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District Court of Appeal, Second District, Division 1, California.


Civ. 15481.

Decided: May 23, 1947

Parker, Stanbury & Reese, of Los Angeles, for appellant. Crider, Runkle & Tilson, of Los Angeles, for respondent.

By the instant action, plaintiff Indemnity Insurance Company of North America, hereinafter referred to as Indemnity, seeks a contribution from defendant American Automobile Insurance Company, hereinafter referred to as American, on account of settlement of a loss made by Indemnity pursuant to liability insurance policies issued by Indemnity and American to Simmons Tank Service, Inc., hereinafter called Simmons.

The policy of American indemnified Simmons for losses incurred through the ownership, maintenance or use of motor vehicles; the policy of Indemnity insured Simmons against liability imposed by law upon him for bodily injuries or death ‘caused by accidents'; said policy excluding ‘ownership, maintenance or use of * * * automobiles or trailers,’ except ‘to the use of special auxiliary equipment while * * * in actual use on any work site.’

The limits of liability were fixed in both policies at $100,000 for each person injured, and $200,000 for each accident.

The complaint alleges that on October 17, 1941, while both policies were in effect, Simmons was engaged in cleaning a large oil storage tank in Ventura, and was using ‘certain tools, equipment, appliances, motors and automobile trucks'; that the trucks were covered by American's policy, and the tools, equipment, appliances and motors were covered by Indemnity's policy; that during the progress of the work the said oil storage tank exploded, fatally injuring one Bertes M. Miller; that on March 17, 1942, the heirs of decedent Miller brought suit against Simmons for recovery of damages for his death caused by the alleged negligence of Simmons. Both American and Indemnity defended Simmons in said action under a reservation of rights.

While the Miller case was on trial, counsel for plaintiffs therein offered to settle the litigation, give a full release and dismiss the action with prejudice in consideration of the sum of $20,000. After said offer of settlement was made, to-wit: on November 19, 1942, Indemnity wrote a letter to American in which it was stated that a difference of opinion then existed between Indemnity and American as to which of the policies covered the accident, or whether it was covered by both; that in the event the proposed settlement was made Indemnity ‘intends to sue’ American under its policy; and that Indemnity would not pay the $20,000 in settlement unless American agreed to stipulate to the following:

I. That any sum up to $20,000 ‘is a fair and reasonable sum in settlement of said action and would constitute a good settlement, and if paid shall not be construed as a voluntary payment, and American will not question the propriety of said settlement.’

II. That Indemnity ‘may maintain any contemplated action in its own name * * *.’

III. That ‘if said action be settled * * * the settlement and amount paid in settlement shall be considered as having been done with the same force and legal effect as if said action had been fully tried before the jury and the jury had rendered its verdict in favor of the plaintiffs (Miller) above named, and against the defendant (Simmons) above named, and judgment had been entered thereon, which judgment became final and the defendants in suit No. 24915 above named had been paid the sum of $20,000.00 in full satisfaction thereof.’

V. That any trucks mentioned in the complaint in the Miller case are trucks mentioned in American's policy of insurance and are covered thereby, and the tools, equipment and appliances mentioned in said complaint are tools, equipment and appliances covered by Indemnity's policy of insurance.

VI. That ‘although the American Automobile Insurance Company denies that it is obligated for any portion of any sum which may be paid by the Indemnity Insurance Company of North America under circumstances as above set forth, in settlement of the said action, it is stipulated that if it is found that the American Automobile Insurance Company is liable at all its liability shall not exceed fifty per cent of any such sum paid in settlement up to $20,000.00. * * *

‘The above stipulation is accepted by the American Automobile Insurance Company.’

Thereafter Indemnity settled the Miller suit for $17,700 and a full release was executed by the plaintiffs in that case. When the instant action by Indemnity for a contribution from American for one-half of the $17,700 paid in settlement of the Miller suit came on for trial, Indemnity's motion for a judgment on the pleadings was granted, apparently on the ground that American was not entitled to a trial on the merits because the stipulation amounted to an adjudication of American's liability.

From the judgment rendered on the pleadings, the defendant American presents this appeal, contending that the stipulation of November 19, 1942, was not intended by either party to preclude a trial on the merits, but expressly contemplated such a trial, and that the actual intention of the parties was expressed in a letter from Indemnity to American dated May 4, 1942, reading in part as follows:

‘We will afford the assured (Simmons) a defense in accordance with the terms of our policy. We believe that you likewise owe the assured a defense. In the event that it is established prior to or during the trial of this action that the explosion was caused through the operation of a truck, we shall expect you to pay any judgment which may be obtained and all expense incident to defending the case. Otherwise, we will pay any judgment which may be rendered and which is covered by the terms of our policy and the expense connected with the defense of the suit.’

