(Super. Ct. No. 30-2011-00468428) Original proceedings; petition for a writ of mandate/prohibition to challenge an order of the Superior Court of Orange County, Derek W. Hunt.
The opinion of the court was delivered by: Fybel, J.
CERTIFIED FOR PUBLICATION
When an insurer retains counsel to defend its insured, a tripartite attorney-client relationship arises among the insurer, insured, and counsel. As a consequence, confidential communications between either the insurer or the insured and counsel are protected by the attorney-client privilege, and both the insurer and insured are holders of the privilege. In addition, counsel's work product does not lose its protection when it is transmitted to the insurer.
In this case, we hold the same tripartite attorney-client relationship arises when a title insurer retains counsel to prosecute an action on behalf of the insured pursuant to the title policy. Our holding leads us to grant the petition for writ of mandate or prohibition brought by Bank of America, N.A. (B of A), and Fidelity National Title Insurance Company (Fidelity).
Fidelity is the insurer and B of A is the insured under a lender's title policy insuring a deed of trust. When B of A made a claim under the policy, Fidelity retained the law firm of Gilbert, Kelly, Crowley & Jennett LLP (GKCJ) to prosecute, on B of A's behalf, the underlying lawsuit for equitable subrogation, injunctive relief, declaratory relief, and fraud. Defendant Pacific City Bank (PCB) served subpoenas duces tecum on Fidelity's parent company and Lawyers Title Insurance Company (Lawyers Title), requesting production of documents, including communications between GKCJ and Fidelity regarding the litigation. B of A moved to quash or modify the subpoenas on the ground they sought confidential communications and documents protected by the attorney-client privilege or attorney work product doctrine. The respondent court denied the motions to quash or modify, and B of A and Fidelity brought this petition for writ of mandate or prohibition to challenge the court's order.
The respondent court erred as a matter of law. A tripartite attorney-client relationship exists among Fidelity, B of A, and GKCJ by virtue of Fidelity's retention of GKCJ to represent B of A. Confidential communications between Fidelity and GKCJ therefore are protected from disclosure by the attorney-client privilege. It does not matter that Fidelity retained GKCJ to prosecute rather than defend a lawsuit, as the respondent court stated and PCB contends, because the title insurer's obligation to protect its insured's title is the same in either case. Nor does it matter that Fidelity retained GKCJ subject to a reservation of rights because Fidelity's reservation of rights did not create a conflict requiring Cumis*fn1 counsel, and GKCJ was not acting as Cumis counsel.
B of A has established it will suffer irreparable injury unless we grant extraordinary relief. We therefore grant the writ petition and order the issuance of a writ of mandate directing the respondent court to grant B of A's motions to quash or modify the subpoenas duces tecum, with further directions as set forth in the disposition.
FACTS AND PROCEDURAL HISTORY
The Petition's Allegations Are Deemed True.
In April 2012, B of A and Fidelity filed their petition for a writ of mandate or prohibition challenging the respondent court's order denying B of A's motions to quash or modify the subpoenas duces tecum. Ultimately, we issued an order to show cause. When the Court of Appeal issues an order to show cause, the real party in interest may file "a return by demurrer, verified answer, or both." (Cal. Rules of Court, rule 8.487(b)(1).) In response to the order to show cause, PCB filed an unverified "Return Brief" that included neither an answer nor a demurrer to the writ petition.
In the absence of a true return, all well-pleaded and verified allegations of the writ petition are accepted as true. (Code Civ. Proc., § 1094; Caliber Bodyworks, Inc. v. Superior Court (2005) 134 Cal.App.4th 365, 372-373, fn. 5; Shaffer v. Superior Court (1995) 33 Cal.App.4th 993, 996, fn. 2; Coppinger v. Superior Court (1982) 134 Cal.App.3d 883, 885.) An unverified return does not constitute a demurrer to a mandate petition and therefore should be stricken for purposes of addressing the petition's merit. (Universal City Studios, Inc. v. Superior Court (2003) 110 Cal.App.4th 1273, 1287.)
In County of San Bernardino v. Superior Court (1994) 30 Cal.App.4th 378, 382, footnote 6, the real parties in interest filed a document called "'responsive brief'" that did not respond to the formal allegations of the petition. The Court of Appeal noted its order issuing an alternative writ requested a formal return, meaning an answer or a demurrer. (Ibid.) By filing a responsive brief, the real parties in interest did not follow the correct procedures. (Ibid.)
Here too, PCB filed an unverified "Return Brief" that did not respond to the formal allegations of the writ petition. Because PCB did not file a true return with a verified answer or demurrer to the allegations of the writ petition, we deem the well-pleaded and verified allegations of the petition to be true. These true allegations are set forth in parts II. and III. of this section.
PCB argues its failure to submit a true return is a mere technicality which we should overlook because B of A and Fidelity did not include with their exhibits in support of the writ petition a copy of PCB's "Supplemental Brief in Opposition to Plaintiff's Motions to Quash/Modify Pacific City Bank's Subpoenas to Fidelity and Lawyer's Title; Declaration of Josh Lazar" (PCB's supplemental brief). The failure to submit a return with a verified answer or demurrer is not a technicality, but is an integral and critical step in the procedure for determining the merit of a petition for extraordinary relief. Further, B of A and Fidelity's mistake does not excuse that of PCB; each must be judged on its own and bear its own consequence determined under the relevant standard.
