FORD MOTOR COMPANY v. BUDGET RENT CAR SYSTEMS INC

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Court of Appeal, First District, Division 3, California.

FORD MOTOR COMPANY, Petitioner, v. The SUPERIOR COURT of Contra Costa County, Respondent; BUDGET RENT–A–CAR SYSTEMS, INC., et al., Real Parties in Interest.

No. A066781.

Decided: June 12, 1995

Frank P. Kelly, III, Susan E. Foe, Dryden, Margoles, Schimaneck, Hartman, Kelly & Wait, San Francisco, for petitioner. No appearance for respondent. John R. Williams, Edward F. Cullen, Jr., Hurst P. Arthur, Williams, Romanski, Polverari & Skelton, San Jose, Richard de Saint Phalle, James B. Wright, J. Karren Baker, Mark C. Goodman, Buchalter, Nemer, Fields & Younger, San Francisco, for real party in interest Budget Rent–A–Car Systems, Inc. Stephen Gorey, Oakland, OR, for real parties in interest plaintiffs Phan, Johnson, Le and Quach.

Petitioner seeks a writ of mandate directing the superior court to reinstate previously granted confirmations of settlement.   Petitioner claims the court improperly reconsidered its confirmation orders, exceeding the jurisdiction granted under Code of Civil Procedure section 1008.1  We grant the requested relief.   Reconsideration exceeded the court's authority under section 1008 and exceeded any inherent power of the court to reconsider its rulings.

A single vehicle roll-over accident on Interstate 80 in Placer County left two passengers and the nineteen-year-old driver dead and five passengers injured.   The injured passengers and those suing on behalf of two decedents brought actions against the estate of the driver;  the manufacturer of the car, Ford Motor Company (Ford);  and its owner, Budget Rent–A–Car Systems, Inc. (Budget).  Ford reached very favorable settlements with all plaintiffs.   Combined settlements totalled $80,000.   The court confirmed the settlements (§ 877.6), over Budget's objection.   Ford challenges the court's later order reconsidering and setting aside its confirmations.

 Petitioner challenges the court's reconsideration under circumstances not meeting the requirements of section 1008.   We conclude a court has the inherent power to reconsider its ruling.   It may not, however, set aside its ruling merely because later-discovered evidence reveals a stronger underlying case against the settling defendant.   Likewise, the court should not take such action because a nonsettling defendant has failed to present its best evidence or strongest arguments against the settlement at the original hearing or has failed to seek writ review in the appellate court.

Facts and Procedures

On April 14, 1990, 19–year–old Andy Pham rented a 1990 Mercury Sable from Budget in San Jose.   Driving to Reno with seven passengers, Pham lost control of the car, which hit the center divider, rolled over, and crashed off the road.   Pham and passengers Thuan Quach and Trang Huynh died in the crash.   Passenger Asali Johnson was rendered quadriplegic.   Passengers Duc Le, Khoa Quack, Linh Huynh, and Tuan Phan were injured to a lesser extent.

The injured passengers and the estates of those killed (plaintiffs) brought actions against Ford, Budget, and Pham's estate, alleging negligent design, manufacturing, and maintenance, as well as failure to warn of dangerous conditions.   They also claimed the vehicle was not sufficiently crashworthy and lacked sufficient safety restraints for the number of passengers.   They blamed the accident, in part, on Pham's speeding, his inexperience as a driver, and his reckless operation of a defective vehicle after warning lights had indicated malfunctions.   Budget cross-complained against Ford and the others.

The car was photographed in 1991, then inspected again in November 1992.2  Plaintiffs' expert, Gerald Rosenbluth, performed a visual inspection and drew fluids.   A kinematics expert and a physics consultant assisted him during a third inspection in April 1993.   At the suggestion of these professionals, a fourth inspection was conducted in August 1993 with an accident reconstructionist and a biomechanical expert assisting.   The fourth inspection did not provide a complete explanation for the accident, but plaintiffs began to suspect the car stalled due to an electrical problem.   They suggested to Budget that the thick film ignition (TFI) module might have been defective and should be tested.   William Rosenbluth (Gerald's brother), another plaintiffs' expert, prepared a protocol for electrical testing.   On September 10, 1993, a request for further testing to include the TFI module was faxed to Ford, with a copy to Budget.

