TECH BILT INC v. WOODWARD CLYDE ASSOCIATES

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

TECH–BILT, INC., Cross-Complainant and Appellant, v. WOODWARD–CLYDE & ASSOCIATES, Cross-Defendant and Respondent.

Civ. 26602.

Decided: September 14, 1983

Gibson & Kennerson and Paul R. Kennerson, San Diego, for cross-complainant and appellant. Daley & Heft and Dennis W. Daley, Encinitas, for cross-defendant and respondent.

Tech-Bilt, Inc. appeals a judgment which granted a motion for summary judgment and dismissed its cross-complaint against Woodward-Clyde & Associates.

Mr. and Mrs. Andrew Fabula, owners of a residential property, brought this action against Tech-Bilt Construction Corporation (the developer), Woodward-Clyde & Associates (soils engineers), and others on various theories to recover damages for structural defects in their residence.   During February and March 1981, the attorneys for Fabula and for Woodward-Clyde negotiated a settlement.   Believing their action against Woodward-Clyde to be barred by the applicable 10-year statute of limitations (Code Civ.Proc.,1 § 337.15) and the proceedings against the engineers would be costly, time consuming and without merit, Fabula agreed to dismiss with prejudice its suit against Woodward-Clyde in exchange for Woodward-Clyde's waiver of costs which we understand to be about $55.   Dismissal was entered March 6, 1981.

On April 29, 1981, Tech-Bilt filed an amended cross-complaint for indemnity and declaratory relief and on June 9, 1981, named Woodward-Clyde as a party cross-defendant.   On September 2, 1981, Woodward-Clyde then brought motions for an order to confirm its agreement with Fabula as a good faith settlement and for summary judgment as to all cross-complaints against it.   After a hearing, the court found the settlement to be in good faith and entered summary judgment dismissing Tech-Bilt's cross-complaint against Woodward-Clyde.   Tech-Bilt appeals, asserting the same question of law it argued before the lower court.

The issue is whether a settlement by a defendant with the plaintiff for waiver of costs operates as a settlement in good faith so as to bar a cross-complaint for comparative negligence or indemnity by a nonsettling defendant against the settling defendant.

The statutes which govern this case are sections 877 and 877.6.   Section 877 states, in pertinent 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—

“․

“(b) It shall discharge the tortfeasor to whom it is given from all liability for any contribution to any other tortfeasors.”

Section 877.6 states, in pertinent part:

“(a) Any party to an action wherein it is alleged that two or more parties are joint tortfeasors shall be entitled to a hearing on the issue of the good faith of a settlement entered into by the plaintiff or other claimant and one or more alleged tortfeasors ․

“․

“(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 equitable comparative contribution, or partial or comparative indemnity, based on comparative negligence or comparative fault.

“(d) The party asserting the lack of good faith shall have the burden of proof on that issue.”

In American Motorcycle Assn. v. Superior Court (1978) 20 Cal.3d 578, 146 Cal.Rptr. 182, 578 P.2d 899, the California Supreme Court stated the legislative policy expressed in section 877 supports the holding that a “settlement” in good faith of the plaintiff's claim would also discharge a defendant from any claim for partial or comparative indemnity.

“Although section 877 reflects a strong public policy in favor of settlement, this statutory policy does not in any way conflict with the recognition of a common law partial indemnity doctrine but rather can, and should, be preserved as an integral part of the partial indemnity doctrine that we adopt today.   Thus, while we recognize that section 877, by its terms, releases a settling tortfeasor only from liability for contribution and not partial indemnity, we conclude that from a realistic perspective the legislative policy underlying the provision dictates that a tortfeasor who has entered into a ‘good faith’ settlement (see River Garden Farms, Inc. v. Superior Court, supra, 26 Cal.App.3d 986 [103 Cal.Rptr. 498] ) with the plaintiff must also be discharged from any claim for partial or comparative indemnity that may be pressed by a concurrent tortfeasor.   As the Court of Appeal noted recently in Stambaugh v. Superior Court (1976) 62 Cal.App.3d 231, 236 [132 Cal.Rptr. 843] ․:  ‘Few things would be better calculated to frustrate [section 877's] policy, and to discourage settlement of disputed tort claims, than knowledge that such a settlement lacked finality and would lead to further litigation with one's joint tortfeasors, and perhaps further liability.’   This observation is as applicable in a partial indemnity framework as in the contribution context.”   (American Motorcycle Assn. v. Superior Court, supra, 20 Cal.3d 578, 603–604 [146 Cal.Rptr. 182, 578 P.2d 899].)

