CHARTER POINT HOMEOWNERS ASSOCIATION, Petitioner, v. The SUPERIOR COURT of San Diego County, Respondent. WESTERN LANDSCAPE CONSTRUCTION, Real Party in Interest.*
Charter Point Homeowners Association (Charter Point) sued developer Treetops Unlimited (Treetops) to recover for alleged construction defects at a condominium project. Treetops and Charter Point settled. The settlement took into account Charter Point's negligence in maintaining the project. Western Landscape Construction (Western), a subcontractor on the project, cross-complained against Charter Point for equitable indemnity. Charter Point seeks a writ of mandate after the court denied its motion for determination of good faith settlement and for dismissal of Western's cross-complaint pursuant to Code of Civil Procedure section 877.6,1 subdivision (c).
The court denied the motion based on Doose Landscape, Inc. v. Superior Court (1991) 234 Cal.App.3d 1698, 286 Cal.Rptr. 321 (Doose Landscape ) in which we held a court was without jurisdiction under section 877.6, subdivision (c), to bar cross-claims for equitable indemnity against a “settling plaintiff.” (Id. at p. 1701, 286 Cal.Rptr. 321.) Charter Point, however, settled not only as a plaintiff but as a joint tortfeasor, and Doose Landscape is not controlling. As discussed herein, we conclude Charter Point, as a settling tortfeasor, is entitled to a good faith determination and to dismissal of Western's cross-complaint if (1) Charter Point can establish the amount it “paid” as a setoff for its negligence in the settlement including the amounts attributable to particular defects for which Western has potential liability, and (2) the court determines those setoffs meet the good faith requirements of Tech–Bilt, Inc. v. Woodward–Clyde & Associates (1985) 38 Cal.3d 488, 213 Cal.Rptr. 256, 698 P.2d 159. We remand the matter to the trial court for further proceedings in accordance with this decision.
This case comes to us for the second time after a long and tortured procedural history. Within months after Charter Point sued Treetops, the parties entered into a settlement agreement whereby a joint expert, Stanley Livingston, Architect of Building Analysts (BA), was commissioned to investigate the alleged deficiencies and to develop recommended repairs. Charter Point and Treetops agreed to have Judge Michael Greer hear and resolve all disputes and further agreed that his decisions would be final and binding.
As part of its charge, BA was to determine whether the deficiencies were the result of improper maintenance or original construction. BA determined the total cost of repair amounted to approximately $12.8 million of which approximately $1.2 million was attributed to Charter Point's negligence, including over $600,000 for landscape related negligence.
After the BA report was issued, the parties disputed the propriety of BA's analysis. Judge Greer referred the dispute to Retired Justice Gerald J. Lewis. For approximately a year the parties engaged in hearings before Justice Lewis. Charter Point disputed there was any negligence on its part, but ultimately, in light of the expert's opinions, agreed to settle for an amount below the anticipated costs of repair. In March 1988, the parties entered into a second settlement agreement whereby Treetops agreed to pay $9.5 million.
While settlement negotiations were pending, Treetops cross-complained against its subcontractors including Western for express and implied indemnity.2 The cross-complaint, however, was not served on Western until after the March 1988 settlement. No subcontractors were involved in the settlement procedure. In May 1988, Western cross-complained for equitable indemnity against the cross-defendants named in Treetops's cross-complaint and certain Roes. In November 1988, Charter Point moved for determination of good faith settlement and a bar to cross-complaints. In December 1988, Western amended its cross-complaint to name Charter Point as a Roe.
Charter Point's motion for good faith settlement determination was continued to allow Western to conduct discovery. Judge Arthur Jones, to whom the case had been assigned for all purposes, denied the motion on the basis Charter Point was not a joint tortfeasor. Judge Jones, however, did not think an action for indemnity would lie and invited Charter Point to move for judgment on the pleadings. Judge Jones subsequently granted a Charter Point motion for judgment on the pleadings. Western appealed. Charter Point cross-appealed the denial of its good faith motion.
