Lead Opinion
Opinion
In this case we must decide whether a tort defendant that has entered into a good faith settlement with the plaintiff remains liable to other defendants for an indemnity claim that rests on a theory of “implied contractual indemnity.” A brief overview of the relevant legal background may help to place this complex issue in perspective.
When a tort action involves multiple defendants, there is often an inherent tension between the state’s interest in encouraging the voluntary settlement of litigation and the state’s interest in promoting a fair apportionment of liability among the defendants. In an attempt to harmonize these two important interests, California has established a number of interrelated legal principles.
Under California law, when one of a number of tort defendants enters into a settlement agreement with a plaintiff, the nonsettling defendants’ liability to the plaintiff is reduced by the amount of the settlement. (Code Civ. Proc., § 877, subd. (a).)
The Legislature has recognized, however, that a defendant is unlikely to settle with a plaintiff if the settlement will not end the defendant’s involvement in the litigation and will leave it vulnerable to further liability to other defendants. (See Stambaugh v. Superior Court (1976)
Under this general framework, the trial court’s good faith determination plays a key role in harmonizing the objective of encouraging settlement with the objective of promoting a fair apportionment of loss among multiple tortfeasors. (Abbott Ford, Inc. v. Superior Court, supra,
A trial court’s decision that a settlement was made in good faith, however, does not absolve a settling defendant from a subsequent indemnification claim in all circumstances. For example, when the settling defendant has previously entered into a contractual agreement to indemnify a nonsettling defendant, a settlement—even if in good faith—does not relieve the settling defendant from performing the contractual indemnification obligations. (See C. L. Peck Contractors v. Superior Court (1984)
The issue here is whether a good faith settlement by a defendant who has not entered into an indemnification agreement bars a nonsettling
In this case, the Court of Appeal held that a good faith settlement bars a claim for implied contractual indemnity. The nonsettling defendants seek a determination that such a claim, like a claim based on an agreement to indemnify, is not barred by such a settlement.
We conclude that the judgment of the Court of Appeal should be affirmed. As we shall explain, our decision in E. L. White, Inc. v. City of Huntington Beach (1978)
Background
This proceeding arises out of a dispute concerning the Mission Village Condominium Project, a 251-unit condominium development in San Diego. In May 1981, current and former owners of the condominium units filed the underlying lawsuit against Bay Development, Ltd. (Bay), a limited partnership that owns the project, and Bowen Company (Bowen). Bowen was both the general partner of Bay and the real estate broker that marketed the units in the project. The complaint alleged, among other things, that in marketing the condominiums Bay and Bowen had fraudulently misrepresented there were 365 parking spaces for the 251 units when in fact there were only 326 spaces. The complaint asserted that the lesser number of parking spaces diminished the value of the condominium units, and sought damages for the diminution.
Shortly after the action was filed, Bay and Bowen filed a cross-complaint for indemnity against, among others, Home Capital Corporation (Home), the company from which Bay had purchased the property in 1979. In their cross-complaint, Bay and Bowen asserted: (1) Home had incorrectly
After the filing of the cross-complaint, plaintiffs filed an amended complaint, substituting Home for one of the Doe defendants included in the original complaint. Thereafter, shortly before the case was to go to trial, Home entered into a settlement agreement with plaintiffs. In return for Home’s payment of $30,000, plaintiffs agreed to release, and to dismiss with prejudice, all claims against Home.
Home then filed a motion, seeking (1) a determination that its settlement with plaintiffs was a “good faith” settlement within the meaning of section 877.6, and (2) an order granting summary judgment in its favor on the indemnity cross-complaint of Bay and Bowen. Bay and Bowen opposed the motion, contending that Home’s $30,000 settlement was not a good faith settlement and that, even if the settlement had been entered into in good faith, it did not bar their claims against Home, either for equitable indemnity or for implied contractual indemnity.
In support of its motion, Home filed declarations and a deposition transcript of one of Bay’s officials to demonstrate that its $30,000 settlement was not disproportionate to its potential share of liability. The declarations stated that opposing real estate experts had variously estimated the diminution in value attributable to the discrepancy in parking spaces to be between $75,000 and $700,000, and that during settlement conferences the settlement judge had suggested $250,000 as a realistic total settlement figure.
One of Bay’s officials explained in his deposition that Bay did not change the number of parking spaces listed in its submission to the Department of Real Estate because it did not believe the 365-space figure was in fact inaccurate. The Bay official testified that architects had informed Bay there was sufficient room within the project’s existing parking area to accommodate 365 parking spaces if the area were restriped and a greater proportion of the spaces sized for compact cars. He also testified Bay had notified the homeowner’s association it was willing to restripe the parking lot to create additional spaces by reducing the number of spaces that would accommodate full-size cars.
