194 Cal. App. 4th 192
Cal. Ct. App.2011Background
- R.C. and R.S., California residents with HIV, purchased health policies from Insurers in 2004.
- In 2007, Insurers stopped paying benefits, damaging appellants’ health and finances.
- In 2008, Missouri filed a declaratory relief action seeking rescission of the policies, asserting multiple grounds for rescission.
- Appellants counterclaimed for breach of contract in Missouri in November 2008; a preliminary injunction later ordered retroactive payment.
- In 2010, Missouri entered judgment for appellants denying rescission and ordering full benefits; Insurers complied.
- California then lifted its stay and Insurers demurred, arguing Missouri’s compulsory counterclaim rule barred appellants’ California claims under full faith and credit.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Missouri’s compulsory counterclaim rule bars California claims. | Appellants: rule is procedural, not part of the judgment; full faith and credit should not bar California claims. | Insurers: rule is part of the Missouri judgment and precludes later related claims. | Missouri rule applies; California claims barred. |
| Whether appellants’ California claims were compulsory counterclaims in Missouri. | Appellants: claims arose after rescission action and were not compulsory. | Insurers: damages claims accrued when benefits were denied; thus compulsory in Missouri. | California claims matured and were compulsory counterclaims under Missouri law. |
| Whether full faith and credit extends to Missouri’s counterclaim rule to bar the California action. | Public policy or forum limitations should permit California relief. | Full faith and credit requires applying Missouri law, including its counterclaim rule. | Full faith and credit applies; Missouri rule bars the California action. |
| Whether any public policy exceptions justify resisting enforcement of Missouri’s judgment. | Appellants seek a public policy exception to full faith and credit. | No recognized public policy exception supports disregarding Missouri’s judgment. | No public policy exception; Missouri judgment enforced. |
Key Cases Cited
- Baker v. General Motors Corp., 522 U.S. 222 (U.S. 1998) (exacting credit to judgments; nationwide preclusion effects)
- Thomas v. Washington Gas Light Co., 448 U.S. 261 (U.S. 1980) (judgment credit/validity and effect across states)
- Martin v. Martin, 2 Cal.3d 752 (Cal. 1970) (governing law of the rendering state for judgments)
- Gagnon Co. Inc. v. Nevada Desert Inn, 45 Cal.2d 448 (Cal. 1955) (control of successive actions by state law on judgments)
- Riley v. New York Trust Co., 315 U.S. 343 (U.S. 1942) (full faith and credit compels recognition of judgments across states)
- World Wide Imports, Inc. v. Bartel, 145 Cal.App.3d 1006 (Cal. App. 1983) (forum must honor sister-state judgments; limited public policy sotto voce)
- Van Pembrook v. Zero Manufacturing Co., 146 Mich.App. 87 (Mich. App. 1985) (discussed compulsory counterclaim rule; later authority questioned)
- Noel v. Hall, 341 F.3d 1148 (9th Cir. 2003) (full faith and credit applied to compulsory counterclaims)
- Conopeo, Inc. v. Roll Internat., 231 F.3d 82 (2d Cir. 2000) (foreign compulsory rules applied to later action)
- Brinker v. Superior Court, 235 Cal.App.3d 1296 (Cal. App. 1991) (finality and res judicata across judgments)