Relying on Daon Corp. v. Place Homeowners Assn. (1989) 207 Cal.App.3d 1449, 255 Cal.Rptr. 448 (Daon ), this court reversed the court's granting of judgment on the pleadings finding Charter Point could be a joint tortfeasor and subject to liability for equitable indemnity. We dismissed Charter Point's cross-appeal because the order denying the motion for good faith determination was nonappealable. Our decision will hereafter be referred to as Western.3
Charter Point renewed its motion to determine good faith settlement and to bar cross-claims. In a telephonic ruling, Judge Robert J. O'Neill, now assigned to the case, indicated he would grant the motion based on this court's decision Charter Point could be a joint tortfeasor and his finding the $9.5 million settlement included a reduction for Charter Point's comparative negligence in an amount which was proportionate to Charter Point's potential liability. Western requested oral argument. Before oral argument, this court published Doose Landscape. Judge O'Neill reversed his tentative ruling and denied the motion for good faith determination on the basis of Doose Landscape.
These proceedings ensued. We issued an order to show cause and stayed trial of Western's cross-complaint against Charter Point. We further granted leave to Aguirre & Eckmann (Aguirre), counsel for Charter Point in its action against Treetops, to file an amici curiae brief in support of the petition and to the California Irrigation and Landscape Council (Council) to file an amici curiae brief in opposition to the petition.
Charter Point contends it is the victim of substantial injustice. According to Charter Point, this court has first held it to be a joint tortfeasor in Western and then under Doose Landscape held it may not avail itself of the protection of section 877.6, subdivision (c), which by its terms protects all joint tortfeasors. Charter Point contends both Western and Doose Landscape were wrongly decided and, in the alternative, asks us to correct the ruling characterizing it as a joint tortfeasor or to permit it the protection afforded joint tortfeasors. Amici curiae Aguirre takes the position Doose Landscape simply prohibited a settling plaintiff from obtaining the protection of section 877.6, subdivision (c), and the case does not preclude Charter Point as a cross-defendant from being entitled to a good faith determination and the consequent bar of cross-claims for equitable indemnity.4
Western, on the other hand, contends that any argument it should not be able to pursue its cross-complaint against Charter Point ignores this court's earlier ruling allowing it to pursue its cross-complaint for indemnity. With respect to good faith settlement determinations, Western proposes that section 877.6, subdivision (c), should not bar a subcontractor's equitable indemnity claims against a homeowners association unless the subcontractor has had a “meaningful opportunity” to participate in settlement negotiations between the homeowners association and the developers. Amici curiae Council joins Western in arguing Western should be permitted to maintain its cause of action for equitable indemnity against Charter Point and further argues that the public policy objectives of section 877.6 require Charter Point's motion for good faith settlement determination be denied.
Both parties and amici curiae urge the court to clarify the application of equitable indemnity cross-complaints against homeowners associations and the associations' concomitant ability to seek the protection of section 877.6, subdivision (c). As discussed below, we conclude Western is entitled to seek equitable indemnity from Charter Point. However, we further conclude the court erred in denying Charter Point's motion for good faith settlement determination solely on the basis of Doose Landscape. Rather, Charter Point may be entitled to good faith settlement protection providing certain requirements are met.
Western's Cross–Complaint for Equitable Indemnity
Charter Point concedes that it is law of the case that Western's cross-complaint is permissible. The doctrine of law of the case is that where an appellate court “states in its opinion a principle or rule of law necessary to the decision, that principle or rule becomes the law of the case and must be adhered to throughout its subsequent progress, both in the lower court and upon subsequent appeal․” (Clemente v. State of California (1985) 40 Cal.3d 202, 211, 219 Cal.Rptr. 445, 707 P.2d 818, quoting People v. Shuey (1975) 13 Cal.3d 835, 841, 120 Cal.Rptr. 83, 533 P.2d 211.) The doctrine, however, is merely a rule of procedure and does not go to the power of the court. “It will not be adhered to where its application will result in an unjust decision.” (Id. at p. 212, 219 Cal.Rptr. 445, 707 P.2d 818.) “In particular it does not apply to issues which were not considered in the previous appellate ruling [citation] and it may be departed from where there has been an intervening change in the law [citations].” (Asare v. Hartford Fire Ins. Co. (1991) 1 Cal.App.4th 856, 866, 2 Cal.Rptr.2d 452.)