In Dompeling v. Superior Court (1981) 117 Cal.App.3d 798, at pages 805 to 806, 173 Cal.Rptr. 38, the court discussed in some detail the concept of “good faith” as contained in section 877:

“ ‘Collusion’ between settling parties was identified in River Garden Farms, Inc. [26 Cal.App.3d 986, 103 Cal.Rptr. 498], as a major element of bad faith.  ‘Any negotiated settlement involves cooperation, but not necessarily collusion.   It becomes collusive when it is aimed to injure the interests of an absent tortfeasor.   Although many kinds of collusive injury are possible, the most obvious and frequent is that created by an unreasonably cheap settlement.   Applied pro tanto to the ultimate judgment, such a settlement contributes little toward equitable—even though unequal—sharing.   As we noted earlier, unreasonably low settlements with the other tortfeasors and the fear of a large unshared judgment may propel the last remaining defendant into a settlement exceeding the plaintiff's remaining damages and transcending that defendant's equitable share.   Prevention of collusion is but a means to the end of preventing unreasonably low settlements which prejudice a nonparticipating tortfeasor.   The price of a settlement is the prime badge of its good or bad faith.

“ ‘․

“ ‘[However,] [l]ack of good faith encompasses many kinds of behavior.   It may characterize one or both sides to a settlement.   When profit is involved, the ingenuity of man spawns limitless varieties of unfairness.   Thus, formulation of a precise definition of good faith is neither possible nor practicable.   The Legislature has here incorporated by reference the general equitable principle of contribution law which frowns on unfair settlements, including those which are so poorly related to the value of the case as to impose a potentially disproportionate cost on the defendant ultimately selected for suit.’  (River Garden Farms, Inc., supra, 26 Cal.App.3d 986, 996–997 [103 Cal.Rptr. 498].)

“The cases emphasize that the question of good or bad faith is a question of fact and suggest the possible relevance of a settling party's financial status.   In Lareau v. Southern Pac. Transportation Co., supra, 44 Cal.App.3d 783, 798 [118 Cal.Rptr. 837], the court stated:  ‘The conduct and motivations of all parties in regard to settlement will be in question.’   In dicta, Fisher v. Superior Court, supra, 103 Cal.App.3d 434, 444 [163 Cal.Rptr. 47] specifically mentions the wealth of the settling defendant as evidence that may be admissible on trial of the good faith issue.   In Stambaugh v. Superior Court, supra, 62 Cal.App.3d 231, 238 [132 Cal.Rptr. 843], the court said:  ‘․ even where the claimant's damages are obviously great, and the liability therefor certain, a disproportionately low settlement figure is often reasonable in the case of a relatively insolvent, and uninsured, or underinsured, joint tortfeasor.’

“However, in the Stambaugh case, the court held that no colorable claim of bad faith had been shown and the trial court was in error in denying the settling tortfeasor's motion for summary judgment on the cross-complaint, stating:  ‘Except in rare cases of collusion or bad faith, ․, a joint tortfeasor should be permitted to negotiate settlement of an adverse claim according to his own best interests, whether for his financial advantage, or for the purchase of peace and quiet, or otherwise.   His good faith will not be determined by the proportion his settlement bears to the damages of the claimant.   For the damages are often speculative, and the probability of legal liability therefor is often uncertain or remote.’  (Stambaugh v. Superior Court, supra [62 Cal.App.3d 231, 132 Cal.Rptr. 843], at pp. 238–239 [132 Cal.Rptr. 843];  italics added.)”

The reason for this often relied on position is found later in the Dompeling case:

“Ours is an adversary system;  one who settles before trial expects to pay less than would be required if after trial the verdict were not in his favor.   This is a moving factor in personal injury settlements, which afford both ‘peace and quiet’ to defendant and needed relief without delay to an injured plaintiff.  (See Stambaugh v. Superior Court, supra, 62 Cal.App.3d 231, 238 [132 Cal.Rptr. 843].)  ‘ “The law wisely favors settlements, ․” ’  (Potter v. Pacific Lumber Co. (1951) 37 Cal.2d 592, 602 [234 P.2d 16] ․;  Fisher v. Superior Court, supra, 103 Cal.App.3d 434, 441 [163 Cal.Rptr. 47].)

“Bad faith is not established by a showing that a settling defendant paid less than his theoretical proportionate or fair share of the value of plaintiff's case.   A settlement always removes the settling defendant from the action;  this necessarily results in a possibility that the remaining defendants will suffer judgment greater in amount than if there had been no settlement.

“Where plaintiff settles with fewer than all defendants, the defendants are clearly adverse parties.   A settling defendant does not owe a legal duty to adverse parties, the nonsettling defendants, to pay the plaintiff more so that the adverse parties may pay the plaintiff less.   Plaintiff and defendants are also adverse parties;  the plaintiff does not owe a legal duty to the nonsettling defendants to seek more from a settling defendant so that the nonsettling defendants may pay less.

“The settling parties owe the nonsettling defendants a legal duty to refrain from tortious or other wrongful conduct;  absent conduct violative of such duty, the settling parties may act to further their respective interests without regard to the effect of their settlement upon other defendants.  [Fn. omitted.]