Home argued that these facts totally undermined the claim of Bay and Bowen that in marketing the units they had reasonably relied on Home’s earlier representation of the number of parking spaces. Home asserted that this evidence established that Bay and Bowen, rather than Home, bore the sole, or at least the major, responsibility for any damage plaintiffs might have incurred. In light of this evidence, Home asserted that its $30,000 settlement was generous and clearly within the reasonable range of its potential proportional liability. (See Tech-Bilt, Inc. v. Woodward-Clyde & Associates, supra,
In their opposition to Home’s motion, Bay and Bowen emphasized the disparity between Home’s $30,000 settlement and the potential liability attributable to the parking space shortage. They claimed the potential liability could be as high as $1 million. Because Home did not deny that the 365-parking-space figure had originated in its initial representations to the Department of Real Estate, Bay and Bowen argued that Home was primarily responsible for any misrepresentation and that, in view of Home’s potential exposure, the $30,000 settlement was “so far ‘out of the ballpark’ as to be ridiculous.” The declarations filed by Bay and Bowen, however, did not refute Home’s evidence that Bay and Bowen knew of the parking space discrepancy before they marketed the units.
Bay and Bowen contended that Home’s settlement was not in good faith, and that even if it were it did not preclude Home’s liability to them on their
After a hearing, the trial court resolved all of the issues in favor of Home. It concluded that the settlement was in good faith, barring Bay’s and Bowen’s indemnity claims.
Bay and Bowen then sought extraordinary writ relief from the Court of Appeal. The Court of Appeal stayed the indemnity action, but permitted plaintiffs’ trial against Bay and Bowen to go forward. The Court of Appeal then set the writ matter for oral argument, heard argument in the matter, and decided the matter by a full, written opinion, upholding the trial court’s order and denying the requested writ. Thereafter, we granted review.
Discussion
1. Procedural Issues
Before reaching the merits of the substantive claims raised by Bay and Bowen, we address two threshold procedural issues.
The first involves a jurisdictional question. The Court of Appeal issued its decision in this case—a 37-page written opinion—on March 31, 1987, and Bay and Bowen filed their petition for review on May 8, 1987. Under California Rules of Court, rule 24(a),
We conclude that the exception in rule 24(a) is not applicable to this case. The statutory provisions governing petitions for an extraordinary writ of mandate contemplate that when a Court of Appeal considers such a petition, the court will either (1) deny the petition summarily; (2) grant a peremptory writ in the first instance without a hearing, after compliance with the procedure set forth in Palma v. U.S. Industrial Fasteners, Inc. (1984)
In order to fulfill the purposes of rule 24(a) and to prevent the provisions of the rule’s exception from becoming an unconscionable trap for the unwary, we conclude that the order of the Court of Appeal setting this matter for oral argument must properly be treated as the issuance of “an alternative writ or order to show cause” for purposes of rule 24(a). Indeed, the Internal Operating Practices and Procedures of the Court of Appeal, Fourth Appellate District, Division One, which is involved here, suggests that oral argument in an original writ proceeding will be ordered only after an alternative writ or order to show cause is issued. (Ct. App., 4th Dist., Div. 1, Internal Operating Practices & Proc., IV, Original Proceeding [West’s Cal. Rules of Court (State ed. 1990) pp. 725-726].) Here, it is apparent that the Court of Appeal itself proceeded on the assumption that
After the parties to the writ proceeding had filed several rounds of briefs in the Court of Appeal, and after the Court of Appeal had notified the parties that it was setting the case for oral argument, the parties informed the Court of Appeal that the trial of plaintiffs’ action against Bay and Bowen had been completed and that the jury had found in favor of Bay and Bowen and judgment had been entered on the jury verdict.
A question has been raised whether this development renders this proceeding moot. Bay and Bowen argue that the proceeding is not moot. We agree.
It is true, of course, that in light of the subsequent jury verdict in their favor, Bay and Bowen have -paid no damages to plaintiffs that they need to recover from Home through an indemnity action. Bay and Bowen, however, continue to have a substantial economic interest in going forward with their indemnity claim, because they are seeking to recover, as part of their claim, the attorney fees and costs that they expended in defending the initial action.
Section 1021.6 permits an indemnitee to recover such attorney fees in an implied indemnity action under specified circumstances,
Thus, if, as Bay and Bowen assert, the trial court erred in dismissing their claim for implied contractual indemnity against Home, Bay and Bowen would be entitled to pursue that indemnity claim and perhaps recover their attorney fees under section 1021.6. Accordingly, the jury verdict in Bay’s and Bowen’s favor does not moot this proceeding.
Having disposed of the threshold procedural questions, we turn to the substantive issues to which the parties’ briefs are addressed.
