Opinion
NOT TO BE PUBLISHED
APPEAL from a judgment of the Superior Court of Los Angeles County Super. Ct. No. VC046515. Raul A. Sahagun, Judge.
Duckor Spradling Metzger & Wynne, Kevin L. Wheeler for Plaintiff and Appellant.
Kirkpatrick & Lockhart Preston Gates Ellis, David P. Schack and Jennifer L. Wayne for Defendant and Respondent.
ARMSTRONG, Acting P. J.
Appellant Howard Mills, the Superintendent of Insurance for the State of New York acting as Rehabilitator of Frontier Insurance Company, sued respondent Bellwood Laundry and Linen Supply, seeking premiums allegedly due on a workers' compensation insurance policy. Judgment was entered for Bellwood after its demurrer was sustained without leave to amend. We affirm.
For purposes of convenience, appellant is referred to herein as "Frontier."
In accord with the rules on appeal, we treat the demurrer as admitting all facts properly pled (Blank v. Kirwan (1985) 39 Cal.3d 311, 318) and accept as true facts appearing in exhibits attached to the complaint. (Dodd v. Citizens Bank of Costa Mesa (1990) 222 Cal.App.3d 1624, 1627.) Bellwood has requested judicial notice of the first amended complaint and ruling on demurrer in another case, which appellant filed against a business called Mike Campbell & Associates. The request is denied. We cannot see that the documents would be helpful to our analysis here.
This case largely concerns Bellwood's and Frontier's relationships with a business called Human Dynamics Corporation ("HDC"), which is the named insured on the policy and which was a co-employer of Bellwood's employees.
The operative first amended complaint alleged that Bellwood, a laundry and linen supply company, contracted with HDC to co-employ Bellwood's employees and to provide administrative services such as human resources, payroll, and workers' compensation insurance. The complaint further alleged that as Bellwood's agent, HDC obtained workers' compensation insurance from Frontier, that the insurance was for Bellwood's benefit, to cover co-employees working at Bellwood's place of employment, and that Frontier handled at least 39 claims under the policy and paid over $744,000 in benefits to Bellwood's workers. (During oral argument in the trial court, counsel for Frontier informed the court that HDC was by then in bankruptcy.)
The Bellwood-HDC contract, called a Client Service Agreement, is attached to the complaint. It is dated March 22, 2000, and recites that "HDC is engaged in the business of furnishing co-employer administrative services to the Client and its Employee(s)," and that Bellwood "desires to make use of HDC's services to provide and administer the programs and duties associated with the employee/employer relationship as set forth in this Agreement . . . ." In the more specific provisions, HDC agreed to issue payroll checks to the co-employees, to withhold and pay all applicable taxes, and to furnish and keep in effect workers' compensation and employer's liability insurance. Bellwood was obligated to pay HDC's invoices no later than 12 hours prior to the time HDC was to issue the payroll checks.
HDC's obligation to furnish workers' compensation insurance was contingent on Bellwood's timely submission of notice of enrollment on each co-employee, and the Agreement makes Bellwood responsible "as a co-employer, for the hiring, firing, wage administration, daily supervision, and disciplinary decisions, and compliance with EEOC, FMLA, and ADA regulations and directives," and for ensuring compliance with all laws and regulations concerning worker safety. Bellwood agreed to verify each co-employee's time sheets and submit accurate records to HDC.
HDC reserved the right to increase fees if there was an increase in payroll taxes or in the cost of workers' compensation insurance. On this point, the complaint alleged, on information and belief, that Bellwood received bi-weekly or monthly invoices from HDC which required payment of a variety of fees, including fees which related to the premiums on the workers' compensation insurance.
The Client Service Agreement also provided that HDC would indemnify Bellwood for any demand against Bellwood in the nature of a back-bill or retro-charge, based on HDC's failure to properly bill Bellwood for insurance premiums.