Charter Point argues that the issues addressed and briefed in the prior opinion were limited to the Jaffe v. Huxley Architecture (1988) 200 Cal.App.3d 1188, 246 Cal.Rptr. 432, Woodward–Gizienski & Associates v. Geotechnical Exploration, Inc. (1989) 208 Cal.App.3d 64, 255 Cal.Rptr. 800, and Daon line of cases and that the court did not consider the argument that a homeowners association cannot be liable for its own negligence and therefore not a joint tortfeasor under American Motorcycle Assn. v. Superior Court (1978) 20 Cal.3d 578, 146 Cal.Rptr. 182, 578 P.2d 899. According to Charter Point, Daon erroneously opined that American Motorcycle sanctioned an indemnity cross-complaint against a plaintiff homeowners association on the theory the association's own negligence in performing its management duties for its members rendered it a joint tortfeasor. Charter Point contends that no matter how many functions it fulfills, a plaintiff is still only a plaintiff and cannot be liable for its own negligence. The exact same argument was raised and rejected in our prior opinion. Our position has not changed.
Charter Point additionally argues that if this court remains convinced the Daon “two hat” theory applies to allow the cross-complaint, then the cross-complaint should be precluded under Platt v. Coldwell Banker Residential Real Estate Services (1990) 217 Cal.App.3d 1439, 266 Cal.Rptr. 601 (Platt ). Platt states:
“[S]trong policies favoring settlement and equitable apportionment of liability are effected through a cross-complaint for equitable indemnity among joint tortfeasors. Accordingly, a cross-complaint for equitable indemnity against an alleged joint tortfeasor states a cause of action unless, under the particular facts alleged, the cross-complaint would operate inequitably. In determining whether the cross-complaint would operate unfairly, the fact liability will be apportioned in the underlying action is not enough.” (Id. at p. 1450, 266 Cal.Rptr. 601.)
Charter Point contends that under the Platt guidelines the cross-complaint should be dismissed, particularly in light of Doose Landscape's prohibition of good faith settlement protection and also because it interferes with the special relationship between the association recognized in Jaffe v. Huxley Architecture, supra, 200 Cal.App.3d 1188, 1193, 246 Cal.Rptr. 432.
In Jaffe, a developer attempted to cross-complain against individual directors of a homeowners association after the developer and the association had settled. The court expressed concern that allowing the developer's cross-complaint would jeopardize the special relationship between the homeowners association and its board with the specter of personal liability discouraging homeowners from serving on the board. Jaffe is readily distinguishable. Western does not seek to sue individual board members. Nonetheless, Charter Point contends that if Western prevails, Charter Point will have to sue past board members. Whether or not Charter Point chooses to sue its past board members is within its own discretion. The fact it may choose to do so cannot protect it from liability for negligence that may have existed in connection with performance of its maintenance duties.
As discussed below, Doose Landscape does not prevent Charter Point from obtaining good faith settlement protection as long as its settlement with the developer met certain criteria. We find no public policy violation or inequity that would preclude Western's cross-complaint under Platt.
Western's Proposed Solution
The policy goals of section 877.6 are “both the encouragement of settlements and the equitable allocation of costs among multiple tortfeasors.” (Tech–Bilt, Inc. v. Woodward–Clyde & Associates, supra, 38 Cal.3d at pp. 498–499, 213 Cal.Rptr. 256, 698 P.2d 159.) Western argues that while partial settlements between a homeowners association and a developer may be a worthwhile goal, the ultimate public policy behind section 877.6 is to encourage total settlements. Additionally, it contends equitable apportionment of loss can never be fairly attained if the developer and homeowners association alone decide the settlement amount and reduction, if any. Therefore, it proposes that a settlement between a developer and homeowners association should bar subcontractor indemnity cross-complaints against the homeowners association only where the subcontractor has been afforded a “meaningful opportunity to participate” in the settlement negotiations including input as to the extent of the homeowners association's negligence.
There is no support for Western's position either in the statute or case law. Section 877.6 clearly contemplates settlements between less than all parties in a lawsuit and a subsequent bar of cross-claims. There is absolutely no indication in the statute participation of nonsettling parties is required or even encouraged. The only case relied upon by Western, Singer Co. v. Superior Court (1986) 179 Cal.App.3d 875, 225 Cal.Rptr. 159, simply stands for the proposition that due process requires that a cross-defendant who was not a party to an action when a settlement was entered into has the right to conduct discovery and contest anew whether the settlement was in good faith. Here, the court allowed Western to oppose the good faith settlement and continued the hearing to allow it to conduct discovery. Western was afforded all rights guaranteed under Singer.