2. Good Faith Settlement
Bay and Bowen initially contend that the trial court abused its discretion in determining Home’s $30,000 settlement was in good faith. If the trial court did abuse its discretion, there would be no need for us to determine whether a good faith settlement bars an indemnity claim based on a theory of implied contractual indemnity. We conclude, however, that the trial court did not abuse its discretion.
In Tech-Bilt, Inc. v. Woodward-Clyde & Associates, supra,
We also explained in Tech-Bilt: “[T]he intent and policies underlying section 877.6 require that a number of factors be taken into account [in determining good faith,] including a rough approximation of plaintiffs’ total recovery and the settlor’s proportionate liability, the amount paid in settlement, the allocation of settlement proceeds among plaintiffs, and a recognition that a settlor should pay less in settlement than he would if he were
Because in this case plaintiffs had sought, at least at one point in the litigation, as much as $1 million in damages for the parking space discrepancy, Bay and Bowen contend that, in applying the Tech-Bilt factors, the trial court should have found that Home’s $30,000 settlement was “so far ‘out of the ballpark’ ” as to render the settlement not in good faith. We disagree.
There was abundant evidence to suggest that the $1 million figure was grossly exaggerated. Plaintiffs themselves, in their second amended complaint, sought only $350,000 for the parking space shortage. Bay’s and Bowen’s own expert determined the total loss in value at only $75,000.
More important, the evidence before the trial court provided substantial support for Home’s contention that, at most, it bore only minor responsibility for the representations Bay and Bowen had made in marketing the condominium units. As discussed earlier, the evidence presented by Home established that officials of Bay and Bowen knew of the discrepancy in the parking space figure before Bay obtained the second Department of Real Estate report used in marketing the units. Given this evidence, the trial court did not abuse its discretion in finding that Bay and Bowen had failed to demonstrate that the settlement was not in good faith.
3. Indemnity Claim
The principal contention of Bay and Bowen is that even if the trial court properly found that the settlement was in good faith, the court nonetheless erred in dismissing their cross-complaint for indemnity.
E. L. White, supra,
As this passage indicates, in E. L. White we recognized a distinction between an indemnity claim based on an express contract to indemnify, that is, an express contractual indemnity claim, and an indemnity claim based on “contractual language not specifically dealing with indemnification” (E. L. White, supra,
The city then filed a declaratory judgment action to establish that E. L. White, Inc., had an obligation to indemnify the city. The city based its declaratory relief action on an express indemnity clause contained in its contract with E. L. White, Inc. The trial court, however, found that the accident had resulted, in part, from the “active negligence” of the city’s own inspectors. Because the express indemnity clause in question was a “gener
The E. L. White case decided by this court (supra,
We rejected the city’s contention and held that E. L. White, Inc., could maintain an action for implied equitable indemnity. (21 Cal. 3d at pp. 506-510.) Furthermore, in remanding the matter for trial of the indemnity claim, we held that the indemnity claim was to be determined “in light of the teaching set forth in our recent decision in American Motorcycle Assn. v. Superior Court . . . .” (
E. L. White, supra,
Our conclusion that a good faith settlement bars a claim for implied contractual indemnity is not at all inconsistent with the principle that such a settlement would not preclude an indemnity action based on an express indemnity agreement. (See C. L. Peck Contractors v. Superior Court, supra,
These considerations do not apply, however, when a settling defendant has not entered into an indemnification agreement with the nonsettling defendant, and the nonsettling defendant’s claim for indemnity is based on “equitable considerations brought into play ... by contractual language not specifically dealing with indemnification.” (E. L. White, supra,
When an indemnity claim is based on an implied contractual indemnity theory, however, there is no written indemnification clause to which the parties or the court may refer. As a consequence, if, as Bay and Bowen contend, we were to consider a claim for implied contractual indemnity as analogous to a claim for express contractual indemnity, an implied contractual indemnity claim could accord an indemnitee greater rights than it would have under an express indemnification contract. This anomaly would arise because in an implied indemnity situation a court could not apply the rules requiring specificity in express indemnification clauses. Thus, the legal rules applicable to the interpretation of express indemnification contracts provide further support for the conclusion that a claim for implied contractual indemnity is a form of equitable indemnity subject to the rules governing equitable indemnity claims.