In conformance with its obligations to Bellwood, HDC obtained a policy from Frontier for the period between May 1, 2000, and May 1, 2001. The complaint alleged, on information and belief, that Bellwood knew that HDC was obtaining the coverage through Frontier and knew about the policy. An attachment to the complaint indicates that HDC furnished Bellwood with certificates of insurance.
The policy was also attached to the complaint. Under "classification of operations," it reads "Laundries." In a section titled "who is insured," the policy provides that, "You are insured if you are an employer named in Item 1 of the Information Page." That Item names "Human Dynamics Corp for Workers Leased to Bellwood Laundry."
There is an estimated annual premium of $199,375. The policy shows a $35,000 deposit, but also provides that the final premium will be determined after the policy ends, by using actual payroll and job classification data, and that "[y]ou will let us examine and audit all your records that relate to this policy." The audit could be conducted "during the policy period and within three years after the policy period ends."
The declarations page shows a total estimated annual premium of over $420,000, but Frontier relies on the smaller sum, estimated later in the policy.
Frontier had the right to cancel the policy for enumerated reasons, including "[t]he occurrence of any change in your business or operations that materially increases the hazard for frequency or severity of loss." Regarding the insured's duties, the policy provides that, "[y]ou will keep records of information needed to compute the premium," "[y]ou will let us examine and audit all your records that relate to this policy," that Frontier had the right to "inspect your workplace."
Frontier was placed into Rehabilitation by the Supreme Court of New York on October 15, 2001. In August 2003, Frontier began an audit of relevant payroll information for the policy period. To this end, it sought Bellwood's records. Bellwood did not respond, but Frontier obtained the information from HDC and completed the audit in August 2004. Frontier determined that a premium of $480,884 was owing, and on August 23, 2004, sent Bellwood a demand for payment of that amount. Bellwood did not respond, and on November 16, Frontier sent another demand. In December, Bellwood responded, denying responsibility for premiums.
The complaint, filed on April 24, 2006, brought causes of action for breach of the insurance policy, breach of the Bellwood-HDC contract, on the theory that Frontier was a third party beneficiary of that contract, breach of an implied contract between Bellwood and Frontier, and money had and received. On those causes of action, Frontier sought $480,844 in damages. There were also two causes of action for unjust enrichment, one seeking payment of the $480,844 premium, and one seeking return of $744,000, the amount Frontier had paid in claims.
Bellwood demurred on the ground that all claims were barred by the statute of limitations, that Frontier had failed to state a cause of action as to every cause of action, and had failed to name an indispensable party, HDC. The trial court sustained the demurrer on all grounds.
DISCUSSION
Statute of Limitations
The parties agree that the four year statute applies to the claim for a breach of written contract, and the two year statute applies to the other claims. (Code Civ. Proc., §§ 337, 339.) They do not agree on when the causes of action accrued.
Bellwood's theory on demurrer was that the statute began to run on the date the policy period ended, in May 2001. We agree with Frontier that the statute of limitations does not bar these claims. Instead, the causes of action did not accrue until Frontier calculated and billed the final premium, and Bellwood refused to pay.
"In ordinary tort and contract actions, the statute of limitations . . . begins to run upon the occurrence of the last element essential to the cause of action." (Neel v. Magana, Olney, Levy, Cathcart & Gelfand (1971) 6 Cal.3d 176, 187.) That is, "A cause of action accrues at the moment the party who owns it is entitled to bring and prosecute an action thereon." (Howe v. Pioneer Mfg. Co. (1968) 262 Cal.App.2d 330, 339-340.) Here, Frontier could not have sued Bellwood for failure to pay the final premium until the final premium was calculated and a bill presented. Frontier was not obliged to send that bill during the policy period, but had three years in which to conduct its audit.
The trial court faulted Frontier for its failure to attach its letter to Bellwood assessing the final premium, deeming the letter a modification of the contract. We do not see that the letter is a modification, and more importantly, do not see that the omission of the letter is fatal. The complaint alleged that the letter was sent, and that no payment was made. For purposes of demurrer, that is sufficient. (See Ochs v. PacifiCare of California (2004) 115 Cal.App.4th 782, 795.)