Bar of Western's Cross–Claims Under Section 877.6
Section 877.6, subdivision (a), provides that any party to an action in which it is alleged that two or more parties are joint tortfeasors is entitled to a hearing on the issue of good faith of a settlement between the plaintiff and one or more alleged tortfeasors. Under subdivision (c), “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 claims for equitable indemnity. In Doose Landscape, we held subdivision (c) only acted as a bar to claims against a settling tortfeasor and that the court was without jurisdiction under the provision to bar cross-claims for equitable indemnity against a settling plaintiff. (Doose Landscape, Inc. v. Superior Court, supra, 234 Cal.App.3d 1698, 1701, 286 Cal.Rptr. 321.) Charter Point opines that Doose Landscape bars it from protection afforded by section 877.6, subdivision (c). Charter Point reads the case too broadly.
In Doose Landscape, a homeowners association (Park Row) sued the developer (Pardee) for construction defects. Pardee cross-complained against multiple subcontractors, including Doose Landscape. Doose in turn cross-complained against Pardee and Park Row for indemnity. Park Row and Pardee settled their dispute, and Park Row moved for a determination of good faith settlement and bar to indemnity cross-complaints. Over Doose Landscape's opposition, the court granted the motion. This court granted Doose Landscape's petition on the grounds previously stated.
Despite the factual similarities, Doose Landscape is readily distinguishable from the present case. In Doose Landscape, the homeowners association and developer stipulated to a settlement procedure in which they agreed to settle for an amount determined by a referee and reviewing judge. The agreement provided for minimum and maximum limits of $1.5 and $3.5 million. The amount awarded exceeded $3.5 million, which resulted in a settlement of $3.5 million.
Unlike the present case, the settlement procedure in Doose Landscape did not include setoffs for the homeowners association's negligence in maintaining the condominium complex. Park Row argued that it was covered by the section simply by virtue of Doose Landscape having cross-complained against it. There is no indication Park Row participated in the settlement or brought its motion for good faith settlement in any capacity other than that of a plaintiff. Doose Landscape does not prevent a homeowners association from barring subcontractor's cross-complaints for equitable indemnity if the amount the association receives in settlement is reduced by any damages that are attributable to the association's own negligence, i.e., where an association settles not only as a plaintiff but as a joint tortfeasor.5
Western opines it is inconceivable that Charter Point settled in any capacity other than plaintiff because at the time of the settlement no other parties had been served with Treetops's cross-complaint. Nor had any party served Charter Point with a cross-complaint. Western contends that for a homeowners association to bar a cross-complaint for equitable indemnity, an association must settle with at least one cross-defendant. We disagree.
Even before an association is named as a cross-defendant, it may settle with the developer and such settlement may take into account the association's purported failings in maintaining the property. If a setoff is included, the association has “paid” an amount in settlement attributable to its negligence. As such, the association is settling not only as a plaintiff but as a potential cross-defendant “tortfeasor” and may be entitled to the protection of section 877.6, subdivision (c).
To determine when a settling homeowners association may be entitled to section 877.6, subdivision (c)'s bar we must look to the specific nature of the construction defects litigation. Generally, the homeowners association sues the developer on the basis of strict liability and other theories for multiple alleged deficiencies. The developer in turn normally cross-complains for contractual and equitable indemnity against multiple subcontractors and professionals who had responsibility for the areas of alleged deficiencies. The subcontractors and professionals may themselves cross-complain against suppliers, other subcontractors, and the developer. The subcontractor's cross-complaint may include a claim for equitable indemnity against the homeowners association as it did in this case.
As to settlement negotiations, the developer and the homeowners association often will negotiate exclusively with each other. In other instances they may include some or all of the subcontractors or professionals subject to cross-complaints. Sometimes the court or appointed referees will participate in the settlement negotiations, as was the case here and in Doose Landscape. Normally, the parties will use experts, either their own or joint experts, as in this case, to investigate the causes and extent of problems and to determine corrective measures and cost.
