CRC proceeding between a bank and appellant surety

In a proceeding between a bank and appellant surety, the surety filed a second petition for a rehearing. He had been held liable on a certain guaranty. In seeking a rehearing, California rules of court 3.110 the surety relied on a state supreme court case that was handed down after the decision in the instant case.

The surety, who was an experienced attorney, had signed a guaranty for a long-standing client, which guarantee contained a specific reference to pre-existing debts. In refusing a rehearing for the second time, the court concluded that nothing in the record supported the contentions of the surety as to the duty of the bank. The court explained that a creditor did not owe to a credit-surety a duty of voluntary disclosure of facts known about a debtor unless the creditor had reason to believe that the facts materially increased the surety's risk beyond that which he assumed and that the surety did not know the facts. Further, a creditor such as the bank had to have a reasonable opportunity to communicate said facts about the debtor, which in the instant case was the client, to the surety. In so ruling, the court noted the surety's experience as an attorney and businessman and his long acquaintance with the client. The evidence did not show that the bank had additional facts about the debtor or that the surety was unaware of those facts. Thus, the court concluded, the surety knew the risks that he was taking and that he assumed them voluntarily to favor his client.

The court denied the petition for a rehearing.

Petitioner insureds, by a timely petition for writ of mandate, challenged a decision of the respondent Superior Court of Contra Costa County (California), which had granted real party in interest insurance companies motion for summary adjudication in an action alleging bad faith in the handling of third party claims arising from a burglary of petitioners jewelry store.

Petitioner insureds' jewelry store was burglarized resulting in a loss of customers' jewelry. Real party in interest insurer had issued special business owners policy to petitioners for business interruption loss and coverage for claims asserted against petitioners by third parties. Petitioners filed suit against insurer which alleged bad faith in handling claims arising from the burglary. Insurer filed a motion for summary adjudication of issues as to both liability and business interruption coverages. The trial court granted the motion, which disposed of petitioners' causes of action against insurer for breach of the implied covenant of good faith and fair dealing and for violation of Cal. Ins. Code § 790.03(h). Petitioners filed a petition for writ of mandate against respondent trial judge. The court let a peremptory writ issue requiring respondent trial judge to vacate its order for summary adjudication because the implied covenant of good faith and fair dealing imposed extra-contractual normative duties on insurer quite apart from those imposed by the contract and § 790.03(h) imposed putative duties that could arise independently of insurers final liability for the claims.

The court issued a peremptory writ of mandate requiring respondent trial judge to vacate its order on the motion for summary adjudication of issues and to enter a new and different order denying the motion in its entirety because real party in interest insurer had extra-contractual and statutory duties, independent of the contract, concerning how it handled claims.

The court affirmed a judgment of the superior court and dismissed appellant individual and appellant corporations challenge, holding that appellant individual was a vexatious litigator and failed to demonstrate that the litigation had merit. The court found that it would be inequitable to allow appellant corporation to avoid the effect the vexatious litigator statute, as there was no evidence of separateness between the two entities.