“Practical considerations support our conclusion that bad faith is not shown by the settling defendant's failure to pay his theoretical fair share of plaintiff's damage;  that determination requires deciding the amount of plaintiff's damage and who is liable under comparative fault principles.   These issues, ordinarily determined at trial, would have to be tried at the hearing to decide whether a settlement was made in good faith.   In fact, the pretrial hearing would encompass issues beyond proportionate liability of the parties, such as the subjective motives for settlement, the reason plaintiff accepted less than the settling defendant's theoretical fair share, or the ability of the settling defendant to pay more.”  (Dompeling v. Superior Court, supra, 117 Cal.App.3d 798, 809–810, 173 Cal.Rptr. 38.)

Webster's 3rd New International Dictionary defines “good faith” as indicating honesty and for lawful purpose, in a belief the conduct is not unconscionable or requiring further investigation, is devoid of fraud, deceit, collusion or gross negligence.   This is the usual sense of the term and no court, nor the Legislature in 1980 when it added section 877.6 (effective Jan. 1, 1981), provides us with a broader definition.   We will not attempt to fashion another definition to satisfy the equities of this case.

The inequities are highlighted by the fact the plaintiff here, as is a general practice, joined everyone conceivably liable, only to discover later his action against the one defendant is barred by the statute of limitations.   In settling with this defendant who may have no liability to the plaintiff, the other defendants are denied contribution by way of comparative or equitable indemnity.

In 1983, a unanimous Supreme Court in a case almost identical factually, though not procedurally, to our case held that even though the plaintiff homeowner's cause of action against the grading engineer was barred by section 337.15, subdivision (a), the cross-complaint for indemnity by the general contractor was proper under section 337.15, subdivision (c), as long as the main action was timely brought against the general contractor (Valley Circle Estates v. VTN Consolidated, Inc., 33 Cal.3d 604, 613–614, 189 Cal.Rptr. 871, 659 P.2d 1160).   In VTN, the homeowner sued the general contractor and the grading engineer for damages caused by soil defects.   The complaint against the engineer was barred, but was timely against the general contractor.   The engineer in VTN moved for and was granted summary judgment on the complaint.   The general contractor cross-complained for indemnity against the engineer, who sought summary judgment on the cross-complaint as well.   In holding the cross-complaint was timely under section 337.15, subdivision (c), the Supreme Court states:

“To impose on general contractors the liability of their subcontractors would not only be unfair, but could effectively deter the activities of the construction industry.   On the other hand, to require that subcontractors remain liable for their work for the period of time during which general contractors must remain liable, should not only promote responsibility in the construction industry generally, but provide an additional incentive on the part of subcontractors to be certain of their work.”  (Valley Circle Estates v. VTN Consolidated, Inc., supra, 33 Cal.3d at p. 614, 189 Cal.Rptr. 871, 659 P.2d 1160.)

VTN explained that although the subcontractor could still assert the bar of the statute of limitations against the primary action by the owner, that defense was not available in the cross-complaint by the general contractor where the statute of limitations between the general and the owner had not run.   The practical effect of VTN was to provide the subcontractor considerable financial incentive to settle with the plaintiff even though he may not be liable to him because of the statute of limitations.   In so doing, he could escape further liability using the relief afforded by sections 877 through 877.6.   It is apparent, too, there are strong financial considerations motivating a plaintiff owner to settle with the defendant subcontractor.   We presume the parties are keenly aware of the benefits each would realize from settlement and the potential loss that might be suffered if settlement was not effected.

The subjective reasoning processes, including the bargaining power offered by VTN, is not revealed by the record here, but we must presume thoughtful analysis by the respective lawyers.   The record is barren, however, of evidence of fraud, deceit, collusion, negligence, or improper motives in effecting the settlement.   Ridding the trial of the evidentiary problems of proof in connection with the claims of negligence against the soil engineer as well as avoiding costs attendant with depositions and expert testimony could provide ample justification for the Fabula's desire later to dismiss as against Woodward-Clyde and approach Tech-Bilt on a strict liability theory only.   Tech-Bilt had an opportunity to appear and did in fact present its argument this settlement was not made in “good faith.”   The evidence clearly supports the trial court's determination the settlement was made in good faith.   We cannot at this late date reopen the factual issues to allow the parties to present new evidence, though there is no suggestion any new evidence is available, or to reargue their case and seek a more favorable ruling from the court.

Recently, as both parties have noted, the Court of Appeal in the Fifth District with a factual situation like the one before us held a defendant who settles in good faith with plaintiff frees himself from further liability, including partial or comparative indemnity claims of concurrent tortfeasors (Cardio Systems, Inc. v. Superior Court (1981) 122 Cal.App.3d 880, 889, 176 Cal.Rptr. 254).   The court in Cardio Systems, Inc. more specifically held a settlement in which plaintiffs released a defendant in consideration of a waiver of costs only was a “good faith settlement.”

