United States District Court, C.D. California.

CENTURY SURETY COMPANY

v.

POPELINO’S TRANSPORTATION, INC. et al.

Case No. 5:21-cv-01987-RGK-RAO

|

Filed January 4, 2023

Attorneys and Law Firms

John E. Peer, Douglas A. Greer, Woolls Peer Dollinger and Scher APC, Los Angeles, CA, for Century Surety Company.

Paul M. Mahoney, Richard A. Soll, Mahoney and Soll LLP, Claremont, CA, for D and R Woods Enterprise Corp.

Proceedings: (IN CHAMBERS) Order Re: Motion for Summary Judgment [DE 65]

R. GARY KLAUSNER, UNITED STATES DISTRICT JUDGE

I. INTRODUCTION

*1 Century Surety Company (“Plaintiff”) seeks a judgment declaring that it owes no duty to defend or indemnify against claims in two other lawsuits, as well as recoupment of costs already expended. Plaintiff names nine defendants: (1) Jose Popelino; (2) Popelino’s Transportation, Inc.; (3) Popelino’s Green Waste Recycling; (4) Jose Barragan; (5) Rosario Rios; (6) Justice Cuts; (7) Richard Boyd; (8) Elisa Boyd; and (9) D & R Woods Enterprise Corporation (“D & R Woods”). Only D & R Woods has defended the action. Jose Popelino was voluntarily dismissed, and the other defendants have had default entered against them. (See ECF Nos. 18, 20, 52, 60.)

On November 9, 2022, Plaintiff filed a motion, which the Court construes as a motion for summary judgment against D & R Woods and a motion for default judgment against the defendants in default. (ECF Nos. 65, 75.) For the following reasons, the Court GRANTS judgment in favor of Plaintiff on all claims.

II. FACTUAL BACKGROUND

Plaintiff alleges the following:

Plaintiff issued a policy for commercial general liability coverage, insuring Popelino’s Transportation, Inc. (“PTI”) and Barragan as PTI’s president. This policy provided coverage for “sums that the insured becomes legally obligated to pay as damages because of ‘bodily injury’ or ‘property damage’ … caused by an ‘occurrence’ ….” (Mot., Ex. 6 at 16, ECF No. 65-10.)¹ The policy also included a “Classification Limitation Endorsement,” which “strictly limited” coverage to the classifications and codes listed in the policy. (Mot., Ex. 6 at 54.) The classification assigned to the policy was “Truckers” (code 99793) because Barragan represented on his insurance application that PTI is a “trucking company hauling construction building materials.” (FAC ¶ 19.) Based on this classification, Plaintiff calculated and charged an annual premium of $1,815.

While the policy was in effect, a fire broke out at 1880 Brown Avenue in Riverside, where Barragan operates Popelino’s Green Waste Recycling (“GWR”). The fire spread and burned adjacent properties owned by Rios, Cuts, the Boyds, and D & R Woods. Rios, Cuts, and the Boyds sued PTI and Barragan for their property damage (the “Rios Action”), and D & R Woods sued PTI for similar claims in a separate action (the “D & R Action”). Plaintiff agreed to defend PTI and Barragan, subject to its right to withdraw and seek recoupment of costs should it determine that there is no coverage under the policy. Plaintiff now claims that there is no coverage.

III. JUDICIAL STANDARDS

A. Summary Judgment

Under Federal Rule of Civil Procedure 56(a), a court may grant summary judgment only if “there is no genuine issue as to any material fact and the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a). To prevail on a summary judgment motion, the movant must show that there are no genuine issues of material fact as to matters on which it has the burden of proof at trial. See Celotex Corp. v. Catrett, 477 U.S. 317, 325 (1986). Upon such a showing, the Court may grant summary judgment on all or part of the claim. Fed. R. Civ. P. 56(a).

*2 To defeat a summary judgment motion, the non-moving party may not merely rely on its pleadings or on conclusory statements. See Celotex, 477 U.S. at 324. Nor may the non-moving party merely attack or discredit the moving party’s evidence. Nat’l Union Fire Ins. Co. v. Argonaut Ins. Co., 701 F.2d 95, 96–97 (9th Cir. 1983). The non-moving party must affirmatively present specific evidence sufficient to create a genuine issue of material fact for trial. See Celotex, 477 U.S. at 324. The materiality of a fact is determined by whether it might influence the outcome of the case based on the contours of the underlying substantive law. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). Disputes over such facts amount to genuine issues if a reasonable jury could resolve them in favor of the nonmoving party. Id.

