## Facts

- San Francisco Federal Savings and Loan Association discovered its branch manager embezzled funds by forging customer withdrawal documents and causing checks to be issued payable to Bank of the Orient.
- The manager deposited those checks into a personal account at Bank of the Orient and withdrew the proceeds.
- St. Paul Fire and Marine Insurance Company insured San Francisco Federal for the loss and paid substantial amounts, receiving releases/assignments that made it at least a partial subrogee/assignee of San Francisco Federal’s claims.
- San Francisco Federal sued Bank of the Orient for conversion and negligence, alleging the bank accepted the checks and permitted deposit into the manager’s personal account.
- The complaint did not join St. Paul and did not state a reason for nonjoinder under California Code of Civil Procedure § 389.
- Bank of the Orient sought (1) joinder of St. Paul as a compulsory/indispensable party and leave to file a cross-complaint against St. Paul, and (2) production of a Coopers & Lybrand “Report to Management,” an internal audit committee report on internal controls, and related deposition testimony.
- The trial court denied joinder and denied the motion to compel discovery.
- Bank of the Orient petitioned for a writ of mandate directing joinder and compelling the requested discovery.

## Issues

1. Whether a partially subrogated insurer/assignee of the insured’s claim is an indispensable party that must be joined as a plaintiff under California Code of Civil Procedure § 389.
2. Whether the trial court abused its discretion by denying discovery of internal audit/management reports and related deposition testimony based on asserted protections such as subsequent remedial measures and work product/trial-preparation doctrines.

## Decision

- The Court of Appeal issued a peremptory writ of mandate.
- The court held St. Paul was an indispensable party under Code of Civil Procedure § 389 and ordered its joinder as a plaintiff; it also directed the trial court to permit Bank of the Orient to file a cross-complaint against St. Paul.
- The court held the trial court abused its discretion in denying discovery and ordered production of the requested reports and related deposition answers.

## Legal Principles

- A partially subrogated insurer or partial assignee of a claim is a real party in interest whose absence can expose a defendant to multiple or inconsistent obligations; such a party must be joined when feasible under Code of Civil Procedure § 389.
- When an insurer has paid part or all of a loss and obtained subrogation/assignment rights, the cause of action is effectively split between insured and insurer, supporting compulsory joinder to allow complete adjudication.
- Limits on admissibility of subsequent remedial measures do not automatically bar discovery; discoverability turns on relevance and permissible discovery scope, not trial admissibility alone.
- Business or management-purpose investigative materials that are primarily factual and not shown to reflect attorney strategy are not automatically protected as attorney work product or trial-preparation materials.
- Denial of relevant discovery that materially impairs preparation of a defense may constitute an abuse of discretion under California’s liberal discovery policies.

## Conclusion

The Court of Appeal required joinder of the partially subrogated insurer under Code of Civil Procedure § 389 to avoid incomplete adjudication and multiple liability risk, and it compelled discovery of internal audit and control reports because asserted evidentiary and work-product objections did not justify withholding relevant factual materials.


Bank of the Orient v. Superior Court, 67 Cal. App. 3d 588, 136 Cal. Rptr. 741 (Cal. Ct. App. 1977)