After settlement the homeowners association may seek a good faith settlement determination and a bar to subcontractors' cross-complaints for indemnity under section 877.6, subdivision (c). It is important to note that the cross-claims for which the homeowners association seek a bar relate to specific areas of deficiencies for which the subcontractor has potential liability, i.e., those specific areas for which it provided services. Therefore, in order for the court to make a good faith determination as to specific cross-complaints it must be able to determine what the homeowners association “paid” in setoff with respect to the particular deficiencies in question. Therefore, for Charter Point to be entitled to a good faith determination and dismissal of Western's cross-complaint, it must establish in its motion the total amount it “paid” as a setoff for its negligence and the amount attributable to particular defects for which Western has potential liability. The court would then determine whether the setoff meets the good faith requirements as established in Tech–Bilt.
Objections to The Court's Approach
The court requested supplemental briefing from the parties with respect to problems they foresaw with the court's approach. Charter Point, Western, and Aguirre submitted supplemental briefs.
Charter Point objected to the proposed approach on multiple grounds including its view the approach would shift the burden of proof. Under section 877.6, subdivision (d), the nonsettling party has the burden to prove lack of good faith. Charter Point contends that by requiring the homeowners association to quantify the setoff amounts, the court shifts that burden.
To the contrary, requiring the homeowners association to quantify the setoffs simply requires it to establish the terms of its settlement. The settling party has always borne the burden of establishing the settlement. (See Arbuthnot v. Relocation Realty Service Corp. (1991) 227 Cal.App.3d 682, 689–690, 278 Cal.Rptr. 135; City of Grand Terrace v. Superior Court (1987) 192 Cal.App.3d 1251, 1261–1262, 238 Cal.Rptr. 119.) Here, the settlement in question is not what the developer paid to the homeowners association but the amount the settling homeowners association “paid” as a “joint tortfeasor” in settlement for its purported negligence. Once the homeowners association has established the terms of the settlement, the burden still rests with the subcontractor to establish the lack of good faith. The court's approach does not require the homeowners association to jump through “special procedural hoops” not required of other tortfeasors as contended by Charter Point.
Charter Point further contends that the homeowners association normally looks to the developer alone for its recovery under strict liability and that the homeowners association should not be required to get caught up in the disputes as to subcontractor's liability for negligence. A homeowners association is free to settle with the developer upon any terms it chooses. However, if the association chooses to use that settlement to bar subcontractor indemnity claims, it cannot expect to do so without quantifying by defect category the amounts it “paid” in setoff. Its failure to do so would make it impossible for the subcontractor to evaluate whether the settlement is in good faith and to meet its burden under section 877.6, subdivision (d).
Charter Point also contends requiring the homeowners association's setoff to be quantified by defect areas will not assist specific cross-defendants because there may be potential liability for overlapping multiple subcontractors in any one defect area. Potential liability for multiple subcontractors in any one area is not a problem. If the homeowners association's setoff for a particular defect is in the good faith “ballpark,” cross-claims for all subcontractors with potential liability for that particular defect would be barred.
In a related vein, Charter Point argues that a homeowners association should not be required to establish the amount of settlement attributable to its own negligence because such negligence may have nothing to do with the settlement amount. That is, the settlement may have had no relationship to the merits of the case but may still be in good faith because of extraneous reasons, e.g., availability or nonavailability of insurance, financial condition of settlors. Such factors are obviously considerations in determining whether a settlement was made in good faith. However, if the homeowners association expects to obtain a bar against indemnity cross-claims, it must establish it settled as a joint tortfeasor. As long as the homeowner can show its potential negligence as to any category of damage was considered by the association and the developer in their settlement agreement, the fact those parties assessed such negligence at zero percent will not bar issuance of the good faith determination for that damage category. In other words, the association does not lose “joint tortfeasor” status just because it gave no setoff where the developer was convinced no negligent conduct existed.
Charter Point finally objects to a homeowners association being required to establish the presence and extent of its own negligence because it will foster collusion between the settling parties and encourage false confessions and self-incrimination on the part of the association. Charter Point wishes to be treated as a joint tortfeasor for purposes of section 877.6. While not necessarily admitting guilt, all settling tortfeasors must establish the terms of their settlements. Homeowners associations in construction defect suits are entitled to no different treatment. Collusion in setting settlement limits is always a concern. It is a major area of inquiry in determining whether a settlement is in good faith. The courts are no less equipped to deal with possible collusion in this instance than any other.