 We believe strong public policy favors settlements, ending litigation and limiting issues, and although it has disadvantages (see Sears, Roebuck & Co. v. International Harvester Co. (1978) 82 Cal.App.3d 492, 496–497, 147 Cal.Rptr. 262), it also has considerable merit.   We agree too with the court in Cardio, supra, 122 Cal.App.3d 880, 176 Cal.Rptr. 254, that a defendant who settles in good faith with plaintiff can free himself of the liability not only on the complaint but also on the cross-complaint for any comparative indemnity the joint tortfeasor may seek to assert.   Thus, while we recognize that plaintiffs settlement for a figure not representing a fair percentage of the ultimate liability may work a hardship on the co-defendants, under the “compulsion” of the dicta in American Motorcycle, supra, and the direction apparently afforded by the Legislature (cf. Cardio, supra, 122 Cal.App.3d at p. 891, 176 Cal.Rptr. 254), the procedures of sections 877 through 877.6 must be given the effect the Legislature authorized and “good faith” must be given a construction commensurate with the usual meaning of the term.

We recognize there may be inequity in a feature of the law giving the plaintiff control over the defendant's right of indemnity in the tort action.   The developer's protection against such loss of the indemnity right, however, is in the sections 877–877.6 procedure.   Additionally, we should note, the developer is in a position to protect himself by way of contract with the subcontractor and the right to indemnity is a standard provision in such contracts.   The release of liability afforded under sections 877–877.6 is to the “tortfeasor ”;  the right to indemnity by virtue of a contract action is another matter.   The cause of action in contract for indemnity would not arise until the contractor's liability has been established in the tort action.   We are mindful, too, it is the plaintiff who is the injured party and we are unwilling to diminish his control of the case for the sake of the wrongdoer's interest.   The latter is, after all, liable jointly and severally in any case.   Finally, we recognize that in the booming field of multi-party tort litigation, particular deference to the doctrine of stare decisis is essential.   Here, for better or for worse, the participants in tort litigation have been able to rely upon the broad holding in Cardio, although the federal courts may not be in total accord (see Commercial Union Insurance Co. v. Ford Motor Co. (9th Cir.1981) 640 F.2d 210).   We therefore conclude that even though another rule could theoretically be fashioned to deal with an unusual and apparently unfair case as we may have here, the disruptive effect of such a holding warrants this court exercise judicial restraint.   As in Cardio, we await direction from a higher authority.

We conclude it was not error for the trial court to find a good faith settlement in this case releasing Woodward-Clyde from liability in this action.

Judgment affirmed.

I respectfully dissent.

Tech-Bilt, Inc. appeals a summary judgment and dismissal of its cross-complaint against Woodward-Clyde & Associates.

Tech-Bilt, the developer-general contractor, and Woodward-Clyde, the soils engineers, and others were sued by Mr. and Mrs. Fabula for damages for structural defects in their residence primarily attributable to defective soil conditions and inadequate soil compaction.   The complaint was filed on October 30, 1980, within the ten-year statute of limitations of Code of Civil Procedure 1 section 337.15, subdivision (a) as to Tech-Bilt.   Through the process of voluntary informal “discovery” provided by Woodward-Clyde's counsel in correspondence, counsel for the plaintiffs learned that Woodward-Clyde's work had been completed prior to October 30, 1970, and the Fabula's complaint as against Woodward-Clyde was barred by section 337.15, subdivision (a).   For that reason, plaintiff's counsel filed a dismissal as to Woodward-Clyde on March 6, 1981, in exchange for an agreement by Woodward-Clyde not to press a claim for their costs of $55.00.   Thereafter, Tech-Bilt filed an amended cross-complaint against Woodward-Clyde for indemnity.   Respondent Woodward-Clyde moved for a determination of a good-faith settlement under section 877.6 and for summary judgment on the cross-complaint and both motions were granted.

In a case almost identical factually but different procedurally, a unanimous Supreme Court held on March 29, 1983, that even though the plaintiff homeowner's cause of action against the grading engineer was barred by section 337.15, subdivision (a), the cross-complaint for indemnity by the general contractor was proper under section 337.15, subdivision (c), as long as the main action was timely brought against the general contractor.   (Valley Circle Estates v. VTN Consolidated, Inc. (1983) 33 Cal.3d 604, 189 Cal.Rptr. 871, 659 P.2d 1160.)   In Valley Circle the homeowner sued the general contractor and the grading engineer for damages caused by soil defects.   The complaint against the engineer was barred, but was timely against the general contractor.   The engineer in Valley Circle moved for and was granted summary judgment on the complaint.   The general contractor cross-complained for indemnity against the engineer, who sought summary judgment on the cross-complaint.   In holding that the cross-complaint was timely under section 337.15, subdivision (c), the Supreme Court states:

“To impose on general contractors the liability of their subcontractors would not only be unfair, but could effectively deter the activities of the construction industry.   On the other hand, to require that subcontractors remain liable for their work for the period of time during which general contractors must remain liable, should not only promote responsibility in the construction industry generally, but provide an additional incentive on the part of subcontractors to be certain of their work.”  (Valley Circle Estates v. VTN Consolidated, Inc., supra, 33 Cal.3d at p. 614, 89 Cal.Rptr. 871, 659 P.2d 1160.)

