Giddings v. Industrial Indemnity Co.

112 Cal.App.3d 213 (1980) 169 Cal. Rptr. 278 DOUGLAS R. GIDDINGS et al., Plaintiffs and Appellants,

v.

INDUSTRIAL INDEMNITY COMPANY et al., Defendants and Respondents.

Docket No. 22179. Court of Appeals of California, Fourth District, Division One.

November 17, 1980. [215] COUNSEL

Hillyer & Irwin, Norman R. Allenby and Mitchel J. Olson for Plaintiffs and Appellants.

Wingert, Grebing, Anello & Chapin, Michael M. Anello, Thelen, Marrin, Johnson & Bridges, Edward J. Ruff, Philip R. Placier, James T. Hendrick and Theresa W. Ryan for Defendants and Respondents.

OPINION

BROWN (Gerald), P.J.

Douglas Giddings and Edwin Giddings appeal the judgment dismissing their suit against Industrial Indemnity Company and Mission Insurance Company, after the trial court granted the [216] companies' motions for summary judgment. The issue involves "property damage" under liability insurance policies.

The Giddings were business associates of C. Arnholt Smith. Douglas Giddings was an officer, director and employee of Westgate California Corporation (Westgate) and a director of United States National Bank (USNB). Edwin Giddings was a director of USNB. After the collapse of Smith's financial empire, the Giddings were named as defendants in three federal actions. In Harmsen v. Smith, a class action, the minority shareholders of USNB sought to recover for the total loss of the value of their holdings, alleging violations of federal banking law and federal and California securities laws, breach of fiduciary duty by USNB's directors and controlling shareholders, fraud, and conspiracy. In Franklin National Bank v. United States National Bank, Franklin National Bank sought recovery of $5 million it had paid for capital notes of USNB, alleging violations of federal securities laws, fraud, and conspiracy. In Trone v. Smith, the trustees for Westgate and related entities in reorganization under the Federal Bankruptcy Act sued on behalf of Westgate and its subsidiaries. The trustees alleged the numerous defendants had engaged in a systematic looting of Westgate, defrauded the corporation and its shareholders and creditors, and appropriated the assets, credit, and corporate opportunities of Westgate for their own gain. The complaint alleged 10 wrongful "courses of conduct" including: causing Westgate to buy assets for substantially more than their fair market value and sell assets for substantially less than their fair market value; taking and misappropriating Westgate's assets; causing Westgate to lend its assets to certain defendants without consideration; causing Westgate to lease its assets for less than their fair rental value; and causing Westgate to transfer assets and security interests without consideration and "other waste and misappropriation." By engaging in these courses of conduct, the Trone plaintiffs alleged, the defendants "wasted, misappropriated and converted the corporate assets and credit of Westgate and its subsidiaries." The complaint also alleged these courses of conduct constituted violations of federal banking and securities laws, violations of California securities laws, breaches of the defendants' duties of loyalty and due care, and fraud.