Flynt, “the question [of] whether the owner had granted permission for the driver’s use of the car was irrelevant to the third party's personal injury claim, and could properly be determined in the declaratory relief action independently of the timing of the third party suit.” Similarly, Plaintiff argues that Herasme was not a party to the settlement agreement at issue in this action and was not involved in its formation. Plaintiff further notes it is not a party to the Seans’ action against Herasme. As such, Plaintiff asserts this Court is able to render a judgment regarding the settlement agreement between Voyager and the Seans as the factual issues are “logically unrelated” and do not overlap with the Seans.

The Court denies the alternative motion to stay the entire case. The underlying action and this action may proceed in parallel. The parties can consider whether there is a need to consolidate the cases for discovery or other purposes, which the Court can address at the May 22 CMC already on calendar.

¿¿¿ Defendants’ Answers shall be filed within 20 days.