Eleven days later, Ford entered the first of three settlements with plaintiffs.   Each settlement recited that “plaintiffs proffer that their investigation has not revealed that any defect in the subject vehicle existed at the time the vehicle left the possession of FORD, nor has it revealed any proof of negligence on the part of FORD sufficient to meet plaintiffs' burden of proof.”   Ford's counsel signed a declaration stating that Ford was not aware of any evidence indicating it had any liability in the action.   Budget at no time informed the court of plaintiffs' desire to test the TFI module.

After proceedings during which it read the deposition testimony of Gerald Rosenbluth, the court confirmed the settlements.   The memorandum of decision stated that, contrary to Budget's assertions, Gerald Rosenbluth's deposition testimony did not show “substantial tort liability” against Ford.   The court acknowledged that his testimony suggested an electrical problem had caused the engine to stall at high speed.   As a result, the driver put the engine in neutral to try to restart the car, causing, in turn, loss of steering control.   The court found, however, that “this all depends on supposition and speculation and is an inadequate opinion ․ to support the probable liability of Ford.”   Budget failed to petition this court for a writ of mandate, the appropriate appellate remedy for an improperly confirmed settlement.  (§ 877.6, subd. (e).)

The court then granted summary judgment for Ford against Budget as to some plaintiffs and ordered dismissal of cross-complaints against Ford as to the other plaintiffs.   It appears, however, that Ford did not secure a judgment of dismissal.3

On May 19, 1994, considerably beyond the 10–day limit for reconsideration under section 1008, subdivision (a), Budget moved for reconsideration of the orders determining good faith.   Budget alleged the settling parties concealed Ford's agreement to transfer the car to plaintiffs.   Budget also presented in support of the motion the results of a recently conducted fifth inspection of the vehicle.   The expert who conducted the fifth inspection concluded the accident was caused by malfunction of the TFI module.   After reviewing the results of this inspection, the court “on its own motion” reconsidered its confirmation rulings.   The court concluded it would have denied confirmation if the more recent declaration and deposition testimony had been presented at the time of the original ruling.   The court set aside its orders confirming the settlements.   This petition followed.

Good Faith Settlement

There is a substantial public policy interest in securing the finality of confirmed settlements.  “The Legislature has recognized ․ 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.  [Citation.]  Accordingly, the Legislature has provided that if a trial court determines a settlement was made in ‘good faith,’ a settling defendant is relieved of any further liability to the nonsettling defendants for equitable indemnity.  (§ 877.6, subd. (c);  see, e.g., Abbott Ford, Inc. v. Superior Court (1987) 43 Cal.3d 858, 871–874 [239 Cal.Rptr. 626, 741 P.2d 124] [ ];  Tech–Bilt, Inc. v. Woodward–Clyde & Associates (1985) 38 Cal.3d 488, 494–500 [213 Cal.Rptr. 256, 698 P.2d 159] [ ].)”  (Bay Development, Ltd. v. Superior Court (1990) 50 Cal.3d 1012, 1019, 269 Cal.Rptr. 720, 791 P.2d 290, fn. omitted.)

Any party to the action is entitled to a hearing on the issue of good faith (§ 877.6, subd. (a)(1)), but the burden of proof is on the party asserting a lack thereof (§ 877.6, subd. (d)).  The issue may be determined on the basis of affidavits and counteraffidavits, or the court may, in its discretion, receive other evidence at the hearing.  (§ 877.6, subd. (b).)  A party aggrieved by the court's determination may petition the proper court to review the determination by writ of mandate.  (§ 877.6, subd. (e).)

 Both the plaintiff and a settling tortfeasor “are primarily interested in obtaining judicial approval of their agreement and cannot realistically be expected to argue against this interest.”  (Singer Co. v. Superior Court (1986) 179 Cal.App.3d 875, 889, 225 Cal.Rptr. 159, italics in original.)   They can be required, however, to disclose fully the terms of the settlement (Alcal Roofing & Insulation v. Superior Court (1992) 8 Cal.App.4th 1121, 1127, 1129, 10 Cal.Rptr.2d 844) and may not unfairly withhold or conceal material evidence from the nonsettling defendants (see Singer Co. v. Superior Court, supra, at p. 896, 225 Cal.Rptr. 159).   The court must not rush the hearing on good faith if the nonsettling parties need more time to complete pertinent discovery relating to this issue.  (Id. at p. 897, 225 Cal.Rptr. 159;  cf. Rankin v. Curtis (1986) 183 Cal.App.3d 939, 947–948, 228 Cal.Rptr. 753.)