In evaluating the settling defendant’s potential proportionate liability for purposes of this determination of good faith, the trial court must take into account any contractual relationship between the settling and nonsettling defendants, and must consider how each party’s performance of its contractual obligations relates to its share of liability. Thus, if the trial court finds that the settling defendant rather than the nonsettling defendant is primarily responsible for the plaintiff’s damages because the loss is largely attributable to the settling defendant’s failure to properly fulfill its contractual obligations, the court should find the settlement in good faith only if the settlement requires the settling defendant to bear an appropriate share of the damages and leaves the nonsettling defendant with a remaining liability that is not grossly disproportionate to its own responsibility for the loss. (Cf. Far West Financial Corp. v. D & S Co., supra,
Conclusion
In sum, we conclude that the trial court properly found that Home’s settlement was a good faith settlement under section 877.6, subdivision (c), and that the settlement barred Bay’s and Bowen’s claim against Home for implied contractual indemnity.
The judgment of the Court of Appeal is affirmed.
Mosk, J., Broussard, J., and Panelli, J., concurred.
Notes
Code of Civil Procedure section 877, subdivision (a) provides in relevant part: “Where a release, dismissal with or without prejudice, or a covenant not to sue or not to enforce judgment is given in good faith before verdict or judgment to one or more of a number of tortfeasors claimed to be liable for the same tort... it shall have the following effect: [][] (a) It shall
Unless otherwise indicated, all further section references are to the Code of Civil Procedure.
Section 877.6, subdivision (c) provides in relevant part: “A determination by the court that the settlement was made in good faith shall bar any other joint tortfeasor . . . from any further claims against the settling tortfeasor . . . for equitable comparative contribution, or partial or comparative indemnity, based on comparative negligence or comparative fault.”
Compare Stratton v. Peat, Marwick, Mitchell & Co. (1987)
In support of their claim for implied contractual indemnity, Bay and Bowen alleged that when Home sold the condominium project to Bay in 1979, Home (1) “impliedly warranted” that the statements contained in the initial report of the Department of Real Estate were accurate, (2) knew that Bay would provide the report to its broker to assist in the marketing of the units, and (3) “knew that [Bay] would rely on [Home] having accurately prepared the report and would disseminate the report to the public without materially changing it.” Although Bay and Bowen denied that the representations in their marketing materials as to the number of parking spaces were inaccurate, the cross-complaint asserted: “[I]f plaintiffs recover pursuant to their amended complaint against cross-complainants, the recovery will be caused primarily and ultimately by [Home’s] breach of contract with [Bay], Cross-complainants’ liability will arise, not as a result of any active fault on its part, but solely as a result of [Home’s] breach of contract.”
Rule 24(a) provides in relevant part: “A decision of a Court of Appeal becomes final as to that court 30 days after filing, except that the decision becomes final as to that court immediately after filing upon the denial of a petition for a writ within its original jurisdiction or a writ of supersedeas, without issuance of an alternative writ or order to show cause, or the denial of an application for bail or to reduce bail pending appeal, or the denial of a transfer to a Court of Appeal in a case within the original jurisdiction of a municipal or justice court; but the denial of a petition for writ of habeas corpus that is filed on the same day as the decision in a related appeal becomes final as to the Court of Appeal at the same time as the related appeal. [H] When a decision of a reviewing court is final as to that court, it is not thereafter subject to modification or rehearing by that court
All further references to rules are to the California Rules of Court.
Rule 28(b) provides in relevant part: “A party seeking review must serve and file a petition within 10 days after the decision of the Court of Appeal becomes final as to that court
The setting in which the jurisdictional question is presented in this case is clearly distinguishable from that presented in two criminal cases, People v. King (1978)
In both cases, we granted a hearing after the Court of Appeal decision, purporting to transfer both the appeal and the petition for habeas corpus to this court. In each case, our ultimate opinion on the appeal effectively resolved the substantive issue presented by the related habeas petition. But in each opinion we concluded in a footnote that because the Court of Appeal had not issued an order to show cause on the habeas petition, that court’s dispositive order denying or dismissing the habeas petition had, under rule 24(a), become final immediately after filing, and the petition for review, which had been filed according to the deadlines applicable to the appeal, had not been timely as to the habeas petition. (People v. King, supra,
After King and Pendleton, considerable confusion continued to arise from the fact that under rule 24(a), as construed in those decisions, a criminal appeal and a consolidated habeas petition that had been resolved in a single opinion frequently became final on different dates for the purposes of filing a petition for review. To address the problem, rule 24(a) was amended in 1989 to explicitly provide that “the denial of a petition for writ of habeas corpus that is filed on the same day as the decision in a related appeal becomes final as to the Court of Appeal at the same time as the related appeal.”
