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Wright v. Ripley7/31/1998
CERTIFIED FOR PUBLICATION
(Super. Ct. No. 78 05 97)
Appeal from a judgment of the Superior Court of Orange County, Thierry P. Colaw, Judge. Reversed.
Frank Wright sued Phyllis Ripley and Fire Insurance Exchange for malicious prosecution. Defendants moved for judgment on the pleadings on the basis of collateral estoppel. They contended the issue of "malice" had been conclusively determined in their favor in the underlying proceeding because Wright's motion for sanctions under Code of Civil Procedure section 128.5 was denied on the ground that "bad faith" was not established. The trial court agreed and granted the motion. We conclude that issues resolved on a routine sanction motion are not entitled to preclusive effect in a later action for malicious prosecution and therefore reverse the judgment.
This case has a tortuous history, which is recounted in detail in the briefs. For our purposes, it is sufficient to explain that Ripley was sued in a personal injury case and hired Wright to defend her. Ripley's defense was tendered to Fire, her insurer under a homeowner's policy, but there was some delay before Fire agreed to undertake Ripley's defense and pay Wright to act as Cumis counsel (San Diego Federal Credit Union v. Cumis Ins. Society, Inc. (1984) 162 Cal.App.3d 358.). By that time, Ripley and Wright had already agreed with the plaintiff to submit the matter to binding arbitration.
At the request of Fire, Wright filed a motion to cancel the binding arbitration and restore the case to the civil active list. The motion was denied the day before the arbitration was scheduled to commence, and Wright filed an immediate appeal. He also informed the arbitrator that Ripley would not participate in an arbitration until the appeal was resolved. The arbitrator refused to continue the matter and it proceeded as a default, resulting in a large award against Ripley.
Fire then hired new counsel to associate with Wright for purposes of appealing the judgment against Ripley. Fire also hired other counsel to file a separate action alleging that Wright's and Ripley's mishandling of the litigation caused the poor result. Ripley then filed her own cross-complaint against Fire and Wright. For awhile the case looked like a growth industry.
Ripley's appeal of the personal injury judgment was unsuccessful. Fire then agreed to "loan" Ripley the funds to pay the judgment and "forgive the loan," in exchange for which Ripley would continue to pursue a malpractice claim against Wright and pay Fire from any proceeds of that suit. This arrangement was apparently intended to avoid the prohibition on subrogation claims by insurers against attorneys (see, Fireman's Fund Insurance Co. v. McDonald, Hecht & Solberg (1994) 30 Cal.App.4th 1373), and to create the impression Ripley herself had incurred personal liability for the judgment against her and had thus been damaged by Wright's alleged malpractice.
Despite the care devoted to this arrangement, the trial court recognized its effect was to fully indemnify Ripley, and she had suffered no actual damage. On that basis, the court granted summary judgment in favor of Wright on Ripley's malpractice claim. In connection with the summary judgment, Wright also sought sanctions under Code of Civil Procedure section 128.5. While noting it was a "more difficult" issue than the summary judgment itself, the court denied the sanction request because it could not say the case "was frivolous and in bad faith." The court was clear, however, that it was making no finding the case was supported by probable cause.
The court subsequently granted summary judgment in favor of Wright on Fire's c
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