Procedural Posture

Appellant insured sought review of a judgment rendered by appellee Superior Court of Los Angeles County (California) that sustained without leave to amend real party in interest insurer’s demurrer to appellant’s cause of action for breach of the implied covenant of good faith and fair dealing.

Overview

Appellant insured sued real party in interest insurer (insurer) for breach of the implied covenant of good faith and fair dealing and other claims based upon insurer’s failure to provide a defense to appellant. Insurer filed a demurrer to the breach of the implied covenant of good faith claim arguing that, as a matter of law, it could not be liable for breach of the implied covenant of good faith for refusing to defend except if it refused to settle a claim likely to exceed policy limits. Appellee trial court sustained insurer’s demurrer. In the mandamus proceeding, the court sought to determine if California recognized a cause of action by an insured against its insurer for breach of the implied covenant of good faith and fair dealing based on failure to defend. The court set aside the order, concluding that the cause of action would be recognized. Insurer had a number of ways to protect itself when faced with a demand for a defense. If the court decided against the action, economic hardship could come to businesses, insureds could suffer emotional distress, and insureds would have responsibility for providing their own legal defense. The court discharged the writ. The parties were counseled by their respective small business lawyer in California.

Outcome

The court to set aside the order sustaining without leave to amend real party in interest insurer’s demurrer to the cause of action for breach of the implied covenant of good faith and fair dealing. The court concluded that an insured may sue its insurer for breach of the implied covenant of good faith and fair dealing based solely upon the insurer’s unjustified refusal to defend.

Procedural Posture

Appellants, bona fide purchasers for value, and respondent debtor sought review of orders of the Superior Court of Los Angeles County (California), which quieted title to real property in favor of respondent and ordered respondent to reimburse appellants for the purchase price plus interest and costs.

Overview

Respondent debtor brought an action against appellants, bona fide purchasers for value, to set aside a nonjudicial foreclosure sale. The lower court set aside the sale pursuant to Cal. Civ. Code § 3275 and ordered respondent to reimburse appellants for the price of the sale and pay costs. The court reversed the lower court because the debtor was protected by notice requirements, reinstatement and redemption periods and a right to postpone the sale. However, respondent never requested a postponement of the sale. The court held that there were no grounds for attacking the validity of the sale, as there were no irregularities in the procedure. Because the sale was to bona fide purchasers for value and a trustee’s deed containing the required statutory recitals was delivered, the sale was conclusively presumed to be valid. Respondent was not entitled to equity because his delays, negligence and inattention were the sole cause of the sale to appellants. The case was remanded so that the lower court could issue orders consistent with the court’s opinion.

Outcome

The judgment of the lower court that quieted title in favor of respondent debtor and required respondent to reimburse and pay costs to appellants, bona fide purchasers for value, was reversed and remanded because appellants, as bona fide purchasers, were vested with title and respondent had no further legal or equitable right, title, or interest in the property.