The issue presented here is:  should the fact that the subcontractor engineer obtained a dismissal of the barred complaint in exchange for a waiver of the $55.00 filing fee rather than the summary judgment to which it was indisputably entitled defeat the general contractor's right to indemnity?

Respondent urges that the dismissal of the barred complaint in exchange for the waiver of costs must act as a bar to the cross-complaint under section 877.6.

As the California Supreme Court noted in Valley Circle, supra, at pages 608, 609, 189 Cal.Rptr. 871, 659 P.2d 1160:

“We are guided by the fundamental rules of statutory construction.   A court ‘ “ ‘should ascertain the intent of the Legislature so as to effectuate the purpose of the law.’ ” '  [Citations.] ․  ‘Excepting when clealy otherwise intended or indicated, words in a statute should be given their ordinary meaning and receive a sensible construction in accord with the commonly understood meaning thereof․’  [Citation.]  ‘Legislative enactments are to be construed in accordance with the ordinary meaning of the language used, if the words are not ambiguous and do not lead to an absurdity.   [Citations.]’ ”

The statute to be interpreted is section 877.6, which states, in pertinent part:

“(a) Any party to an action wherein it is alleged that two or more parties are joint tortfeasors shall be entitled to a hearing on the issue of the good faith of a settlement entered into by the plaintiff or other claimant and one or more alleged tortfeasors, upon giving notice thereof in the manner provided in Sections 1010 and 1011 at least 20 days before the hearing.   Upon a showing of good cause, the court may shorten the time for giving the required notice to permit the determination of the issue to be made before the commencement of the trial of the action, or before the verdict or judgment if settlement is made after the trial has commenced.

“․

“(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 equitable comparative contribution, or partial or comparative indemnity, based on comparative negligence or comparative fault.

“(d) The party asserting the lack of good faith shall have the burden of proof on that issue.”

The question is, was there a “settlement made in good faith” within the meaning of this statute?

The first part of the question is, was there a settlement of the plaintiff's claim against the soils engineers?   Applying the principles of statutory construction just referred to, in the ordinary, sensible and commonly understood meaning of the language as used, the answer must be:  “of course not.”   Lawyers, judges and legislators know the difference between a “settlement” and the dismissal of a barred claim.   Had the lawyers involved here reported to the court a “settlement” of Fabula v. Woodward-Clyde, their candor, at the very least, would have been seriously questioned.   The commonly understood and sensible description of the events would have been “We discovered the claim was barred and we agreed to dismiss as against Woodward-Clyde, and they agreed to waive their $55.00 filing fee in order to avoid having to make their motion for summary judgment.”   A “settlement” is ordinarily, commonly and sensibly understood to mean that as a result of at least some evaluation of a live claim, the parties have arrived at a form of consideration that they agree resolves the disputes between them.   Nothing of the sort occurred here.

The simple answer should be that, while the existence of a good faith settlement is certainly a question of fact, here the facts were not in dispute and as a matter of law within the plain language meaning of section 877.6, there has not been a settlement, therefore there has not been a good faith settlement, and Tech-Bilt's timely cross-complaint for indemnity is not barred.

Can this simple answer be reached within the confines of existing precedent?   (Appellant Tech-Bilt states that the issue is whether Cardio Systems, Inc. v. Superior Court (1981) 122 Cal.App.3d 880, 176 Cal.Rptr. 254, is or should be the law in this District.)   I suggest that the simple answer can be reached on either of two grounds.

First, the narrow ground is that Cardio Systems, Inc. v. Superior Court, supra, 122 Cal.App.3d 880, 176 Cal.Rptr. 254, is distinguishable from this case and not controlling.   In Cardio, plaintiff's counsel believed he had a good case against defendant Cardio Systems, Inc., a distributor of a heart-lung machine, and prior to trial chose to dismiss his good case without prejudice in return for a waiver of costs by Cardio so as not to “complicate a clear liability, relatively simple medical malpractice case by bringing in a products case.”   The court in Cardio held this to be a good faith settlement under section 877 and a bar to the cross-complaint for indemnity pursuant to American Motorcycle Assn. v. Superior Court (1978) 20 Cal.3d 578, 146 Cal.Rptr. 182, 578 P.2d 899.   Here Mr. and Mrs. Fabula did not dismiss a good case against Woodward-Clyde, but rather dismissed a barred claim.   While we are unaware of the specific amount of costs waived in Cardio, it seems reasonably clear here that the real consideration for the waiver of the $55.00 by Woodward-Clyde was the avoiding of the fees necessary to move for and obtain the summary judgment.   Woodward-Clyde was going to be out of Fabula's case one way or the other.   We should observe these distinctions and hold that, at least, the dismissal of a barred complaint and the waiver of $55.00 of costs does not constitute a settlement in good faith so as to bar timely cross-complaints for indemnity.