As to the assertion B of A and Fidelity did not provide a complete record, California Rules of Court, rule 8.486(b)(1)(B) requires a petition seeking review of a trial court ruling to be accompanied by a record that includes "[a]ll documents and exhibits submitted to the trial court supporting and opposing the petitioner's position." This rule required B of A and Fidelity to include PCB's supplemental brief in the exhibits accompanying the writ petition. The consequence for failure to "submit the required record or explanations" is that we "may summarily deny a stay request, the petition, or both." (Cal. Rules of Court, rule 8.486(b)(4), italics added.) Summary denial of B of A and Fidelity's writ petition would be an overly harsh consequence for the failure to include a single pleading in a lengthy record, particularly so because B of A and Fidelity did include in the exhibits both PCB's opposition and amended opposition to the motions to quash or modify the subpoenas.*fn2 In addition, before issuing an order to show cause, we requested informal opposition from PCB, and, with its return, PCB submitted an appendix that included the supplemental brief and other pleadings.
While California Rules of Court, rule 8.486(b)(4) gives us discretion in deciding whether to summarily deny a writ petition for failure to submit the required record, the failure to file a true return gives us no option but to accept the well-pleaded allegations of the writ petition as true. Unlike a document omitted from the exhibits, a verified answer to the writ petition cannot be supplied from another source, certainly not from the petitioner. B of A and Fidelity should have included PCB's supplemental brief in the exhibits to their writ petition, but their failure to do so does not excuse PCB's failure to file a true return.
In July 2007, Helena A. Cho applied for a loan from B of A to refinance her home mortgage. At that time, the property was encumbered by a $630,000 deed of trust in favor of American Sterling Bank, which had been recorded on November 10, 2005.
B of A approved the refinance loan, under the terms of which the loan proceeds would be used to pay off the American Sterling Bank loan. B of A's loan would be secured by a first deed of trust. On October 19, 2007, Cho executed a $608,000 promissory note in favor of B of A. On October 30, the loan funded, and a deed of trust securing the loan was recorded in the Orange County Recorder's Office. B of A paid a little over $598,000 to satisfy the American Sterling Bank loan.
In connection with the B of A loan to Cho, Transnation Title Insurance Company (Transnation) issued a title insurance policy to B of A (the Transnation Policy) insuring the priority of B of A's deed of trust over any other lien or encumbrance. The Transnation Policy provided that Transnation would defend B of A in any litigation involving a covered claim and that Transnation had the right to institute and prosecute any action to establish the lien of the insured mortgage or to prevent or reduce damage or loss to B of A. Transnation was acquired by Lawyer's Title, which in turn was acquired by Fidelity.
Unbeknownst to B of A, at about the same time that Cho refinanced with B of A, Cho (on behalf of her business DC Marketing) obtained a $1.5 million business line of credit from PCB. The line of credit was secured not only by Cho's business assets, but also by a deed of trust recorded against Cho's home on October 25, 2007, five days before the recordation of B of A's deed of trust.
In November 2010, PCB recorded a notice of default under its deed of trust and sent the notice to B of A in December 2010. In February 2011, PCB recorded a notice of trustee's sale, scheduling the sale for the following month. To protect its security interest, B of A retained the law firm of Miles, Bauer, Bergstrom & Winters, LLP (MBBW). PCB refused MBBW's request to postpone the sale and purchased the property with a full credit bid.
Two days before the scheduled sale date, MBBW, on behalf of B of A, tendered to Fidelity a claim under the Transnation Policy. Fidelity accepted the claim and retained temporary counsel to commence the underlying action to subrogate B of A to the position of the American Sterling Bank encumbrance that B of A had satisfied. In April 2011, temporary counsel filed the complaint for equitable subrogation and declaratory relief. In June, Fidelity retained GKCJ to represent B of A in the underlying action. Fidelity is paying GKCJ's fees to represent B of A.
B of A, represented by GKCJ, filed a first amended complaint asserting causes of action for equitable subrogation, injunctive relief, declaratory relief, and fraud.
The writ petition alleges: "During GKCJ's representation of [B of A] in the underlying action, GKCJ attorneys have communicated extensively with Fidelity regarding the facts of the underlying action, the status of the underlying action, [B of A]'s communications, GKCJ's litigation strategy, GKCJ's assessment of the strengths and weaknesses of each party's case and GKCJ's recommendations and opinions regarding settlement and other possible resolutions of the underlying action. GKCJ has also transmitted its research and other written work product to Fidelity. Further, the great majority of GKCJ's communications with Fidelity have been with Lindsy Doucette, who is a licensed attorney, and include Ms. Doucette's mental thoughts and impressions as an attorney. GKCJ and its attorneys have believed at all times that there was a tripartite relationship between [B of A], Fidelity and GKCJ and GKCJ's communications with Fidelity were protected by the attorney-client privilege and the attorney work product privilege."