B. Default Judgment

The grant or denial of default judgment is within the court’s sound discretion. Aldabe v. Aldabe, 616 F.2d 1089, 1092 (9th Cir. 1980). The Ninth Circuit has enumerated the following factors (collectively, the “Eitel factors”) that courts should consider in determining whether to grant default judgment:

(1) the possibility of prejudice to the plaintiff; (2) the merits of the plaintiff’s substantive claim; (3) the sufficiency of the complaint; (4) the sum of money at stake in the action; (5) the possibility of a dispute concerning material facts; (6) whether the default was due to excusable neglect; and (7) the strong policy underlying the Federal Rules of Civil Procedure favoring decisions on the merits.

Eitel v. McCool, 782 F.2d 1470, 1471–72 (9th Cir. 1986).

In general, once default has been entered by the clerk, all factual allegations in the complaint, except those relating to the amount of damages, will be taken as true. Televideo Sys., Inc. v. Heidenthal, 826 F.2d 915, 917–18 (9th Cir. 1987).

IV. DISCUSSION

Plaintiff argues that there is no coverage under the policy for two reasons: (1) Barragan’s failure to disclose his recycling business (GWR) allows Plaintiff to rescind the policy; and (2) because the policy limited coverage to trucking operations, the property damage caused by Barragan’s recycling operations are not covered. The Court agrees that there is no coverage because the evidence in the record establishes that Plaintiff is entitled to rescind the policy and therefore owes no duty to defend or indemnify PTI or Barragan.²

A. Rescission and No Duty to Defend/Indemnify

“Concealment, whether intentional or unintentional, entitles the injured party to rescind insurance,” so long as the concealed fact is material. Cal. Ins. Code §§ 331, 334. “Materiality is to be determined not by the event, but solely by the probable and reasonable influence of the facts upon the party to whom the communication is due, in forming his estimate of the disadvantages of the proposed contract, or in making his inquiries.” Cal. Ins. Code § 334. The central question is whether the concealed fact could reasonably influence the insurer in deciding whether to issue the policy, in evaluating the degree of the risk, or in calculating the appropriate premium. Old Line Life Ins. Co. v. Superior Court, 229 Cal. App. 3d 1600, 1605 (1991).

Plaintiff contends that Barragan concealed material information by characterizing PTI as only a trucking company, when in fact the business also engaged in green waste recycling. The record indicates that PTI’s trucking and recycling operations worked together as “one company,” from the same location at 1880 Brown Avenue in Riverside. (Hall Decl., Ex. 1 at 4, ECF No. 65-4.) Notwithstanding this operation, when applying for the policy at issue, Barragan expressly characterized his business solely as a “trucking company hauling construction building materials.” (Ins. Appl., Foreman Decl., Ex. 7 at 1, ECF No. 65-11.) The application materials in the record do not disclose any recycling operations, and no defendant has offered specific evidence indicating otherwise. Therefore, there is no genuine dispute that Barragan’s failure to disclose the recycling operations constitutes concealment. See Cal. Ins. Code § 330 (“Neglect to communicate that which a party knows, and ought to communicate, is concealment.”).

*3 The question therefore becomes whether Barragan’s concealment was material. Plaintiff offers a declaration from an underwriter stating that Plaintiff “would not have issued [the policy] for the premium indicated on the policy if it had been aware of the existence of [GWR] and the operations at the 1880 Brown Avenue property … [Plaintiff] would have charged additional premium based upon the proper classification code for the recycling operations….” (Foreman Decl. ¶¶ 13, 14, ECF No. 65-9.) There is no evidence in the record that contradicts the underwriter’s statements. Because the concealed fact would have influenced how Plaintiff evaluated its risk in issuing the policy, and therefore the premium it charged, it was material.

