DAVIS v. WOOD MIZER PRODUCTS INC (1998)

Three-year-old plaintiff Lorena Davis was injured when she wandered off her grandparents' porch to a portable sawmill and put her hand in the sprocket gear of the sawmill.   Through her guardian ad litem, plaintiff brought suit against Wood-Mizer Products, Inc., the manufacturer of the sawmill, for defective design, and against her grandparents, Glenn H. and Dorothie Davis, for negligent supervision.   These defendants filed cross-complaints for indemnity against each other.   Before trial, the grandparents' homeowners' insurance carrier settled with plaintiff for $300,000 and assignment of the cross-complaint for indemnity against Wood-Mizer.   The jury found for plaintiff and awarded damages of $420,100.   It apportioned liability 99 percent to Wood-Mizer and 1 percent to Dorothie Davis.   The court entered judgment of $415,899 against Wood-Mizer (99 percent of $420,100).

Plaintiff then moved to correct or amend the judgment to address the assigned cross-complaint for indemnity.   Over Wood-Mizer's objection, the trial court granted the motion and entered a corrected or amended judgment against Wood-Mizer in the amount of $593,100.

This appeal raises the question of the proper calculation of the amount of the total judgment against Wood-Mizer on both the tort action and the cross-complaint for indemnity.   Resolution of this issue requires consideration of the principles of comparative equitable indemnity under American Motorcycle Assn. v. Superior Court (1978) 20 Cal.3d 578, 146 Cal.Rptr. 182, 578 P.2d 899, the elimination of joint and several liability for noneconomic damages under Civil Code section 1431.2, and the assignment of an American Motorcycle cross-complaint, as permitted by Bush v. Superior Court (1992) 10 Cal.App.4th 1374, 13 Cal.Rptr.2d 382.   As we explain, we conclude the trial court erred in calculating the amount due from Wood-Mizer on both the tort cause of action and the cross-complaint for indemnity.   We reverse the judgment and direct entry of a judgment against Wood-Mizer in the original amount of $415,899.

In the cross-appeal, plaintiff contends the trial court erred in granting Wood-Mizer's motion for summary adjudication on the issue of punitive damages.   We find no error in this ruling.

FACTUAL AND PROCEDURAL BACKGROUND***

DISCUSSION

I-II ***III

We turn now to the heart of Wood-Mizer's appeal, its contention that the award of damages against it based on the assigned cross-complaint was “contrary to law, in derogation of public policy, overly punitive and fundamentally unfair.”   Again, Wood-Mizer makes two points in this argument.   First, it contends that Bush v. Superior Court, supra, 10 Cal.App.4th 1374, 13 Cal.Rptr.2d 382, which permits the assignment of a cause of action for equitable comparative indemnity to a plaintiff, is bad law.   Second, it argues that even if Bush is good law, it was incorrectly applied.   We agree only with the second point.

We begin our analysis with a brief review of the law pertaining to multiple party tort litigation.   In Li v. Yellow Cab Co. (1975) 13 Cal.3d 804, 119 Cal.Rptr. 858, 532 P.2d 1226, the California Supreme Court abrogated the all-or-nothing rule of contributory negligence.   The court replaced it with a system of comparative negligence under which “liability for damage will be borne by those whose negligence caused it in direct proportion to their respective fault.”  (Id. at p. 813, 119 Cal.Rptr. 858, 532 P.2d 1226, fn. omitted.)   In American Motorcycle Assn. v. Superior Court, supra, 20 Cal.3d 578, 146 Cal.Rptr. 182, 578 P.2d 899, the court determined that Li did not mandate abolition of the doctrine of joint and several liability among multiple tortfeasors.   It did conclude that the common law doctrine of equitable indemnity should be modified to recognize comparative negligence.   “ [T]he current equitable indemnity rule should be modified to permit a concurrent tortfeasor to obtain partial indemnity from other concurrent tortfeasors on a comparative fault basis.”  (Id. at p. 598, 146 Cal.Rptr. 182, 578 P.2d 899.)

