Opinion
B226752
09-15-2011
NAVCOM DEFENSE ELECTRONICS, INC., Plaintiff and Appellant, v. GOULD ELECTRONICS INC., Defendant and Respondent.
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.
(Los Angeles County Super. Ct. No. BC 374697)
ORDER MODIFYING OPINION
and DENYING PETITION FOR
REHEARING
[NO CHANGE IN JUDGMENT]
THE COURT:
The opinion herein, filed on August 16, 2011, is modified as follows:
1. On page 4, in the second full paragraph, delete the next to last sentence and replace it with: The settlement terms were confidential, but the existence of the settlements may be gleaned from Illinois court records.
2. On page 15, in the first full paragraph, delete the last sentence and replace it with the following two sentences: The settlement terms were not publicly disclosed, but agreed orders of dismissal of the insurers and references to settlement were a matter of public record. NDE's reliance on an eight-year-old (as of 2003) verbal promise to keep NDE "in the loop" about the coverage litigation, in the face of NDE's own belief in 2003 that Gould was misusing those policies, is unreasonable as a matter of law.
3. On page 15, delete the last paragraph, which begins with "NDE relies on Davies," through and including the entirety of page 16, including footnote 7 (and renumber all succeeding footnotes accordingly). Replace the deleted material with the following paragraphs:
NDE relies on Davies v. Krasna (1975) 14 Cal.3d 502 (Davies), a case involving the accrual of the statute of limitation in a cause of action for a breach of confidence not founded on a contract. Davies held that a cause of action for breach of confidence arises upon defendant's unauthorized disclosure of the confidential idea. (Id. at p. 512.) The Supreme Court held that "although a right to recover nominal damages will not trigger the running of the period of limitation, the infliction of appreciable and actual harm, however uncertain in amount, will commence the statutory period," and "neither uncertainty as to the amount of damages nor difficulty in proving damages tolls the period of limitations." (Id. at pp. 514 ["we generally now subscribe to the view that the period cannot run before plaintiff possesses a true cause of action, by which we mean that events have developed to a point where plaintiff is entitled to a legal remedy, not merely a symbolic judgment such as an award of nominal damages" (id. at p. 513)].)
But Davies -- and other cases NDE cites finding that the statute of limitations did not begin to run until the plaintiff suffered an injury (appreciable and actual harm) -- do not help NDE, as they do not involve causes of action for breach of contract or for conversion. Certainly, as the Supreme Court has observed, citing Davies, " ' "appreciable harm" ' " is "an essential element of a negligence claim." (Aas v. Superior Court (2000) 24 Cal.4th 627, 646.) The same is not so of a breach of contract claim, as the Supreme Court explicitly noted in Budd v. Nixen (1971) 6 Cal.3d 195, a case upon which NDE also relies. Budd v. Nixen involved the accrual of a cause of action for legal malpractice. The court noted the plaintiff's additional claim for breach of the oral attorney-client contract, and found the statute of limitation for a suit in contract had run: "Since the cause of action for breach of such a professional service contract arises on the date of the breach, and no consequential or actual damages need be suffered to give the client a right to bring suit in contract [citations], the statutory limitations period commences when the client knows, or reasonably should know of the breach." (Id. at p. 203, fn. 6, italics added.) That is exactly this case: the statute of limitations on NDE's claim for breach of the purchase agreement began to run when NDE knew or reasonably should have known of the breach. (See also Tabachnick v. Ticor Title Ins. Co. (1994) 24 Cal.App.4th 70, 76 ["While incurring a loss has always been a prerequisite to accrual of a cause of action in tort, it has never been a requirement in contract law."].)
Conversion is, of course, a tort, and damages are an element of a claim for conversion. (Oakdale Village Group v. Fong (1996) 43 Cal.App.4th 539, 543-544 ["Conversion is the wrongful exercise of dominion over the property of another. The elements of a conversion are the plaintiff's ownership or right to possession of the property at the time of the conversion; the defendant's conversion by a wrongful act or disposition of property rights; and damages."].) But we know of no case holding that a cause of action for conversion does not accrue until the plaintiff has a particular need for the property converted, even though plaintiff knew or should have known of the loss of the property long before it was needed. Yet this is NDE's argument: that "insurance is a unique asset whose 'value' only exists when it is needed."