Second, on the broader or alternative ground, I suggest that taking into consideration all of the statutory and case law on this issue, Tech-Bilt's cross-complaint against Woodward-Clyde is not barred by section 877.6 and that to the extent that Cardio be read as indicating otherwise it should not be followed in this District.   The competition between the need for courts to do equity pursuant to the doctrine of comparative negligence and comparative or equitable indemnity and the judicial and legislative policies encouraging final settlement of cases has produced some conflict but not insolvable problems.   A fair accommodation between these conflicting considerations may be summarized as follows:  In order to carry out the legislative purpose of sections 877 and 877.6 in cases involving multiple tortfeasors, any settlement between the plaintiff and one defendant entered into solely for the purpose of resolving the disputes between them and reflecting at least in some degree a judgment by the settling parties of the relative merits and values of their cases against each other and not involving any tortious or other wrongful conduct directed toward the other defendants, will completely bar all cross-complaints for indemnity or contribution.   Furthermore, this will be true even where the plaintiff has different possibilities of recovery as against different defendants, such as strict liability versus negligence, or where one defendant's liability is “primary” and the other's is “secondary,” (Lopez v. Blecher (1983) 143 Cal.App.3d 736, 192 Cal.Rptr. 190), and even where the case being settled by the plaintiff is based on a different theory of liability than that of the cross-complaint.   As long as the settlement does result from some consideration by the settling parties of the merits of their case, enlightened self-interest on behalf of plaintiffs and plaintiff's counsel acts in the direction of equity and fairness for the remaining defendants, and the compromise between the various competing policies is workable.

Where, however, a defendant is dismissed from the main case for a reason unrelated to the potential merits of the plaintiff's claim, and therefore by definition unrelated to any consideration of the respective or comparative fault or liability as among the defendants, no legislative or judicial purpose is accomplished by the barring of the cross-complaints.   Equity among the defendants will have been defeated, and no practical necessity of the plaintiff requires such a result.   If the plaintiff's counsel wishes to dismiss as against one defendant because the claim against that defendant is barred, or because he wishes to “simplify his case” or because counsel for that defendant does an exceptional job of cross-examining the economist he plans to use, it seems highly unlikely that such defendant will resist a dismissal over the issue of costs because he is still subject to the cross-complaints.   The defendant, after all, attains a benefit from the dismissal because that defendant will have no exposure regarding his own conduct, unless and until the plaintiff can make a case against one of the other defendants.

The succession of cases from River Garden Farms v. Superior Court (1972) 26 Cal.App.3d 986, 103 Cal.Rptr. 498, to the present have dealt primarily with the concept of “good faith” as initially contained in section 877 and subsequently in section 877.6, and definitions and standards have emerged in the context of the payment of large sums of money and/or the limits of insurance policies.   In River Garden Farms, the payments as to which the fairness of the allocations were questioned totalled $1,290,000.   The payments to Mr. and Mrs. Lareau disputed by Southern Pacific totalled $130,000 (Lareau v. Southern Pacific Transportation Co. (1975) 44 Cal.App.3d 783, 118 Cal.Rptr. 837).   The policy limits were paid in Stambaugh v. Superior Court (1976) 62 Cal.App.3d 231, 132 Cal.Rptr. 843, as well as in Fisher v. Superior Court (1980) 103 Cal.App.3d 434, 163 Cal.Rptr. 47, as modified 104 Cal.App.3d 766c, and Mr. Dompeling agreed to pay his policy of $100,000 plus another $10,000 on a sliding scale.  (Dompeling v. Superior Court (1981) 117 Cal.App.3d 798, 173 Cal.Rptr. 38.)   In Burlington Northern R.R. Co. v. Superior Court (1982) 137 Cal.App.3d 942, 187 Cal.Rptr. 376, the issue of “good faith” involved the terms of the payment of $2,000,000.   None of these cases involved any question of whether there had been a “settlement” within the meaning of the statute, and the definitions of “good faith” from these cases do not help our understanding of whether we have a “settlement in good faith” here, because no “bad faith” is attributed to Mr. and Mrs. Fabula or to Woodward-Clyde.

The United States Court of Appeals, Ninth Circuit, analyzed the California law on problems presented where the plaintiff dismissed against Ford believing that he stood a better chance for recovering if Ford's expert witness did not testify.   In Commercial U. Ins. Co. v. Ford Motor Co. (9th Cir.1981) 640 F.2d 210, the Court of Appeals reversed a trial court finding that there had been a settlement in good faith which barred the cross-complaint for indemnity where the decision to dismiss was “substantially a tactical maneuver by plaintiff's attorney,” 2 stating at pages 212–214:

“First, courts interpret section 877 as reflecting a policy in favor of settlement․

“Second, the California courts have developed an equitable rule allocating liability among tortfeasors in proportion to fault․

“This court is bound by these two goals of California law—equity and settlement.  ‘[I]f the policy of encouraging settlements is permitted to overwhelm equitable financial sharing, the possibilities of unfair tactics are multiplied.   Neither statutory goal should be applied to defeat the other.’   River Garden Farms v. Superior Court, supra [26 Cal.3d] at 998 [103 Cal.Rptr. 498].  Hence, the expansion of § 877 to prevent a party from seeking indemnification from another should apply only when the policy of settlement has been furthered and a settlement is made in good faith.