Breach of Contract
First, we cannot agree with Frontier that Bellwood was a party to the insurance policy. The named insured was HDC, not Frontier, and that is the determinative fact.
Frontier points out that the policy covered workers leased to Bellwood, and argues that the premium was based on Bellwood's job classifications, not HDC's, that the policy gave Frontier the right to cancel if Bellwood's business changed, not if HDC's did, and to inspect Bellwood's premises, not HDC's. Even if we were to agree that likely intended meaning of the inspection clause, for instance, was that Frontier could inspect the laundry, not HDC's administrative offices, these arguments ignore the fact that HDC was a co-employer. (See Diamond Woodworks, Inc. v. Argonaut Ins. Co. (2003) 109 Cal.App.4th 1020, 1030-1031 , disapproved on another ground in Simon v. San Paolo U.S. Holding Co., Inc. (2005) 35 Cal.4th 1159, 1182-1183 [employee leasing company is an employer for purposes of workers' compensation law, and must obtain insurance].) Given that fact, the clause which allows inspection of "your premises," could easily be read to allow inspection of the co-employees' actual work site, at the laundry. At any rate, when the policy was issued, Frontier did not insist that Bellwood, a co-employer, be a named insured, and we cannot now amend the policy to make that happen.
Nor do we agree that when the allegations of the complaint and the facts in the attachments are considered, HDC was Bellwood's agent. Frontier finds agency in the provisions of the Client Service Agreement which bound HDC to provide insurance and bound Bellwood to pay HDC the amount of the premiums, in the reference to services to be furnished by HDC to "the client and its employees," in the fact that Bellwood, not HDC, was doing the hiring, and in the indemnification provision of the Client Service Agreement, which in Frontier's view put Bellwood on notice that it could be audited, and admitted agency. Frontier also cites the fact that the policy covered employees leased to Bellwood.
An agent "represents another . . . in dealings with third persons." (3 Witkin, Summary of Cal. Law (10th ed. 2005) Agency, § 2, p. 40.) "In California agency is either actual or ostensible. (Civ. Code, § 2298.) An agency is actual when the agent is really employed by the principal. (Civ. Code, § 2299.) An agency is ostensible when a principal causes a third person to believe another to be his agent, who is really not employed by him. (Civ. Code, § 2300.)" (Van Den Eikhof v. Hocker (1978) 87 Cal.App.3d 900, 905.)
We cannot see that the Client Service Agreement created an agency. Instead, the Client Service Agreement conspicuously avoids an agency relationship by making the individual workers co-employees of both Bellwood and HDC. HDC did not procure insurance for Bellwood as Bellwood's agent, but instead became a co-employer with Bellwood and obtained insurance, with itself as the sole named insured. The fact that the policy covered HDC for "workers leased to Bellwood laundries," does not mean that HDC was Bellwood's agent. Instead, the wording is inconsistent with an agency relationship.
As Frontier argues, the Client Service Agreement provided that HDC would invoice Bellwood for the amount of the premiums, and that Bellwood would choose the employees and notify Frontier of their existence, but that does not create an agency. We say the same about the indemnification clause. Further, the complaint nowhere alleges that Frontier saw the Client Service Agreement and inferred an agency agreement which meant that Bellwood was bound as a principal.
Frontier argues that the defect could be cured by amendment. The only specific amendment it suggests is an amendment to include facts relating to purchase of the insurance policy through an insurance agent. Frontier does not explain how the involvement of the insurance agent could make HDC Bellwood's agent, vis a vis Frontier, and thus has not shown a reasonable possibility that the defect could be cured by amendment. (Zelig v. County of Los Angeles (2002) 27 Cal.4th 1112, 1126.)
