HENRY DOLEGER BUILDER INC v. UNDERWRITERS AT LLOYDS LONDON

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District Court of Appeal, First District, Division 2, California.

HENRY DOLEGER BUILDER, INC., Plaintiff, v. UNDERWRITERS AT LLOYDS, LONDON et al., Defendants.

R. Walker ROYLANCE, and All Other Underwriters at Lloyd's, London, Subscribing Certificate No. LC 104806, Cross-complainants and Appellants, v. Henry DOELGER and Thelma Doelger, Cross-defendants and Respondents.*

Civ. 19087.

Decided: June 28, 1961

Wallace, Garrison, Norton & Ray, San Francisco, for appellants R. Walker Roylance, and All Other Underwriters at Lloyd's, London. Ropers, Majeski & Kane, Redwood City, for respondents.

This is an appeal from an order granting a motion to strike the cross-complaint.

Plaintiff, Henry Doelger Builder, Inc., brought an action against defendants to recover money allegedly due it under an insurance certificate. From the complaint, it appears that James H. and Juanita Bullis previously brought an action against a school district, Henry Doelger, Thelma Doelger, and Henry Doelger Builder, Inc. The present complaint alleges a judgment was entered against Henry Doelger Builder, Inc. (a defendant in the Bullis case and plaintiff in the instant action), which judgment was paid by Henry Doelger Builder, Inc. Sometime before the Bullis action, defendants had issued to plaintiff a certificate of insurance insuring plaintiff corporation against property damage caused by reason of its operations. Plaintiff corporation seeks by its action to recover from defendants on the insurance certificate for the sum it had to pay to satisfy the judgment in the Bullis case and for attorneys' fees in defending that action.

By way of affirmative defenses, defendants allege (1) the complaint does not state sufficient facts to constitute a cause of action, (2) defendants tendered the defense to the Bullis lawsuit on behalf of plaintiff corporation to Henry Doelger and Thelma Doelger; said tender of defense was accepted by Henry Doelger and Thelma Doelger and that by reason of this tender and acceptance, defendants performed their obligations under the certificate of insurance, (3) without notice to defendants, plaintiff corporation assumed liability for and compromised and satisfied the Bullis judgment and thus breached the terms, conditions and provisions of the certificate of insurance.

In addition to their answer, defendants filed a cross-complaint for declaratory relief naming Henry Doelger and Thelma Doelger as cross-defendants. By the cross-complaint, defendants and cross-complainants contend in the first cause of action that the Bullis lawsuit was a result of plaintiff corporation ‘and others' excavating adjacent to the Bullis property leaving the Bullis property without proper support which resulted in the Bullis land collapsing causing damage to the Bullis property. It is further alleged that the land upon which the excavation was made was owned by cross-defendants Doelger and the excavation by plaintiff corporation was done under the supervision, direction and control of cross-defendants Doelger and thus said cross-defendants are primarily liable for the damage to the Bullis land. Defendants and cross-complainants alleged that if plaintiff corporation recovers from defendants, the defendants will be subrogated to plaintiff's rights including indemnity from cross-defendants. By the second cause of action of the cross-complaint, defendants and cross-complainants alleged that cross-defendants by agreement with defendants and cross-complainants agreed to defend plaintiff corporation in the Bullis action and to hold plaintiff corporation harmles from any liability which it might have in the Bullis case, and it is this liability from which cross-defendants agreed to hold cross-complainants harmless. In each cause of action, defendants and cross-complainants seek a declaration of the rights of the parties under the insurance certificate.

The motion to strike the cross-complaint from the record as being ‘* * * incompetent, irrelevant and immaterial, and constitutes an attempt to collaterally attack a final judgment,’ was granted and the cross-complaint ordered stricken. From this order the defendants and cross-complainants appeal.

Section 442, Code of Civil Procedure, provides in part, ‘Whenever the defendant seeks affirmative relief against any person, whether or not a party to the original action, relating to or depending upon the contract, transaction, matter happening or accident upon which the action is brought or affecting the property to which the action relates, he may, in addition to his answer, file at the same time, or by permission of the court subsequently, a cross-complaint. * * *’ It is quite clear the defendants and cross-complainants had a legal right to file a cross-complaint but this answer does not satisfy the inquiry as to whether this is a proper matter for declaratory relief.