“In determining whether the policy of settlement has been furthered, we look to the conduct of the parties.   Where a plaintiff dismisses an action, the policy is furthered only when the dismissal resulted from a mutual decision to settle the dispute․

“․  Hence, good faith of the dismissal alone is not sufficient.   The dismissal must represent a settlement which is a good faith determination of relative liabilities.   Only in this situation are both policies behind § 877—equity and settlement—furthered.

“․

“The district court did not analyze Meyers' dismissal by Ford to determine first, if a settlement had occurred and, second, if the settlement was made in good faith.   Instead, the district court reviewed the testimony of plaintiff's counsel regarding the decision to dismiss Ford in order to decide whether, as between the plaintiff and Ford, it was a good faith dismissal.   But an affirmative response to this question would not satisfy § 877, as it would not establish the existence of a settlement or the good faith required towards interested individuals not participating in the dismissal.

“The record reveals that the decision to dismiss was substantially a tactical maneuver by plaintiff's attorneys.   It does not reflect the cooperative decision-making between parties which is the earmark of settlement.   Nor does it reflect a consideration of relative liability․

“Moreover, a settlement, to the extent that it is dictated by the tactical advantage of removing a deep-pocket defendant because of the experts it could produce and the skilled trial attorneys it could retain, is not made in ‘good faith’ consideration of the relevant liability of all parties [or even, it should be noted, of the relevant liabilities as between the settling parties]․

“․

“The policies served by § 877 are equity and the settlement of cases prior to trial.   The ability of a court to achieve equity among parties should not be abridged absent proof that a true settlement has occurred.   California courts acknowledge the control given a settling plaintiff over the party defendants and the concomitant danger to equitable considerations.   If, as here, the dismissal appears to be little more than tactical maneuvering by the plaintiff, the losing defendant should not be prevented from seeking equitable indemnification from a party who may be partially responsible.”  (Fn. omitted, italics added.)

In concluding that a dismissal of a “good” case without prejudice for a waiver of costs was a good faith settlement under section 877 so as to bar the cross-complaint, the court in Cardio felt that “without further legislative clarification, the term ‘good faith’ must be given a meaning within the usual sense of the term;  under such a definition Hospital is barred by a good faith dismissal from seeking indemnity against Cardio.”  (Cardio Systems, Inc. v. Superior Court, supra, 122 Cal.App.3d 880, 890, 176 Cal.Rptr. 254.)

The court there treated the issue of whether a dismissal for costs was a “settlement” and the extensive analysis provided by Commercial U. Ins. Co. v. Ford Motor Co., supra, 640 F.2d 210, in a footnote at page 890.

The Cardio court goes on to say about its decision:

“The result is unsatisfactory.   The rule permits a plaintiff to insulate a defendant ․ from being liable to a codefendant ․ for comparative indemnity by dismissing against Cardio in consideration of a waiver of costs where the dismissal is motivated by plaintiffs' tactical consideration having little relationship to the potential liability of Cardio.   The facts show that plaintiffs' counsel was of the opinion that plaintiffs had a fairly good liability case against Cardio and the reason for the dismissal against Cardio ․ was to avoid conplicating plaintiffs' ‘clear liability, relatively simple medical malpractice case’ against Hospital.   The result is fundamentally unfair and cannot be what the Legislature intended.

“The Legislature could not anticipate the problems arising after the Supreme Court's decision in American Motorcycle Assn. v. Superior Court ․ 20 Cal.3d 578 [146 Cal.Rptr. 182, 578 P.2d 899];  however, the governing section (Code Civ.Proc., § 877) needs to be reexamined in light of that decision.   The Legislature is equipped with the facilities and the forum to hear from all interested parties and to pass appropriate amendments to Code of Civil Procedure section 877;  the Legislature should move with dispatch to prevent the occurrence of such an unfortunate result as in this case.”  (Cardio Systems, Inc. v. Superior Court, supra, 122 Cal.App.3d 880, 890–891, 176 Cal.Rptr. 254.)

The fact is the Legislature had responded to American Motorcycle by the adoption of section 877.6 in 1980.  (Of course, the Cardio court was dealing only with section 877.)   In setting up the procedure for determination of the existence of good faith settlement which will bar all “claims for equitable comparative contribution or partial or comparative indemnity, based on comparative negligence or comparative fault,” the Legislature has placed the burden on the moving party to persuade the court that there had been a settlement, and the party asserting the lack of good faith then has the burden of proof on that issue.  (§ 877.6, subd. (d).)

Surely the Legislature contemplated and intended that the court's determination of whether a settlement had occurred would be a meaningful determination.   The Legislature was aware in 1980 of the conclusion of the California Supreme Court in American Motorcycle, supra, that:

“․ Code of Civil Procedure section 875 et seq. do not preclude the development of new common law principles in this area, and we hold that under the common law of this state a concurrent tortfeasor may seek partial indemnity from another concurrent tortfeasor on a comparative fault basis” (American Motorcycle Assn. v. Superior Court, supra, 20 Cal.3d 578, 604 [146 Cal.Rptr. 182, 578 P.2d 899] ) and, “recognizing with Dean Prosser the indefensibility of a doctrine which ‘ “places upon one party the entire burden of a loss for which two are, by hypothesis, responsible.” ’ ”  (Id., at p. 607, 146 Cal.Rptr. 182, 578 P.2d 899.)