Implied Contract
Here, Frontier alleged that there was an implied contract between it and Bellwood. "An implied contract is one, the existence and terms of which are manifested by conduct." (Civ. Code, § 1621.) Like an express contract, it is based on the expressed or apparent intention of the parties. (Varni Bros. Corp. v. Wine World, Inc. (1995) 35 Cal.App.4th 880, 888.) "The true implied contract, then, consists of obligations arising from a mutual agreement and intent to promise where the agreement and promise have not been expressed in words." (Silva v. Providence Hospital of Oakland (1939) 14 Cal.2d 762, 773.)
Frontier finds Bellwood's intent to enter into a contract with Frontier in the fact that Bellwood employed HDC to obtain the coverage, and accepted the benefits of the coverage in satisfaction of its statutory duty to carry workers' compensation coverage, and because claims were made and paid. Frontier also cites its own conduct in issuing the policy and paying claims. It is apparent, however, that Frontier's argument is not really that there was an implied contract of insurance. It is that there was an implied amendment to the contract of insurance which already existed, adding Bellwood as a party. Frontier cites no authority which would allow such an implied amendment. The contract has an integration clause, and Bellwood was not a party to the contract. We do not believe that the doctrine of implied contract can be used in this manner.
Third Party Beneficiary
In this cause of action, Frontier sought to recover as a third party beneficiary of the Bellwood-HDC Client Service Agreement.
"A contract, made expressly for the benefit of a third person, may be enforced by him at any time before the parties thereto rescind it." (Civ. Code, § 1559.) "A third party may qualify as a beneficiary under a contract where the contracting parties must have intended to benefit that third party and such intent appears on the terms of the contract. [Citation.] However, it is well settled that Civil Code section 1559 excludes enforcement of a contract by persons who are only incidentally or remotely benefited by it. [Citations.]" (Jones v. Aetna Casualty & Surety Co. (1994) 26 Cal.App.4th 1717, 1724-1725.) Whether a third party is an intended beneficiary or an incidental beneficiary to the contract involves the parties' intent, to be determined from reading the contract as a whole in light of the circumstances under which it was entered. (Johnson v. Superior Court (2000) 80 Cal.App.4th 1050, 1064.)
Frontier cites cases which hold that, "It is sufficient if the third party belongs to a class of persons for whose benefit the contract was made" (Johnson, supra, 80 Cal.App.4th at p. 1064) and argues that workers' compensation carriers are thus third party beneficiaries of agreements to procure workers' compensation insurance.
However, in each of the cited cases, the relationship between the contract and the benefit to the third party is clear and immediate, and unlike the relationship between Frontier and the contracting parties here. In Johnson, supra, a contract between prospective parents and a sperm bank included the parents' agreement not to ask the sperm bank for information about the paid "donor." The court found that the "donor" was an intended beneficiary of the contract. (Johnson, supra, 80 Cal.App.4th at p. 1065.) In Marina Tenants Assn. v. Deauville Marina Development Co. (1986) 181 Cal.App.3d 122, the holding was that Marina del Rey tenants were third party beneficiaries of a master lease between the County of Los Angeles and the developer/landlord which required the landlord to charge fair and reasonable rents. (Id. at p. 313.) Diamond Woodworks, Inc. v. Argonaut Ins. Co., supra, 109 Cal.App.4th 1020 (disapproved on another ground in Simon v. San Paolo U.S. Holding Co., Inc., supra, 35 Cal.4th at pp. 1182-1183), is similar to this case in that it concerned leased employees, but does not support Frontier's position. There, the plaintiff, Diamond, transferred its employees to an employee leasing company, BSC, which leased the employees back to Diamond. BSC carried workers' compensation insurance for all its employees (those leased to Diamond and those leased to other businesses) with Argonaut, and Argonaut issued a certificate of insurance to Diamond. On those facts, the court held that Diamond was a third-party beneficiary of the insurance contract. The policy had been purchased for the purpose of covering Diamond's employees and satisfying Diamond's legal obligation under the workers' compensation insurance law. (Diamond Woodworks, Inc. v. Argonaut Ins. Co., supra, 109 Cal.App.4th at p. 1042.)
