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Berghoff v. Gavrity7/31/2002
volved in a legal contest must be included in his pleadings then. If he neglects or chooses not to do so the judgment entered will be deemed final as to such question as may have been a potential issue. [Citation.]" (Seaboard Finance Co. v. Carter (1951) 106 Cal.App.2d 738, 742.) The doctrine extends to facts and conditions as they existed when the issues in the first action arose and to the legal rights and relations of the parties as set by the facts determined by that judgment. (Lord v. Garland (1946) 27 Cal.2d 840, 849.)
BAFJ claims the two lawsuits were critically different because the claim in Berghoff I was that Revere failed to fulfill BAFJ's claims under the contract, whereas in the current lawsuit the claim is that BAFJ was misled into buying the contract. However, application of these standards leads us to conclude the trial court did not err in sustaining Revere's demurrer without leave to amend. Plaintiffs' primary right in both lawsuits was the alleged harm caused by BAFJ's not receiving insurance benefits from Revere. That plaintiffs framed the first lawsuit, at least in part, on contract interpretation does not change the fact that the second lawsuit, framed exclusively in tort terms, complained of the same harm. The right plaintiffs sought to enforce in both lawsuits was BAFJ's right to payment by Revere.
In addition, critical facts giving rise to the fraud allegations in this lawsuit (misrepresentations about when payment would be made) necessarily occurred and were known before BAFJ secured the disability buy-out policy. Nonetheless, the accounting firm chose to pursue only the claim that Revere was required to pay it when the expenses from Berghoff's disability were "incurred," in the sense of obligated to pay, rather than, as the federal district court ruled, when the firm paid and was entitled to reimbursement. Thus, when Revere declined to pay the policy limits requested by BAFJ, the issues raised in both lawsuits could have been raised. BAFJ's failure to raise them gives rise to the bar aspect of the doctrine of res judicata.
Moreover, plaintiffs introduced the possibility of a tort recovery in Berghoff I by alleging "tortious . . . actions" by Revere based on its failure to pay. Plaintiffs' allegation in Berghoff I that they had placed trust and confidence in Revere to protect the firm from the adverse consequences of Berghoff's disability is tort language at the core of their claims in this lawsuit.
We find no error in the trial court's sustaining without leave to amend Revere's demurrer to the negligent misrepresentation and intentional misrepresentation claims against it.
DISPOSITION
The trial court is directed to correct its March 23, 2000, minute order nunc pro tunc, to read: "Demurrer is sustained, without leave to amend, res judicata, on all causes of action except the first cause of action against defendant Donald Gavrity. Counsel for plaintiff states that he would not change complaint if given another opportunity to amend the complaint. Notice is waived."
The trial court is directed to correct its June 13, 2001, minute order nunc pro tunc, to read: "The demurrer of defendants, Paul Revere Life Insurance Company and Donald J. Gavrity, Jr., to the first amended complaint having been sustained without leave to amend as to all causes of action with the exception of the first cause of action against defendant Gavrity by Judge Mary Anne Murphy presiding in Department Northwest "Z" on 3/23/01, and Judge Murphy having been assigned to the central district of the Superior Court prior to the assignment of the above-captioned case to this court by the Presiding Judge of this district, the court now makes
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