In Mercer Casualty Co. v. Lewis (1940) 41 Cal. App. 2d 918, an insurance company brought an action for declaratory relief and cancellation of an insurance policy against a policyholder and a victim of a car accident who had recovered damages in a prior action against the policyholder. The insurance company was a defendant in the prior action and had successfully demurred to the victim's complaint on a ground not specified in the opinion. The victim filed a cross-complaint against the insurance company in the second action. The insurance company argued the judgment in the prior action barred the victim's cross-complaint. (Mercer, supra, 41 Cal. App. 2d at pages 920, 924.) The appellate court found the insurance company had no obligation to the victim until judgment was entered against the policyholder in the prior action. The court concluded "in sustaining the insurance company's demurrer to the complaint the court could have held nothing more than that the victim at that time had no right to sue the company." The court held the cross-complaint was not barred by res judicata because the court in the prior action did not reach the merits of the victim's cause of action.