In Bush v. Superior Court, supra, 10 Cal.App.4th 1374, 13 Cal.Rptr.2d 382, this court held an American Motorcycle claim for comparative indemnity is assignable to a tort plaintiff.   In Bush, the plaintiffs' home burned and they sued their fire insurance carrier for bad faith in failing to settle.   Separately, one plaintiff, O.L. Rains, sued defendants Robert Wright and William Bush for medical malpractice and defendant American Therapeutics, Inc., for products liability, claiming injuries from the side effects of a drug prescribed to treat emotional distress.   The plaintiffs settled with their insurer for $1,750,000, and assignment of its claim against the remaining defendants for equitable indemnity.   They then filed suit for comparative indemnity.   After their demurrer to this complaint was overruled, Wright and Bush petitioned for a writ of mandate.   We denied the writ.

After determining that the American Motorcycle claim could be assigned to a tort plaintiff under the established principles of indemnity, this court considered the “facially appealing argument” that plaintiffs should not be permitted to maintain the action on assignment because if they prevailed they could obtain more than full compensation for their injuries.  (Bush v. Superior Court, supra, 10 Cal.App.4th at pp. 1384-1385, 13 Cal.Rptr.2d 382.)   We recognized the potential for overcompensation because if O.L. Rains recovered on his American Motorcycle action, he would also prevail in the tort action “barring some procedural misadventure.”  (Id. at p. 1385, 13 Cal.Rptr.2d 382.)   Cognizant of the public policy against excess recovery, we nonetheless concluded that since each defendant's liability would be limited to his proportional share of fault, the assignment caused no unfairness to Wright and Bush. (Id. at pp. 1387-1388, 13 Cal.Rptr.2d 382.)  “When one who is asked to bear no more than his or her proportionate share raises this shield he or she implicitly complains on behalf of another tortfeasor who has borne a disproportionate share.   This prompts the rhetorical question:  ‘ “What's Hecuba to him or he to Hecuba, that he should weep for her?” ’   [Citation.]”  (Id. at p. 1388, 13 Cal.Rptr.2d 382.)

 Wood-Mizer takes issue with the application of Bush in this case, arguing that it is unfair that plaintiff recover much more than the amount of damages found by the jury.   To the extent Wood-Mizer's argument is based on the correction of the judgment that increased its liability to more than 99 percent of the damages, we agree, as more fully discussed below.   To the extent, however, that Wood-Mizer objects to the application of Bush because it results in overcompensation to plaintiff, at the expense of her grandparents' insurance carrier, that is of no concern to Wood-Mizer.   Overcompensation to a plaintiff may result whenever a defendant settles for more than its proportionate share of the damages, as later found by a jury.   The amount of overcompensation may be increased if there is an assignment of the American Motorcycle claim.   The result is the same as if the dollar amount of the settlement had been increased to include the value of the American Motorcycle claim.   While the plaintiff may recover more than her damages, so long as the remaining, nonsettling defendants pay no more than their proportionate share of the damages, they have no claim of unfairness.

In Bush, we stated the nonsettling defendants, if liable, are subject to damages in the plaintiff's tort action “measured by [plaintiff's] total damages minus the value of the portion of the ․ settlement attributable to those damages.”  (Bush v. Superior Court, supra, 10 Cal.App.4th at p. 1387, 13 Cal.Rptr.2d 382.)   In the American Motorcycle assignment action, “the measure of exposure is the value of the portion of the ․ settlement attributable to [plaintiff's] tort damages minus [the settling defendant's] proportional share of those damages.”  (Id. at p. 1388, 13 Cal.Rptr.2d 382.)   We now apply this calculation of liability to the case at hand.

In calculating Wood-Mizer's share of the tort damages, Wood-Mizer is entitled to an offset for the $300,000 settlement.   Under Code of Civil Procedure section 877, subdivision (a), a good faith settlement by one tortfeasor “shall reduce the claims against the others in the amount stipulated by the release ․ or in the amount of consideration paid for it whichever is greater.”

Under both Bush and Code of Civil Procedure section 877, Wood-Mizer's share of tort damages is calculated as follows.   The total amount of damages, $420,100, is reduced by the amount of the settlement, $300,000, for damages of $120,100.

 Both parties add a complication to the calculation of damages by applying Civil Code section 1431.2.   In 1986, the voters of California approved an initiative measure (Prop.51) known as the Fair Responsibility Act of 1986 (Civ.Code, §§ 1431-1431.5), which modified the traditional joint and several liability doctrine.   Under the Act, an individual tortfeasor's liability for noneconomic damages is limited to his percentage of fault.  (Civ.Code, § 1431.2.)   Joint and several liability remains viable only for economic damages.