This case is distinguishable from King and Pendleton in a number of crucial respects. First, because the petition for writ of mandate filed by Bay and Bowen in the Court of Appeal stood alone, and was not related to an appeal or any other proceeding then pending before the Court of Appeal, that court’s order setting the matter for argument was more likely to be, and could more reasonably be, viewed by the parties as the equivalent of an alternative writ or order to show cause than was the case with respect to the consolidation order filed by the Court of Appeal in King or Pendleton. Second, because in both King and Pendleton the issue raised by the habeas petition was directly related to an issue raised on appeal, this court’s application of rule 24(a) in those cases did not have the effect of unexpectedly depriving parties, who had acted reasonably under the circumstances, of this court’s review of the merits of the Court of Appeal’s decision. The same would not be true if in this case our court, in contravention of the reasonable expectations of the parties and the Court of Appeal, were to interpret rule 24(a) in a manner that rendered the petition for review untimely.
To avoid any possible confusion, in the future all Courts of Appeal should follow the contemplated statutory procedure by issuing an alternative writ or order to show cause before setting a writ matter for oral argument.
Section 1021.6 provides in relevant part: “Upon motion, a court after reviewing the evidence in the principal case may award attorney’s fees to a person who prevails on a claim for implied indemnity if the court finds (a) that the indemnitee through the tort of the indemnitor has been required to act in the protection of the indemnitee’s interest by . . . defending an action by a third person and (b) if that indemnitor was properly notified of the demand to . . . provide the defense and did not avail itself of the opportunity to do so, and (c) that the trier of fact determined that the indemnitee was without fault in the principal case which is the basis for the action in indemnity . . . . ”
Although the implied contractual indemnity doctrine and the implied noncontractual equitable indemnity doctrine arose separately and were sometimes characterized as distinct categories of indemnity (see, e.g., Rossmoor Sanitation, Inc. v. Pylon, Inc. (1975)
Before the advent of the comparative indemnity doctrine in American Motorcycle Assn. v. Superior Court, supra,
In describing implied contractual indemnity as a form of equitable indemnity, our decision in E. L. White, supra,
Although Bay and Bowen assert that a claim for implied contractual indemnity is not barred by a good faith settlement because the language of section 877.6, subdivision (c) does not explicitly refer to such a claim but instead refers to indemnity claims which are “based on comparative negligence or comparative fault” (see ante, at p. 1019, fn. 2), in our recent decision in Far West Financial Corp. v. D & S Co., supra,
In County of Los Angeles, supra,
In Bear Creek Planning Com., supra,
The decisions in County of Los Angeles v. Superior Court, supra,
The special legal principles governing express contractual indemnification provisions also refute any suggestion that Bay’s and Bowen’s claim against Home should be analyzed as a claim for ordinary contract damages rather than as a claim for implied contractual indemnity. Although Bay’s and Bowen’s claim against Home rested on Home’s alleged breach of an implied warranty in the contract for the sale of the property from Home to Bay (see ante, at p. 1021, fn. 4), Bay and Bowen were not seeking to recover from Home the ordinary damages recoverable for breach of contract (see Civ. Code, § 3300), but instead were asserting that if they were held legally responsible for damages in the underlying action on any of the numerous theories which the plaintiffs in that action had pursued, those damages should be entirely shifted to Home. As such, Bay’s and Bowen’s claim represented a classic claim for indemnity,
The dissent’s argument that application of section 877.6, subdivision (c) to a claim for implied contractual indemnity constitutes an unconstitutional impairment of contract (see dis. opn.,post, at pp. 1044-1045) is similarly untenable. As explained, a party’s right to obtain implied contractual indemnity has always been limited by equitable considerations, and the good faith settlement requirement of section 877.6, subdivision (c) protects the substantive principles embodied in the implied contractual indemnity doctrine. (See post, at pp. 1034-1035.)
Concurrence Opinion
I concur, but I write separately regarding the application of California Rules of Court, rule 24(a). As the majority notes, rule 24(a) contains an exception to the usual rule that a Court of Appeal decision becomes final 30 days after filing: “the decision becomes final as to that court immediately after filing upon the denial of a petition for a writ within its original jurisdiction or a writ of supersedeas, without issuance of an alternative writ or order to show cause.” (Italics added.) In this case, no alternative writ or order to show cause issued. Although I agree with the majority’s result on this question in this case, I cannot join in concluding that a Court of Appeal order setting a case for oral argument generally may serve as the equivalent of an alternative writ or order to show cause.
Although we have deemed issuance of a peremptory writ in the first instance a “rarity” (Palma v. U.S. Industrial Fasteners, Inc. (1984)
Despite these clearly drawn distinctions, since at least August 10, 1982, rule 3 of the Local Rules of the Fourth Appellate District has expressly recited that “Division One will accept for filing only those petitions for writs of mandate and prohibition which pray solely for a peremptory writ. If meritorious, upon due notice by petitioners, the court can grant them in the first instance. The court will not accept for filing petitions praying for alternative writs." (Ct. App., Fourth Dist., Local Rules, rule 3 [West’s Cal. Rules of Court (State ed. 1990) p. 684], italics added.) Appellants who seek extraordinary relief in the Fourth Appellate District thus enter a separate land with independent rules whose singular nature causes the very problem with which we are here confronted.