Plaintiff has therefore satisfied its burden of showing that it is entitled to rescind the policy. And because it is entitled to rescind the policy, Plaintiff owes no duty to defend or indemnify PTI or Barragan in the Rios and D & R Actions. See DuBeck v. Cal. Physicians’ Serv., 234 Cal. App. 4th 1254, 1264 (2015) (“Rescission extinguishes a contract, rendering it void ab initio, as if it never existed.”). Furthermore, having prevailed on the rescission issue, Plaintiff shall refund all premiums paid. See Imperial Casualty & Indemnity Co. v. Sogomonian, 198 Cal. App. 3d 169, 184 (1988) (“The consequence of rescission is not only the termination of further liability, but also the restoration of the parties to their former positions by requiring each to return whatever consideration has been received.”).

Because neither D & R Woods nor any other defendant has offered evidence to create a genuine dispute of fact, the Court grants summary judgment against D & R Woods.

The Court also finds that default judgment against the remaining defendants is warranted. It appears that the procedural requirements are satisfied, see Fed. R. Civ. P. 55(b)(2), and the Eitel factors weigh in favor of granting default judgment. Plaintiff would be prejudiced if the Court denies default judgment, because despite prevailing on its claim against D & R Woods, Plaintiff would be left without recourse as to the defendants who have not responded. See Pepsico, Inc. v. Cal. Sec. Cans, 238 F. Supp.2d 1172, 1177 (C.D. Cal. 2002). The allegations in the complaint are sufficient, and as discussed above, there is no genuine dispute of material facts. Also, there is no evidence of excusable neglect in defendants’ failure to respond to the complaint.

The Court therefore grants judgment in favor of Plaintiff on all claims, as to all defendants.³

B. Recoupment of Costs

Because Plaintiff had no duty to defend the underlying actions, it may recoup the costs incurred in defending those actions. See Buss v. Superior Court, 16 Cal. 4th 35, 50 (1997). As evidence, Plaintiff offers various invoices, which itemize the $50,774.59 in attorneys’ fees and expenses requested. Defendants do not offer any evidence contesting this amount. Accordingly, the Court finds that Plaintiff is entitled to $50,774.59 for reimbursement of defense costs.

V. CONCLUSION

*4 For the foregoing reasons, the Court GRANTS Plaintiff’s motion for summary and default judgment, and hereby DECLARES that Plaintiff owes no duty to indemnify PTI or Barragan in the Rios and D & R Actions. Plaintiff is entitled to rescind the policy at issue and shall duly refund all premiums paid. PTI shall reimburse Plaintiff for defense costs in the amount of $50,774.59.⁴

All pending hearing dates are vacated and taken off calendar.

Plaintiff has until January 11, 2023 to file a proposed final judgment that conforms to the Court’s ruling.

IT IS SO ORDERED.

All Citations

1 The Court incorporates the insurance policy by reference for purposes of default judgment. See United States v. Ritchie, 342 F.3d 903, 908 (9th Cir. 2003) (A document “may be incorporated by reference into a complaint if the plaintiff refers extensively to the document or the document forms the basis of the plaintiff’s claim … for example, when a plaintiff’s claim about insurance coverage is based on the contents of a coverage plan.”).

2 Because Plaintiff prevails on its rescission argument, the Court need not analyze the scope of the policy coverage.

3 Paul M. Mahoney, counsel to D & R Woods, dedicated nearly one third of his opposition brief to grumbling over the Court’s denial of a stipulation to continue the trial. (See D & R Woods’s Opp’n to Mot. at 2, ECF No. 72.) Instead of meaningfully citing to the record to oppose summary judgment, Mr. Mahoney spilled ink lamenting that “the world has changed dramatically for the worst,” as evinced by the Court’s denial of the parties’ stipulation. (Id.) Mr. Mahoney has recently been rebuked by the California Court of Appeal for his incivility and fined $2,000 for impugning the integrity of the court. See In re Mahoney, 65 Cal. App. 5th 376, 380 (2021) (“This kind of over-the-top, anything-goes. devil-take-the-hindmost rhetoric has to stop.”). Nonetheless, Mr. Mahoney appears undeterred. Although his recent filing does not arise to contempt of court, it is still unbecoming, particularly when filed by an attorney whose unprofessional behavior was recently criticized in a published opinion. The Court cautions Mr. Mahoney to exercise better judgment in future filings with this Court and others.

4 The Court also denies Plaintiff’s request for judicial notice (ECF No. 65-2) as moot.

End of Document