Contentions of the Parties

The arguments presented by Ford's petition to this court are straightforward:  Section 1008, subdivision (a) requires that a motion for reconsideration be brought within 10 days after notice of the challenged order.   Although the court may, on its own motion, reconsider a prior order because of a change of law (§ 1008, subd. (c)), no change of law was involved here.   Ford contends the aggrieved party's only remedy after 10 days is to petition for a writ of mandate.

Budget does not rely on section 1008.   Instead, it asserts the court's inherent power to correct errors in the interest of justice 4 and points to Ford's failure to disclose all circumstances leading up to settlement and its side agreement to transfer possession of the subject vehicle to plaintiffs.

Ford replies it did not conceal anything from Budget or the court and it had no side deal with plaintiffs to sell the car to them for secret testing.   Ford contends that, in setting aside its confirmations, the court improperly relied upon new information about liability not available to plaintiffs at the time of the settlements.   Ford warns that parties will be reluctant to settle if courts are permitted to reconsider and overturn such rulings.

Section 1008

 Before its amendment in 1992, section 1008 applied only to final rulings, not those characterized as “interim.”   Trial courts had inherent jurisdiction to reconsider their interim rulings until those rulings became final by entry of judgment.  (Salowitz Organization, Inc. v. Traditional Industries, Inc. (1990) 219 Cal.App.3d 797, 807–808, 268 Cal.Rptr. 493;  Blue Mountain Development Co. v. Carville (1982) 132 Cal.App.3d 1005, 1013, 183 Cal.Rptr. 594 (Blue Mountain ).)   In 1992, seeking to restrict reconsideration of interim orders, the Legislature amended section 1008 to its present form.5

The court's order reconsidering its confirmation rulings did not satisfy the conditions set by amended section 1008.  (See Gilberd v. AC Transit (1995) 32 Cal.App.4th 1494, 1500–1502, 38 Cal.Rptr.2d 626;  Morite of California v. Superior Court (1993) 19 Cal.App.4th 485, 492–493, 23 Cal.Rptr.2d 666.)   Budget's request was not filed within 10 days after the original rulings.   No change of law took place to permit the court to reconsider on its own motion.   Thus, the court's action may be sustained only if its inherent power in this area survived the Legislature's amendment of section 1008.   We conclude the court retained its ability to act, but abused its power in this case.

Inherent Powers of a Court

The California Supreme Court has “often recognized the ‘inherent powers of the court ․ to insure the orderly administration of justice.’  [Citations.]  Although some of these powers are set out by statute (§ 128, subd. (a)), it is established that the inherent powers of the courts are derived from the Constitution (art. VI, § 1 [reserving judicial power to courts];  [citations] ), and are not confined by or dependent on statute [citations.]”   (Walker v. Superior Court (1991) 53 Cal.3d 257, 266–267, 279 Cal.Rptr. 576, 807 P.2d 418.)  “Courts have used their inherent equitable power in limited situations ․ when it was warranted by the equities of the case.”   (Bauguess v. Paine (1978) 22 Cal.3d 626, 636, 150 Cal.Rptr. 461, 586 P.2d 942.)

 A court's inherent powers are wide ranging but not well-defined.  (See Asbestos Claims Facility v. Berry & Berry (1990) 219 Cal.App.3d 9, 19–20, 23–24, 267 Cal.Rptr. 896;  see also Cottle v. Superior Court (1992) 3 Cal.App.4th 1367, 1377–1378, 5 Cal.Rptr.2d 882, and cases cited therein.)   It is clear, however, that a court has some measure of authority to rehear or reconsider its rulings:  “the power to grant rehearings is inherent,—is an essential ingredient of jurisdiction, and ends only with the loss of jurisdiction.”  (In re Jessup (1889) 81 Cal. 408, 468, 22 P. 742, 976, 1028;  accord, Metropolitan Water Dist. v. Adams (1942) 19 Cal.2d 463, 469, 122 P.2d 257;  cf. Bank of America v. Superior Court (1942) 20 Cal.2d 697, 702, 128 P.2d 357;  De La Beckwith v. Superior Court (1905) 146 Cal. 496, 499–500, 80 P. 717.)   Although the Legislature may regulate the exercise of this power, its regulations must not “ ‘․ substantially impair the constitutional powers of the courts, or practically defeat their exercise.’ ”   (In re Jessup, supra, at p. 470, 22 P. 742, 976, 1028, quoting Ex parte Harker (1875) 49 Cal. 465, 467, italics added by Jessup.) 6