It is clear that the purpose of section 877.6 was to provide a procedure for putting these principles into operation, not to defeat them.

It may be that the existence of a settlement in good faith is one of those things easier to recognize than describe, and it may be easier to describe those things that are not settlements in good faith.   Courts are able to recognize tokenism, e.g., an offer of $1.00 under section 998 which was sure to be rejected in an unsuccessful attempt to recover expert witness fees (Wear v. Calderon (1981) 121 Cal.App.3d 818, 175 Cal.Rptr. 566), and even a section 998 offer of $2,500 against a $20,000,000 demand similarly rejected as a basis for expert witness fees, even though the purpose of section 998 is to encourage settlements, because the court is able to recognize the offer as not being “reasonable” or “realistic.”  (Pineda v. Los Angeles Turf Club, Inc. (1980) 112 Cal.App.3d 53, 169 Cal.Rptr. 66.)

It must be noted that a “hierarchy of interests” has been described as having been created by decision of the California Supreme Court.   In Sears, Roebuck & Co. v. International Harvester Co. (1978) 82 Cal.App.3d 492, 147 Cal.Rptr. 262, the Court of Appeal stated:  “We analyze the Supreme Court decisions as creating a hierarchy of interests.   First in the hierarchy is maximization of recovery to the injured party for the amount of his injury to the extent fault of others has contributed to it․  Second is encouragement of settlement of the injured party's claim․  Third is the equitable apportionment of liability among the tortfeasors․”  (Id., at p. 496, 147 Cal.Rptr. 262, fn. omitted.)

The Ninth Circuit Court of Appeals interprets the correct order of the policies served by section 877 as being “equity and the settlement of cases prior to trial.”  (Commercial U. Ins. Co. v. Ford Motor Co., supra, 640 F.2d 210, 214.)   While it seems unlikely that a system of justice would regard the settling of cases as more important than an equitable result, in whichever order of priority these interests are considered, none are served by permitting Woodward-Clyde to skate free.   Letting the soils engineer escape participation in the potential settlement “pot” will not realistically or reasonably serve to maximize the recovery for Mr. and Mrs. Fabula.   On the contrary, for practical purposes, the potential for raising enough settlement money to compensate Mr. and Mrs. Fabula will be significantly increased by keeping all parties who may have caused their damages participating in the settlement.

It is surely beyond dispute that cases, and especially construction defect cases, are easier to settle with all the participants contributing than with only one or two left to pay the whole bill, and by definition the considerations of equity are served by requiring Woodward-Clyde to participate and defeated by excusing them.

In the case that led the way to Valley Circle, supra, the California Supreme Court held in People ex rel. Dept. of Transportation v. Superior Court (1980) 26 Cal.3d 744, 163 Cal.Rptr. 585, 608 P.2d 673, that the fact the plaintiff's claim against one defendant was barred (in this case by failure to file a timely claim against the government entity) does not protect that defendant from the cross-complaint for inequitable indemnity.   Knowing the complaint was barred, the plaintiff did not join the State as a defendant, and the State then demurred to the cross-complaint.   Justice Tobriner pointed out at p. 761, that:

“the state's reading of the [tort claims] act would permit the injured plaintiff to forfeit a defendant's indemnity rights by simply delaying the filing of an action until after the claims period has run.   As the Iowa Supreme Court stated in rejecting a similar contention as to legislative purpose:  ‘[W]e refuse to attribute to this legislation an intention to permit an injured claimant to elect which of two equally culpable tort-feasors shall bear the whole burden simply because one happens to be a governmental unit․’ ”

Woodward-Clyde should not be excused just because plaintiff's counsel did not know that they should be left out of the complaint, as the Department of Transportation was, and consequently had to dismiss for a waiver of costs.

The principles of American Motorcycle, Valley Circle and the intent of section 877.6 require the conclusion that as a matter of law, the dismissal by Mr. and Mrs. Fabula of a barred claim against Woodward-Clyde does not constitute a settlement in good faith as a bar to Tech-Bilt's cross-complaint for indemnity.

The judgment should be reversed.

FOOTNOTES

FN1. All statutory references are to the Code of Civil Procedure unless otherwise specified..  FN1. All statutory references are to the Code of Civil Procedure unless otherwise specified.

FN1. All statutory references are to the Code of Civil Procedure unless otherwise specified..  FN1. All statutory references are to the Code of Civil Procedure unless otherwise specified.

2.   We are not advised whether plaintiff obtained a waiver of costs, but the reasoning of the case would not appear to be based on any argument of complete lack of consideration.

COLOGNE, Associate Justice.

WIENER, J., concurs.