Although the applicable local rules clearly forbid filing of requests for alternative writs or orders to show cause, the Internal Operating Practices and Procedures of Division One of the Fourth Appellate District expressly provide that when a petition for writ is filed and a response received or time therefor has elapsed, “the writs attorney will prepare a written presentation to the panel of judges to determine if the matter should be made a cause by issuing an alternative writ, order to show cause, or, in appropriate cases, whether a peremptory writ should issue in the first instance, [fl] If the matter becomes a cause, it will be assigned to a member of the panel for the preparation of an opinion ....[][] Once the writ has been assigned to a judge . . . , it will be placed on calendar if oral argument is desired by the court or by the parties.” (Ct. App., 4th Dist., Div. 1, Internal Operating Practices & Proc., IV, Original Proceedings [West’s Cal. Rules of Court (State ed. 1990) pp. 725-726].) In this case, of course, no peremptory writ was issued. The only provision for calendaring writ matters contemplated in the Internal Operating Practices and Procedures indicates that a matter becomes a “cause” only on issuance of an alternative writ or order to show cause and will be calendared only after becoming a cause.
This confusion about the effect of an order scheduling oral argument was further exacerbated by the Court of Appeal’s consideration of the merits of a petition for rehearing. Rule 24 of the California Rules of Court provides that “When a decision of a reviewing court is final as to that court, it is not thereafter subject to modification or rehearing by that court . . . .” The Court of Appeal’s action here further muddied the procedural waters.
In my view, the fault lies not so much with the parties as with the Court of Appeal because of its failure to conform its practices with those required
Where I depart from the majority is in its intimation that the Court of Appeal’s procedures here may be acceptable, albeit not preferable. Thus, the majority suggests that “To avoid any possible confusion, in the future all Courts of Appeal should follow the contemplated statutory procedures by issuing an alternative writ or order to show cause before setting a writ matter for oral argument.” (See maj. opn., ante, at p. 1025, fn. 8.) Instead, in my view, the procedures described in the local rules precluding requests for alternative writs or orders to show cause are inconsistent with statute and rule and should be disapproved. The language of rule 24 of the California Rules of Court should be read according to its plain meaning: a denial of a petition for writ when no alternative writ or order to show cause has been issued is final immediately.
Eagleson, J., and Arabian, J., concurred.
Reading the two applicable local rules together leaves one to ponder what purpose is served by a refusal to accept petitions requesting alternative writs. It appears from its internal operating procedures that the court contemplates issuing alternative writs and holding argument when it wishes to consider matters fully on their merits before deciding whether or not to issue a writ. If it wishes to issue a peremptory writ in the first instance, it can give Palma notice and do so. If it wishes to deny summarily, it may do so as well. The preclusion of alternative writ prayers apparently was not intended to limit the court’s issuance of such writs in undefined instances. The court’s action here in scheduling oral argument without issuance of an alternative writ amounted in effect to an unfortunate and unnecessary hybrid of alternative writ procedures and Palma notice procedures.
The majority describes another situation in which rule 24(a) had a harsh and anomalous effect. (Maj. opn., ante, at p. 1025, fn. 7.) Under the rule, a criminal appeal and consolidated habeas corpus petition had different dates of finality for purposes of filing a petition for review. The existing language was not read “creatively” to cure the problem; instead, rule 24(a) was amended to expressly provide the same date of finality.
An amendment to the rule could cover the situation faced by petitioner here and provide that when the Court of Appeal holds argument and issues a full written opinion, the decision is final 30 days after the filing of the opinion as is true in an ordinary appeal. I am not convinced such an amendment is necessary. Confusion can be avoided by simply adhering to the plain language of the rule and by requiring the lower courts, in their local procedures, to adopt methods that comport with generally applicable statutes and rules.
Because the majority opinion will bar recovery for breach of a contractual promise to perform, whether express or implied, the fact the warranty in this case was implied is not sig-
The majority acknowledges that settlement does not bar enforcement of an express indemnity provision. (Maj. opn., ante, at pp. 1031-1032.)
Dissenting Opinion
Dissenting.—Although I have joined the Chief Justice’s concurring opinion to reflect my concern with the majority’s treatment of the jurisdictional issue in this case, I find it necessary to write separately to express my further disagreement with the majority’s decision of the underlying indemnity issue.
The majority concludes a settlement determined by a trial court to be in good faith under Code of Civil Procedure section 877.6 bars a claim for implied contractual indemnity.