In those cases, intent to benefit is quite clear. We see nothing in the Client Service Agreement which indicates an intent to benefit Frontier or any other insurance carrier. Instead, in the Client Service Agreement, the parties intended to benefit each other, and to comply with the law. Under Frontier's reasoning, every contract which required the purchase of goods or services for its satisfaction (for instance, a construction contract which required the contractor to buy lumber) would make the seller of those goods or services a third party beneficiary of the contract. That is not the law.
What is more, Frontier's argument assumes that if it was a third party beneficiary of the contract between HDC and Bellwood, it would be entitled to enforce HDC's rights under the contract, by collecting sums Bellwood owed HDC for premiums. The assumption is erroneous. The only right Frontier would have as a third party beneficiary would be the right to sell workers' compensation insurance to cover Bellwood's and HDC's co-employees -- which, of course, it did.
Money Had and Received
This cause of action is duplicative of the contract and implied contract causes of action. "When a common count is used as an alternative way of seeking the same recovery demanded in a specific cause of action, and is based on the same facts, the common count is demurrable if the cause of action is demurrable." (McBride v. Boughton (2004) 123 Cal.App.4th 379, 394-395.) For the reasons already stated, we find that demurrer to the cause of action for money had and received was well taken.
Unjust Enrichment
An unjust enrichment claim "is grounded in equitable principles of restitution. An individual is required to make restitution when he or she has been unjustly enriched at the expense of another. (Rest., Restitution, § 1, p. 12; Ghirardo v. Antonioli (1996) 14 Cal.4th 39, 51.) A person is enriched if he or she receives a benefit at another's expense. (Rest., Restitution, § 1, com. a, p. 12; Ghirardo v. Antonioli, supra, 14 Cal.4th at p. 51.)" (Hirsch v. Bank of America (2003) 107 Cal.App.4th 708, 721-722.) "The basis of the action is the equitable principle 'a person should not be allowed to enrich himself at the expense of another.' [Citation.] Unjust enrichment 'presupposes the acceptance and retention of a benefit by one party with full appreciation of the facts, under circumstances making it inequitable for the benefit to be retained without payment of the reasonable value thereof.' [Citation.]" (Van de Kamp v. Bank of America (1988) 204 Cal.App.3d 819, 855.)
Those principles do not describe this case. Frontier argued that Bellwood received the benefit of workers' compensation insurance for its employees, pointing out that such insurance is mandatory, and also pointing out that Frontier paid claims on the policy. The argument is misplaced. The benefit Bellwood received was from its contract with HDC, which was obliged to procure insurance for the co-employees. It was thus HDC which benefited from the insurance policy. If Bellwood was unjustly enriched, it was at HDC's expense, and only HDC could enforce that payment.
Frontier failed to make Bellwood a named insured on the policy or to in any way secure the right to recover premiums from Bellwood. It cannot solve that problem now with resort to this equitable cause of action.
Here, too, Frontier argues that it could amend the complaint, contending that it could include facts relating to purchase of the insurance policy through an insurance agent, and contending very generally that it could allege facts to show that Bellwood's workers were specially employed by Bellwood. Frontier does not explain how these facts could add up to a cause of action for unjust enrichment, and thus has not shown a reasonable possibility that the defect could be cured by amendment. (Zelig v. County of Los Angeles, supra, 27 Cal.4th at p. 1126.)
Indispensable Party
Bellwood also demurred on the ground that Frontier had failed to name an indispensable party, HDC. Frontier argues that the trial court abused its discretion when it sustained the demurrer on this ground. Because we have found that judgment was properly entered on the substantive causes of action, it is an argument we need not reach.
DISPOSITION
The judgment is affirmed. Bellwood is to recover its own costs on appeal.
We concur: MOSK, J., KRIEGLER, J.