Section 1060, Code of Civil Procedure, provides as follows: ‘Any person interested under a deed, will or other other written instrument, or under a contract, or who desires a declaration of his rights or duties with respect to another, or in respect to, in, over or upon property, or with respect to the location of the natural channel of a water course, may, in cases of actual controversy relating to the legal rights and duties of the respective parties, bring an action in the superior court for a declaration of his rights and duties in the premises, including a determination of any question of construction or validity arising under such instrument or contract. He may ask for a declaration of rights or duties, either alone or with other relief; and the court may make a binding declaration of such rights or duties, whether or not further relief is or could be claimed at the time. The declaration may be either affirmative or negative in form and effect, and such declaration shall have the force of a final judgment. Such declaration may be had before there has been any breach of the obligation in respect to which said declaration is sought.’

It is defendants' and cross-complainants' position that when plaintiff corporation was served with complaint and summons in the Bullis action, defendants and cross-complainants made an agreement with Henry Doelger and Thelma Doelger whereby the Doelgers would defend the plaintiff corporation and hold defendants and cross-complainants harmless. Defendants and cross-complainants contend the Doelgers did not do so since plaintiff corporation paid the Bullis judgment. Further, defendants' position is that the Doelgers are primarily liable for the damage to the Bullis property. Defendants' and cross-complainants' contention is that if plaintiff corporation in the instant action recovers against defendants and cross-complainants, defendants and cross-complainants in turn have a right of action, subrogated and primary, against the cross-defendants Doelger. Thus it clearly appears a situation exists in which there is an actual controversy existing between several persons as to their respective legal rights and duties. To strike the cross-complaint does not dispose of the litigation between the parties if only the legal issues presented by the complaint are determined.

It is true that section 1061, Code of Civil Procedure, provides, ‘The court may refuse to exercise the power granted by this chapter in any case where its declaration or determination is not necessary or proper at the time under all the circumstances,’ but discretion resting in the court is not unlimited.

In Columbia Pictures Corp. v. DeToth, 26 Cal.2d 753, 161 P.2d 217, 162 A.L.R. 747, the court said: ‘Although under the declaratory relief statute (Code Civ.Proc. §§ 1060–1062a), wide powers have been conferred upon the trial court, its discretion is not unlimited. It is a legal or judicial discretion, hardened by experience into rule, and its exercise is subject to appellate review (Borchard, Declaratory Judgments, p. 299). As said by a text-writer (Anderson, Declaratory Judgments, p. 525, § 172), ‘It would seem to be a self-evident principle that this discretion is not an arbitrary one, and is not one that may be granted as a special favor, or one that may be exercised personally by the court; but is a sound judicial discretion and one that is controlled in a great measure by legal principles; and in consonance with the rule that the discretion exercised in these cases by the courts is a judicial or legal one, and must be bottomed upon good reason, it may be generally stated that such discretion is subject to review at the hands of appellate tribunals.’ Where, therefore, a case is properly before the trial court, under a complaint which is legally sufficient and sets forth facts and circumstances showing that a declaratory adjudication is entirely appropriate, the trial court may not properly refuse to assume jurisdiction; and if it does enter a dismissal, it will be directed by an appellate tribunal to entertain the action. Declaratory relief must be granted when the facts justifying that course are sufficiently alleged.' 26 Cal.2d at page 762, 161 P.2d at page 221.

Where, under the pleadings, the party is entitled to some relief over which the parties are in controversy, the declaration is both necessary and proper and not governed by the discretionary provisions of section 1061, Code of Civil Procedure. Zimmer v. Gorelink, 42 Cal.App.2d 440, 109 P.2d 34.

The pleadings in this case clearly satisfy the provisions for declaratory relief since they set forth facts showing the existence of an actual controversy relating to legal rights and duties of the respective parties and they further reflect that if the cross-complaint is not allowed to stand, of necessity there will have to be another action brought. One of the purposes of declaratory relief is to liquidate uncertainties and controversies that might result in future litigation. Haley v. Los Angeles County Flood Control Dist., 172 Cal.App.2d 285, 342 P.2d 476.

It is quite clear that defendants and cross-complainants may not attack the judgment in the Bullis case and are not seeking to do so. The Bullis case determined only one facet of the controversy.

Since there is an actual controversy existing between the parties which can and should be resolved in this proceeding, the cross-complaint should be allowed to remain. It was an abuse of the discretionary power of the court to strike it.

Order reversed.

McCABE, Justice pro tem.

DRAPER, Acting P. J., and SHOEMAKER, J., concur.