There is a significant difference between a contractual promise to indemnify and a contractual promise to perform in a certain way. The majority does not adequately reflect this distinction. Its holding will preclude a party to a contract from recovering for breach of contract when the breaching party has entered into a good faith settlement with a third party. The majority opinion will mandate this result even when the breach was of an express contractual provision to perform in a specified manner. I find no support for this conclusion in the statute or common sense.
The majority does not acknowledge that we are confronted with nothing more than a question of statutory construction—the scope of section 877.6, subdivision (c).* *
Section 877.6(c) is unambiguous. It applies to contribution and indemnity claims “based on comparative negligence or comparative fault.” (Italics added.) Bay and Bowen’s claim is based on neither comparative negligence nor comparative fault. Their claim is based on an alleged breach of contract, i.e., an implied warranty. The majority opinion assumes that section 877.6(c) applies to such a claim despite the statutory language to the contrary. I believe due consideration should be given to this threshold, potentially dispositive issue.
The application of section 877.6(c) to contract actions is correct only if an action for breach of contract is properly characterized as being a claim based on “comparative fault.” I am unaware of any support for that characterization. We recently reiterated the principle that “The distinction between tort and contract is well grounded in common law, and divergent objectives underlie the remedies created in the two areas.” (Foley v. Interactive Data Corp. (1988)
In Bear Creek Planning Com. v. Title Ins. & Trust Co. (1985)
B. Prior court decisions
The majority opinion relies heavily on E. L. White, Inc. v. City of Huntington Beach (1978) 21 Cal.3d 497 [
First, unlike in the present case, the indemnity claim in White was not based on a warranty of performance. The claim arose out of an accident in which a trench collapsed onto two workers. Shortly before the accident, a city inspector and engineer visited the site several times and observed a safety order violation, but they took no action to compel compliance. As the court noted, the indemnity claim was for damages caused by the city’s “active negligence.” There was no allegation the city had any contractual duty to inspect the work site or to ensure its safety. In the present case, the claim is founded on a warranty as to the number of parking spaces.
Second, the White court’s observation was made in response to an argument that, because an express indemnity provision did not apply to the facts before the court, there was no other basis for indemnity. The quoted passage in White (21 Cal. 3d at pp. 506-507) rejected that argument and made clear that a right to indemnity can be found in other sources: (1) contractual language or (2) equities of the case. Unlike the majority, the White court did
Third, a study of the authorities cited in White makes clear that the court’s reference to two forms of indemnity was meant to indicate merely a distinction between express and implied indemnity, not a conclusion that all implied indemnity is the same. (As noted above, the latter issue was not before the court.) In Rossmoor Sanitation, Inc. v. Pylon, Inc. (1975)
Fourth, the majority reads too much into the statement that an indemnity claim “may find its source in equitable considerations brought into play ... by contractual language not specifically dealing with indemnification . . . .” (White, supra,
In short, I find no support in White, supra,
That White, supra,
Similarly, in Bear Creek Planning Com. v. Title Ins. & Trust Co., supra,
C. Conflict with Civil Code section 3300 and other statutes
The majority’s conclusion is especially troubling because it directly conflicts with Civil Code section 3300, which states: “For the breach of an
Under the majority opinion, a good faith settlement under section 877.6 would bar recovery for breach of contract. This result would conflict with Civil Code section 3300’s provision that the injured party is entitled to all damages proximately caused by the breach. A brief example illustrates the point: A bolt maker contracts with an aircraft manufacturer to supply bolts. This contract expressly requires that the bolts be of a certain specification. The manufacturer, in turn, contracts with an airline company to deliver an aircraft that meets certain specifications contained in their contract. The bolt maker breaches its contract by supplying nonconforming bolts. The manufacturer incorporates them into an aircraft. As a result, the plane crashes. The victims sue the airline, the manufacturer, and the bolt maker. If the bolt maker enters into a good faith settlement with the victims under section 877.6, the majority opinion will preclude the manufacturer from recovering for the bolt maker’s breach of contract. This result conflicts with Civil Code section 3300. If the manufacturer can show that its damages were proximately caused by the component maker’s breach of their contract, section 3300 should allow the manufacturer to recover all those damages.
The majority opinion also conflicts with California Uniform Commercial Code sections 2714 and 2715, which allow a buyer of goods to recover incidental and consequential damages for a seller’s breach of contract. Under the majority’s expansive holding, these sections, like Civil Code section 3300, would have no effect if the breaching seller entered into a good faith settlement with an injured third party under section 877.6.
Nothing in section 877.6 suggests the Legislature intended to abrogate Civil Code section 3300 or California Uniform Commercial Code sections 2714 and 2715. All presumptions are against a repeal by implication. (Western Oil <6 Gas Assn. v. Monterey Bay Unified Air Pollution Control Dist. (1989)
The majority creates an unnecessary conflict between section 877.6 and other statutes. I see no reason to do so.