The parties agree Wood-Mizer's share of the liability for plaintiff's tort action should be calculated under the formula set forth in Espinoza v. Machonga (1992) 9 Cal.App.4th 268, 11 Cal.Rptr.2d 498.   Under this formula, the total damages are allocated between economic and noneconomic damages, as found by the jury.   The resulting percentage of economic damages is applied to the settlement to determine what portion of the settlement is attributable to economic damages.   This amount is offset against the damage award, as is any amount attributable to the comparative fault of the plaintiff;  the remainder is the nonsettling defendant's joint and several liability for economic damages.   To this is added the nonsettling defendant's proportionate share of the noneconomic damages.  (Id. at p. 273, 11 Cal.Rptr.2d 498.)

We disagree that Proposition 51 and the Espinoza formula apply in this case.   Proposition 51 was enacted to hold defendants in tort actions “financially liable in closer proportion to their degree of fault.”   (Civ.Code, § 1431.1, subd. (c).)  The concern addressed was that some governmental and private defendants were perceived to have substantial financial resources;  they were the deep pockets.   These defendants were included in lawsuits although there was little basis for finding them at fault.   If they were found to share a small fraction of the fault, they were often held financially liable for all the damage.  (Civ.Code, § 1431.1, subd. (b).)

Proposition 51, therefore, was concerned with allocating economic and noneconomic damages where one of the defendants, perhaps the one most at fault, did not pay its share of the damages.   Under Civil Code section 1431.2, a plaintiff can recover only economic damages from the other defendants.   In Espinoza, the settlement had to be apportioned between economic and noneconomic damages because the settling defendant paid less than its proportionate share of the damages.   That concern is not present here.   The settling defendants, the grandparents, paid more than their share of the damages.   There is no question as to whether plaintiff can recover the shortfall in economic or noneconomic damages from the other defendant.   There is no shortfall;  rather, this is a case of overpayment.

It is the grandparents' overpayment that brings the indemnity action into play.   The grandparents have an American Motorcycle claim to “obtain partial indemnity from other concurrent tortfeasors on a comparative fault basis.”  (American Motorcycle Assn. v. Superior Court, supra, 20 Cal.3d 578, 598, 146 Cal.Rptr. 182, 578 P.2d 899.)   They assigned this claim to plaintiff, who seeks to recover on it from Wood-Mizer.   Wood-Mizer contends its total liability for both the tort action and the indemnity action is limited to its proportionate share of the total damages, 99 percent of $420,100 or $415,899.   We agree.

Bush states the nonsettling defendant's exposure for the assigned American Motorcycle claim is the value of the settlement attributable to tort damages less the settling defendant's proportionate share of those damages.  (Bush v. Superior Court, supra, 10 Cal.App.4th at p. 1388, 13 Cal.Rptr.2d 382.)   The calculation of the damages on the American Motorcycle cross-complaint is as follows.   The total settlement of $300,000 is reduced by the grandparents' proportionate share of fault or $4201 (one percent of $420,100) for total of $295,799.

The total damages to be paid by Wood-Mizer are $120,100 on the tort action, which takes into account the offset for the settlement, plus $295,799 on the cross-complaint for indemnity, the amount of the settlement that is in excess of the settling defendants' proportionate share of the damages.   The total is $415,899;  this amount is 99 percent of the total tort damages of $420,100.   As stated in Bush, the maximum liability of the nonsettling defendant where there is an assignment to the tort plaintiff of the American Motorcycle claim is the “total tort damages times each [nonsettling defendant's] share of fault-or as American Motorcycle has it, the ‘liability ․ borne by each individual tortfeasor in direct proportion to [his] respective fault․’  [Citation.]”  (10 Cal.App.4th at p. 1388, 13 Cal.Rptr.2d 382.)   We reverse the judgment for $593,100 and direct the trial court to enter judgment for $415,899.

IV †

DISPOSITION

The judgment is reversed and the trial court is directed to enter a new judgment against Wood-Mizer in the amount of $415,899.   Wood-Mizer shall recover its costs on appeal.

FOOTNOTES

FOOTNOTE.   See footnote *, ante.

FOOTNOTE.  FN††<> See footnote *, ante.

MORRISON, Associate Justice.

BLEASE, Acting P.J., and HULL, J., concur.