NDE relies on Butcher v. Truck Ins. Exchange (2000) 77 Cal.App.4th 1442 (Butcher)and Walker v. Pacific Indemnity Co. (1960) 183 Cal.App.2d 513 (Walker) for the proposition that it incurred damages from the conversion "at the earliest, when the insurance protection [was] needed, but denied." But these cases involved the accrual of the statute of limitations on negligence claims and have no application to NDE's conversion cause of action. In Butcher, an insurance agent misled insureds into believing their policy contained personal injury coverage that it did not contain. The court found that, while the nonconforming policy was delivered in 1986, "the fact of any damage at all was completely uncertain until [the insurer] told [the insureds] it would not defend them" in a malicious prosecution lawsuit in 1993. (Butcher, supra, 77 Cal.App.4th at pp. 1469-1470.) Until that lawsuit was filed, "whether the omission of personal injury coverage would harm them at all was a mere possibility," and "[t]hat remained the case until [the insurer] refused to defend [the lawsuit] . . . ." (Id. at p. 1470.)
Unlike Butcher, this is not a negligence action, and this is not a suit between insurer and insured. NDE was injured when Gould converted the insurance policies to its exclusive use, in contravention of its agreement to share the benefits with NDE. When NDE acquired the NavCom site in 1988, NDE knew of the risk of suffering appreciable harm if it had no insurance coverage for potential contamination cleanup costs at the NavCom site. In 1994, NDE's Christ discussed with Gould's Veysey the importance to both companies of pursuing insurance coverage to pay for the cleanup. The insurers' later refusal to defend NDE under the settled policies has nothing at all to do with Gould's wrongful act of converting NDE's rights under the policies by entering into those settlements.
Walker is to like effect; the insured was not harmed by an insurance broker's negligence in securing automobile liability insurance in an amount less than the insured ordered until a judgment was entered against the insured in excess of that amount. (Walker, supra, 183 Cal.App.2d at pp. 514-516.) The significant point in these cases is that the plaintiff could not bring a cause of action earlier because "the fact of damage, rather than its amount," was uncertain and "negative[d] the existence of a cause of action." (Id. at p. 517.) That is not this case.
In short, we decline to hold that the ordinary rules for accrual of a cause of action for conversion -- that the statute of limitations " 'is triggered by the act of wrongfully taking property' " (AmerUS, supra, 143 Cal.App.4th at p. 639) -- is any different when the item converted is an insurance policy. NDE was injured when Gould wrongfully converted the insurance policies to its own use, depriving NDE of the benefits of those policies, events which occurred between 1995 and 2000, and the only bases for tolling the statute are fraudulent concealment of relevant facts or failure to disclose such facts in violation of a fiduciary duty. Thus, NDE could have sued Gould for breach of contract and for conversion by the summer of 2001, had it known about the settlements. The only issue here is whether Gould prevented NDE from discovering its injury by fraudulent concealment of the settlements.
4. On page 17, in the second full paragraph that begins with "NDE has produced," delete the second sentence and replace it with: The settlements were not "committed in secret"; their existence could be gleaned from public records, and NDE, knowing about the Illinois coverage action since 1994, could easily have discovered them.
5. On page 18, footnote 9 of the opinion (under these modifications, renumbered to be footnote 8), in the first line, delete the words "NDE's counsel" and replace them with "Gould's counsel".
6. On page 19 of the opinion, delete the second, third and fourth sentences of the paragraph and replace them with:
Moreover, NDE fails to address the law as it applies to conversion claims: as we discussed above, those claims accrue when the property is wrongfully taken. The discovery rule applies "only . . . when the defendant in a conversion action fraudulently conceals the relevant facts" or fails to disclose those facts in violation of his or her fiduciary duty to the plaintiff. (AmerUS, supra, 143 Cal.App.4th at p. 639.) The evidence clearly shows Gould did not disclose the settlements, but it does not support an inference Gould fraudulently concealed them. Promising to keep NDE "in the loop" and failing to do so simply is not evidence of fraudulent concealment, and the fact settlements had been reached could be gleaned from public records.
[End of Modifications]
There is no change in the judgment.
The petition for rehearing is denied.
BIGELOW, P. J.
GRIMES, J.
I concur in the denial of the petition for rehearing:
RUBIN, J.