Amici curiae Aguirre proposes homeowners associations should be afforded protection under section 877.6, subdivision (c), but should not be required to establish any amounts attributable to its purported negligence. Citing Southern California Gas Co. v. Superior Court (1986) 187 Cal.App.3d 1030, 232 Cal.Rptr. 320 and Arbuthnot v. Relocation Realty Service Corp., supra, 227 Cal.App.3d 682, 278 Cal.Rptr. 135, amici curiae contends there is no need to determine the amount of setoff in the settlement during the good faith determination. Rather, Aguirre contends the amount of setoff only becomes relevant after trial to determine what credit a subcontractor might be entitled to under section 877, subdivision (a).6
The cases cited do not stand for the proposition that the amount of setoff need not be established until after trial. To the contrary, the cases imply the amount of settlement should be established at the time of the good faith determination. As stated by the Arbuthnot court:
“The settling parties ․ should have provided the trial court with a value for the settlement agreement․ As a practical matter, the failure to fix the amount of consideration makes it impossible to determine whether that amount is within the reasonable range of the settling tortfeasor's share of comparative liability. Even if all the parties could stipulate that the settlement was made in good faith without fixing the amount of consideration, ․ we believe the uncertainty created by such a strategy may serve to discourage full settlement of the case.” (Id. at p. 690, 278 Cal.Rptr. 135.)
In summary, Aguirre objects that the proposed rule of law would place the homeowners association in an almost impossible dilemma, discourage settlement, encourage class actions, and make actual repairs less likely. The association board of directors would have to choose between exposing its individual members to liability or not settling the case with finality. If the board spent association funds to determine the extent to which the association caused its own damages, they would create a conflict of interest between the board and its association members which would probably bar it from representing the association. Aguirre contends this would leave the class action as the only safe procedural alternative and thereby reduce the prospects of actually having the common areas repaired.
We are unconvinced that a board's investigation of causes of damages including possible association negligence would prevent it from representing the association members and pursuing an action to recover damages. The facts of this case demonstrate otherwise. Here, BA investigated the causes of the damages including association negligence. The expert reports included allocations for association negligence. Charter Point contends the purported negligence was taken into account in reaching the settlement figure. The board was not prevented from pursuing the suit on the members behalf.
We agree with Charter Point that if an association chooses to settle with the developer without taking its negligence into account or without being able to demonstrate what it “paid” as a joint tortfeasor that it would remain subject to cross-complaints for indemnity. An association would be forced to make a choice between taking its negligence into account in reaching a settlement or in leaving itself open to later liability. If the association selects the second alternative it could impact on its ability to effectuate repairs due to the need to maintain a reserve for future litigation costs. We disagree, however, that requiring an association to take its own negligence into account in reaching a settlement will essentially eradicate the incentive to settle.
Rather, a rule of law requiring proof of proportionate settlement will simply change settlement negotiations and good faith settlement determination proof. Henceforth, the developer and the association will not be able to settle the matter without regard to how the settlement might impact upon subcontractor cross-defendant's claims. If the homeowners association seeks a bar to indemnity cross-claims, the parties must take into account the existence of any association negligence and be able to document proportionate setoffs or lack thereof for the good faith determination hearing. Though certainly more cumbersome than apparent past practices, we do not see the change as negative. In the past this court has been aware of complex construction defect cases where subcontractors with ultimately little liability have been subjected to drawn out litigation and discovery with little regard for their specific liability. Making proof of proportionate settlement a prerequisite to a section 877.6, subdivision (c) bar, may in some measure alleviate the abuses that have become apparent to this court.7 Also, while the procedure may be more cumbersome than past practices, it is far less cumbersome than class action suits.
We are unconvinced by Charter Point's and amici curiae's arguments. We, therefore, hold a homeowners association that settles with a developer may be entitled to a section 877.6, subdivision (c), bar to indemnity cross-claims if the association settled not only in its capacity as a plaintiff but also in its capacity as a joint tortfeasor. To be entitled to such bar, however, the association must, within the context of its good faith settlement motion, be able to establish either (1) the amount “it paid” as a setoff for its negligence including the amounts attributable to particular defects for which cross-defendants against whom the association seeks a bar have potential liability, or (2) that the parties to the settlement reasonably agreed the association had no fault for particular damage categories.