We will not attempt to conclusively articulate a court's inherent power to reconsider its rulings.   We will only examine the court's exercise of its power in this case.   We emphasize, however, that the authority to reconsider rests with the court.   That courts retain this power does not excuse a litigant from satisfying section 1008.   A court may return unread any request for reconsideration that does not meet the time limit set by section 1008, subdivision (a) and may sanction a litigant for filing beyond the section 1008 time limit (see subd. (d)).

Reconsideration in This Case

The court based its ruling on the “evidence and facts set forth in BUDGET's motion for reconsideration.”   The court gave the following basis for its ruling:  “I don't profess to know the motives of the attorney's moves that have gone on in this case regarding the vehicle and the inspections.  [¶] I think [Budget's attorney] pointed out, and I accepted 100 percent, that everybody has been being an ethical advocate in this case, and there is no bad faith whatsoever.   It's a huge case if the outcome is as plaintiffs desire and for plaintiffs.   And obviously, the onus against all defendants would be substantial money-wise and otherwise.   Everybody's done what they thought they have to do, so I have no problems with that.  [¶] ․ [¶] Okay.   I have reviewed [Budget's attorney's] declaration and supporting documents that were filed May 19th of this year.   I am satisfied that if the deposition testimony quoted in the declaration and supporting exhibits had been before me of William Rosenbluth, Gerald Rosenbluth, the subsequent depositions and Dr. Boster, I could not have approved a good faith settlement.   I mean, this is an issue of a manufacturing defect.  [¶] So I am going to, on my own motion, because I think in the time period under 1008 is probably gone by the time the motion was made, on my own motion, based on the motion that brought these facts to my attention, set aside the good faith settlement.”

 The court expressly relied on evidence developed after the settlements took place.   This newly discovered evidence about liability was irrelevant to the issues before the court.   Good faith depends upon what the plaintiffs knew about liability at the time of settlement, not evidence that might be acquired later.  (See Tech–Bilt, Inc. v. Woodward–Clyde & Associates (1985) 38 Cal.3d 488, 499, 213 Cal.Rptr. 256, 698 P.2d 159;  Torres v. Union Pacific R.R. Co. (1984) 157 Cal.App.3d 499, 508–509, 203 Cal.Rptr. 825.)   To the extent the court relied upon new evidence about defects in the automobile, it erred in reconsidering its ruling.

In connection with the reconsideration hearing, Budget presented evidence for the first time that Ford settled with plaintiffs within days after plaintiffs proposed testing the TFI module.   Budget's action was untimely.   Budget had the burden of proof on the issue.  (§ 877.6, subd. (d).)  Before the original confirmation hearing, it knew about plaintiffs' suspicions and plaintiffs' testing plans yet did not advise the court that this evidence showed the settlement was not in good faith.   Nor did Budget seek review in this court within the prescribed period after the superior court confirmed the settlements.  (§ 877.6, subd. (e).)  The superior court's reconsideration thus gave Budget a second chance to satisfy its burden of proof and provided Budget a belated alternative to writ review.   The court's inherent powers do not extend this far.   The court could not rely on this belatedly offered information in deciding to reconsider.

Budget also presented newly discovered evidence that Ford agreed to transfer the car to plaintiffs and plaintiffs' declaration that one reason for settling was to obtain the vehicle.   Ford denies any secret agreement to transfer the vehicle to plaintiffs for testing.   Ford was finished with the car and did not wish to remain responsible for coordinating vehicle examinations or to pay for storage.7  Transfer of the wreckage was never a condition of the settlement agreements.