D. Unconstitutional impairment of contract
Article I, section 9 of the California Constitution states, “A bill of attainder, ex post facto law, or law impairing the obligation of contracts may not be passed.” As construed by the majority, section 877.6(c) clearly impairs the obligation of existing contracts and therefore runs afoul of the state Constitution.
Absent section 877.6 (as construed by the majority), it is undisputed that Bay and Bowen could maintain an action for the alleged breach of an implied warranty in their contract with Home. Stated simply, they would have a remedy for the breach. We long ago made clear that, “The remedy, where it affects substantial rights, is included in the term ‘obligation of contract’, and the remedy cannot be altered so as to materially impair such obligations.” (Brown v. Ferdon (1936)
E. Practical effects of the majority decision
Apparently in recognition of the great potential for unfairness under its rule, the majority advises trial courts they “must take into account any contractual relationship between the settling and nonsettling defendants.” (Maj. opn., ante, at p. 1034.) I believe the majority’s cautionary note is insufficient. For example, the majority opinion states that, when the nonsettling defendant is primarily responsible for the plaintiff’s damages, “ . . . the court should find the settlement in good faith only if the settlement requires the settling defendant to bear an appropriate share of the damages and leaves the nonsettling defendant with a remaining liability that is not grossly disproportionate to its own responsibility for the loss.” (Maj. opn., ante, at p. 1034, italics added.) This is troublesome in two respects. First, it is a mere suggestion and does not reflect the reality of litigation. There are extreme pressures on trial courts to dispose of as many cases as possible by settlement. Faced with even a remotely colorable claim of good faith, many trial courts will be disposed to view it favorably and approve settlement under section 877.6. Under the majority’s “should” language, a trial court can approve a settlement even if the settling defendant does not bear an appropriate share of the damages.
Second, the phrase “appropriate share of the damages” provides no guidance. The term is not defined or even explained. Moreover, where, as in this case, the nonsettling defendant is found to have no responsibility for the loss, I do not see how any damages sustained by the nonsettling defendant can be said to be “appropriate.” For the same reason, I also question the majority’s observation that a trial court “may decline” to find good faith if the nonsettling defendant’s liability to plaintiff is wholly attributable to the settling defendant’s breach. (Maj. opn., ante, at pp. 1034-1035.) I do not see how a trial court could possibly find good faith in that situation. As a matter of logic and fairness, the party without fault should not be required to pay anything. For example, if the breaching party settles with the third party by paying 90 percent of its damages, the nonbreaching party would be liable to the third party for the remaining 10 percent. The majority opinion, however, would allow the trial court to bar the nonbreaching party from recovering this 10 percent from the breaching (settling) party. This result would be grossly and fundamentally unfair. The majority opinion should make clear that the trial court in that situation must not deem a settlement to be in good faith. In short, the majority opinion leaves too much room for grossly unfair results.
Assume, however, the airline does not discover the defective bolts, and the plane crashes. The victims sue the manufacturer, the airline, and the bolt maker. If the bolt maker enters into a good faith settlement with the victims under section 877.6, the majority opinion would preclude the manufacturer from recovering for the breach of its contract with the bolt maker. The manufacturer would be deprived of the benefit of a freely negotiated and bargained-for performance provision in the contract.
All further section references are to the Code of Civil Procedure unless otherwise indicated.
For convenience, I will hereafter refer to section 877.6, subdivision (c) as section 877.6(c).
The majority contends the phrase “equitable apportionment or allocation of loss” may be more descriptive than section 877.6(c)’s use of the phrase “comparative negligence or comparative fault.” (Ante, p. 1029, fn. 10.) The majority’s phrase is perhaps more descriptive, but it is not the language employed by the Legislature.
Nor am I persuaded by the two Court of Appeal decisions on which the majority relies. (IRM Corp. v. Carlson (1986)
The majority opinion faults the court in Bear Creek, supra,
Aside from the placement of the two statutes in different codes, it is questionable whether the Legislature could limit Civil Code section 3300 by implication in light of its statement that it applies “except where otherwise expressly provided.” (Italics added; see Western Oil & Gas Assn. v. Monterey Bay Unified Air Pollution Control Dist., supra,
The United States Constitution, article I, section 10, contains a similar proscription. Thus, the majority’s result is infirm under both the state and federal Constitutions.
This result is particularly anomalous because, if the manufacturer had merely been required to replace the bolts (or pay the airline to do so), it could have recovered on its contract with the bolt maker. As a result of the crash, which will give rise to much greater damages, the manufacturer loses any right to recover.