Obviously, the trial court decision to grant the good faith determination will not bind either the settling developer or any of its subcontractors (or additional cross-defendants brought into the litigation by the subcontractor cross-defendants) in the subsequent resolution of the developer's cross-complaint.8 The only effect of the good faith determination will be to bar cross-complaints against the association by parties before the court at the time of the hearing and who are bound by the good faith determination. If the developer or its cross-defendants add additional cross-defendants after the good faith order is issued, these new parties may again force the association to seek additional good faith orders in order to bar new cross-complaints.
Finally, for the procedural guidance of our trial courts, we hold an association need only demonstrate the extent of setoff in damage categories where cross-complaints are pending when the good faith motion is filed. If other subcontractors desire to contest the good faith determination, it shall be their burden to make a specific showing of association negligence in some other damage category before association and developer must specify their assessment of association negligence in any such damage category.
Summarizing our holdings, when a homeowners association desires to bar indemnity cross-complaints by a good faith determination, it must:
1. Support its motion with proof the settlement considered and set off association's potential negligence in damage categories which are raised in the cross-complaint(s) it seeks to bar; and
2. If challenged, prove it has considered and has set off potential association negligence in other damage categories not yet raised by cross-complaint but raised by other parties during the good faith motion proceedings.
When the setoffs are found to be “ballpark” amounts under Tech–Bilt standards, the association will be entitled to a good faith order protecting it from further claims from all parties before the court at the good faith hearing.
Application to This Case
BA was charged with determining whether the deficiencies were the result of improper maintenance or original construction. In its original report BA determined that of the approximately $12.8 million total cost of repairs, $1.2 million was attributable to Charter Point's negligence, including over $600,000 that was attributable to landscaping related matters. Ultimately, the parties settled for $9.5 million which likewise included a setoff for Charter Point's negligence. Further, Charter Point moved for a good faith settlement determination in its capacity as a cross-defendant.
From the record it is clear Charter Point's negligence was taken into account in reaching the settlement and that it therefore settled in its capacity as a “joint tortfeasor.” However, it is unclear how much the association ultimately “paid” in settlement. The moving papers contained a declaration of counsel that the ultimate settlement included a reduction of approximately $1 million attributed to association negligence. However, it is not clear from the declaration how counsel arrived at that figure. Moreover, on the documentation submitted we have been unable to determine how much of the suggested $1 million figure is attributable to the damages for which Western has potential liability.
However, the fact we are unable to make a determination on the present record is not determinative. At the time Charter Point brought its motion for determination of good faith settlement and bar to cross-claims it was unaware of the requirements imposed in this opinion. Upon the presentation of more detailed declarations Charter Point may be able to meet the evidentiary showing required herein.
Let a peremptory writ issue directing the court to vacate its order denying Charter Point's motion for good faith settlement determination. The matter is remanded to the court for further hearings consistent with this opinion. The stay issued January 14, 1992, is vacated upon issuance of the remittitur.
1. All statutory references are to the Code of Civil Procedure unless otherwise specified.
2. At this point in the litigation Western and Treetops have settled.
3. Our decision was originally published as Western Landscape Construction v. Charter Point Homeowners Assn. (1990) 226 Cal.App.3d 423, 277 Cal.Rptr. 22. On February 28, 1991, the Supreme Court directed the Reporter of Decisions not to publish the opinion in the Official Appellate Reports. We therefore do not cite the decision as precedent but only to set forth the history and law of the case.
4. Amicus curiae further requests this court to clarify the principles of homeowners association standing, indemnity, and cross-complaints against homeowners associations. The extensive analysis requested by amicus curiae is not required for our decision and we deny its request.
5. In part IV, infra, we discuss how joint tortfeasor status is not lost where there is no setoff but the homeowners association's possible negligence has been considered and assessed at zero.
6. Section 877 provides in pertinent part: “Where a release ․ 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 not discharge any other such party from liability unless its terms so provide, but it shall reduce the claims against the others in the amount stipulated by the release․”
7. We do not mean to imply the settlement procedure in this case was collusive, abusive, or anything other than above board. To the contrary, settlement negotiations here with the designated joint expert, consideration of association negligence, and extensive court participation leaves little to criticize.
8. This consideration may be of no moment here, as Charter Point informs us that all subcontractors including Western have settled with Treetops.
TODD, Acting Presiding Justice.
BENKE and NARES, JJ., concur.