We need not determine whether the vehicle transfer was a secret side agreement improperly concealed from the court or merely the routine, expected transfer of the car from a settling defendant to a remaining party.   However characterized, transfer was not a material part of the settlements.   Nonrevelation of the transfer did not justify reconsideration.8

Disposition

Let a peremptory writ of mandate issue directing the Contra Costa County Superior Court to vacate its ruling reconsidering the settlements and to reinstate its orders confirming the settlements.

FOOTNOTES

1.   All further statutory references are to the Code of Civil Procedure.

2.   Consistent with the parties' usage, we will call this the second inspection.   The first inspection was either the photographing of the vehicle in 1991 or a mechanical and visual inspection performed by the California Highway Patrol shortly after the crash.

3.   The record before us contains no judgment of dismissal and no claim by Ford that it obtained a judgment of dismissal, even in response to Budget's assertion no judgment had been entered on Ford's behalf.

4.   Budget points to sections 128, subdivision (a)(8), 473, and 662 for examples of court powers not removed by the limitations imposed by recent amendments to section 1008.

5.   We take judicial notice of the legislative materials presented by Budget, including the reports of the Senate Committee on Judiciary, the Senate Rules Committee, and the Assembly Committee on Judiciary, which show clearly a legislative intent to reverse the Blue Mountain line of decisions.In its present form, section 1008 provides:  “(a) When an application for an order has been made to a judge, or to a court, and refused in whole or in part, or granted, or granted conditionally, or on terms, any party affected by the order may, within 10 days after service upon the party of written notice of entry of the order and based upon new or different facts, circumstances, or law, make application to the same judge or court that made the order, to reconsider the matter and modify, amend, or revoke the prior order.   The party making the application shall state by affidavit what application was made before, when and to what judge, what order or decisions were made, and what new or different facts, circumstances, or law are claimed to be shown.  [¶] (b) A party who originally made an application for an order which was refused in whole or part, or granted conditionally or on terms, may make a subsequent application for the same order upon new or different facts, circumstances, or law, in which case it shall be shown by affidavit what application was made before, when and to what judge, what order or decisions were made, and what new or different facts, circumstances, or law are claimed to be shown.   For a failure to comply with this subdivision, any order made on a subsequent application may be revoked or set aside on ex parte motion.  [¶] (c) If a court at any time determines that there has been a change of law that warrants it to reconsider a prior order it entered, it may do so on its own motion and enter a different order.  [¶] (d) A violation of this section may be punished as a contempt and with sanctions as allowed by Section 128.5.   In addition, an order made contrary to this section may be revoked by the judge or commissioner who made it, or vacated by a judge of the court in which the action or proceeding is pending.  [¶] (e) This section specifies the court's jurisdiction with regard to applications for reconsideration of its orders and renewals of previous motions, and applies to all applications to reconsider any order of a judge or court, or for the renewal of a previous motion, whether the order deciding the previous matter or motion is interim or final.   No application to reconsider any order or for the renewal of a previous motion may be considered by any judge or court unless made according to this section.  [¶] (f) For the purposes of this section, an alleged new or different law shall not include a later enacted statute without a retroactive application.”  (Stats.1992, ch. 460, § 4, pp. 1526–1527.)

6.   In Jessup, the court refused to follow a statutory requirement that five Supreme Court justices sign in order to grant a rehearing.  (In re Jessup, supra, 81 Cal. at pp. 460, 472–473, 22 P. 742, 976, 1028.)  Jessup found that the Legislature assumed the existence of the court's authority to reconsider its rulings and sought to control the conditions under which the court did so.  (Id. at p. 466, 22 P. 742, 976, 1028.)   The Legislature has done the same here by purporting to authorize the court to reconsider sua sponte, but conditioning the authority upon a change in the law.  (§ 1008, subd. (c).)

7.   In fact, the transfer never took place.   Ford mistakenly believed it owned the vehicle.   The parties later learned that Budget held title.

8.   Budget also asserts Ford concealed its knowledge of defects in the TFI modules of other Ford vehicles.   Budget contends Ford should be estopped from challenging the court's reconsideration order because Ford withheld evidence about defective TFI modules from Budget and the court.   Good faith depends, however, on plaintiffs' knowledge of the TFI defects, not Ford's.   Budget cites no evidence showing that plaintiffs knew about other TFI module problems when they settled.

CORRIGAN, Associate Justice.

CHIN, P.J., and MERRILL, J., concur.