Appellant claims that the words in the stipulation ‘as if said action had been fully tried’ were ‘not intended to crystalize and forever determine the rights of the parties,’ and that paragraph VI of the stipulation ‘definitely indicates the contemplation by both parties to it that further litigation to fix the responsibility of the two parties, if any, would be undertaken.’

‘A motion by plaintiff for judgment on the pleadings is in the nature of a general demurrer, and the motion must be denied if the defendant's pleadings raise a material issue or set up affirmative matter constituting a defense. Cohn v. Klein, 209 Cal. 421, 424, 287 P. 459; Cass v. Richester, 174 Cal. 358, 360, 163 P. 212; Neale v. Morrow, 174 Cal. 49, 54, 161 P. 1165. For the purpose of ruling on the motion, the trial court must treat all of defendant's allegations as being true, and since the moving party admits the untruth of his own allegations insofar as they have been controverted, all such averments must be disregarded whether there is a direct and specific denial or an indirect denial by virtue of affirmative allegations of a contrary state of facts.’ MacIsaac v. Pozzo, 26 Cal.2d 809, 812, 161 P.2d 449, 451.

The complaint herein sets up the stipulation practically in haec verba, and a copy thereof a is attached to the complaint as an exhibit. But the answer neither denies nor refers to the stipulation; hence, it must be deemed admitted.

An examination of the letter accompanying the stipulation discloses that a difference of opinion existed between Indemnity and American ‘as to which of said policies covers the accident’ mentioned in the Miller case, or ‘whether both policies of insurance cover said accident’; that trial of the Miller case was then in progress and that counsel were defending the case ‘with a full reservation of rights of their respective companies, and without waiving any provision of either policy and without admitting that either policy covers the accident’; further, that if the Miller case was settled, Indemnity ‘intends to sue’ American under its policy of insurance.

Throughout the controversy, American has continuously denied its liability, paragraph VI of the stipulation providing that although American ‘denies that it is obligated for any portion of any sum which may be paid by Indemnity * * * in settlement of the said action, it is stipulated that if it is found that American * * * is liable at all, its liability shall not exceed fifty per cent of any such sum paid in settlement up to $20,000.00.’

The trial court herein overruled American's general demurrer to the complaint, whereupon American filed its answer in which it denied ‘that any truck or motor vehicular equipment covered by any insurance with the defendant was the proximate cause of the explosion and fire referred to in the complaint’ in the Miller action. Since the complaint contains no contrary allegation to which this denial could possibly be addressed, such so-called denial constitutes an assertion of an affirmative fact which must be accepted as true under the rule announced in MacIsaac v. Pozzo, supra. Consequently, the motion for judgment on the pleadings should not have been granted, but appellant should have been permitted to go to trial on the issue raised by its answer.

This very situation is discussed by way of dicta in Lamb v. Belt Casualty Co., 3 Cal.App.2d 624, 631, 40 P.2d 311, 314, as follows:

‘On the other hand, where there is no trial and no judgment establishing the liability of the insured, but a settlement of the litigation has been made, the question whether the liability of the insured was one which the contract of insurance covered is still open, as is also the question as to the fact of liability and the extent thereof, and these questions may be litigated and determined in the action brought by the insured to recover the amount so paid in settlement. The settlement, or a judgment rendered upon a stipulation of such a settlement, becomes presumptive evidence only of the liability of the insured and the amount thereof, which presumption is subject to being overcome by proof on the part of the insurer. Butler [Bros.] v. American Fidelity Co., supra, [120 Minn. 157, 139 .n.W. 355, 44 L.R.A.,N.S., 609]; St. Louis Dressed Beef & Provision Co. v. Maryland Casualty Co., supra, [201 U.S. 173, 26 S.Ct. 400, 50 L.Ed. 712]. We are, however, not confronted with any question of settlement or stipulated judgment in this case.’

Nothing was agreed to by American in the stipulation that amounts to a waiver of its right to an adjudication of the basic issue here involved, to-wit, its liability under its contract of insurance and the extent of such liability.

For the reasons stated, the judgment appealed from is reversed.

YORK, Presiding Justice.

DORAN and WHITE, JJ., concur.