WESTERN LANDSCAPE CONSTRUCTION v. CHARTER POINT HOMEOWNERS ASSOCIATION (1990)

 Western Landscape Construction, a California corporation, (Western) appeals after the trial court granted the motion of Charter Point Homeowners Association (HOA) for judgment on the pleadings ¹ with respect to Western's cross-complaint for equitable indemnity, contribution and declaratory relief.   Western's cross-complaint named HOA as a cross-defendant on the theory HOA's improper maintenance and modification of certain landscaping and drainage devices contributed to the damages claimed by HOA in its main action against a developer, Treetops Unlimited, (Treetops) for damages for defective construction of a 274–unit condominium project in Chula Vista known as Charter Point.   Western contends the trial court erred in concluding it had no cause of action against HOA and in dismissing its cause of action for declaratory relief without a judicial determination of the respective obligations of Western and HOA.   Western also seeks sanctions against HOA for taking a frivolous appeal.   Finding merit in Western's contentions except as to sanctions, we reverse the order granting HOA's motion for judgment on the pleadings.

HOA, which settled with Treetops before Western filed its cross-complaint, cross-appeals an order denying its motion for a determination its settlement with Treetops was in good faith.   Finding the order is nonappealable, we dismiss HOA's cross-appeal.   We do not impose sanctions against HOA.

FACTS

HOA's underlying lawsuit against Treetops for defective construction of the Charter Point condominium project was filed March 26, 1985.   In September 1985, HOA and Treetops entered a settlement agreement to resolve the action.   As part of the agreement Building Analysts was retained to conduct an investigation and make determinations with respect to the Charter Point project, including a determination whether identified deficiencies constituted construction, design of material deficiencies and whether the deficiency was a result of improper maintenance or original construction.   After Building Analysts served its report in January 1987, a dispute arose concerning its conclusions.   During 1987 and 1988, the case was before retired Justice Gerald J. Lewis for a trial by referee.

In October 1987, Treetops filed a cross-complaint for indemnity against other participants in the Charter Point construction project, including Western.   In March 1988, Treetops and HOA entered into a settlement agreement with Treetops agreeing to pay HOA $9.5 million.   HOA's responsibility for any damages caused by its own negligence was factored into the settlement amount.   The settlement agreement became final in April 1988.

In May 1988 Western cross-complained against the cross-defendant's named in Treetop's cross-complaint and certain Roes.   In December 1988 Western filed and served an amendment to its cross-complaint naming HOA as the “Roe 4” cross-defendant.

In November 1988, just before Western's cross-complaint was amended to name HOA as a cross-defendant, HOA moved for a determination its settlement with Treetops was in good faith and for dismissal of all cross-complaints against HOA.²  Western opposed HOA's motion, and the matter was continued to February 1989 to allow for further discovery.   The case was designated complex and assigned to Judge Arthur W. Jones for all purposes.

After a hearing on March 30, 1989, the trial court denied HOA's motion for a determination the settlement with Treetops was in good faith.   The court's theory was that HOA was a “successive tort-feasor,” not a joint tortfeasor, and thus the provisions of Code of Civil Procedure 3 section 877.6, relating to determinations of good faith settlement, do not apply.⁴  The court further announced its findings in part as follows:

“[A]pportionment is permitted and does apply ․ [T]he extent of credit to which each subcontractor is entitled is to be determined on ․ each individual claim of the developer against the sub;  and, in effect, the developer risks that peril in respect to whether or not its settlement truly reflected the extent to which the plaintiff was negligent.  [¶] Because of that determination, I cannot make an order barring any cross-complaints joining the plaintiff because I do not feel 877.6 applies.

“I do not feel that the cross-defendants, however, are entitled to equitable indemnity against the plaintiff and that the plaintiff is not a necessary party to any of the cross-defendants in order to achieve their right to apportion out damages caused by the plaintiff.   That determination can be made in absence of the plaintiff in the action and it will have to be.”

The order denying HOA's motion for a determination the settlement was in good faith was entered May 19, 1989.

The court suggested that since Western was not entitled to indemnity against HOA because section 877.6 was inapplicable, it would be appropriate for HOA to move for a judgment on the pleadings on the theory it is not a necessary party.   After a hearing on May 15, 1989, the court granted HOA's motion for judgment on the pleadings.   Part of the court's rationale was that the ruling “keeps a party out of the case that doesn't have to be there.   Charter Point [HOA] is never going to pay anybody any money for indemnity.   The end result is that the cross-defendants are going to have ․ their claim of damages sought by the developers, Treetops and all, reduced to the extent of the negligence of [HOA].  [¶ ] The burden of proof is still on the subcontractors to demonstrate the extent of damages ․ caused by the negligence of [HOA] just as if [HOA] were in the case.   Except you don't have another party in there putting on evidence that isn't necessary.  [¶] The evidence of the lack of negligence by [HOA] would be shown by Treetops who had made an assessment itself and made the determination to settle and give them some credit or get a reduction because of the [HOA] negligence.”

From a total cost of repair estimate of about $12.8 million, there was subtracted a total of about $1.2 million for maintenance failures by HOA, leaving a recommended settlement amount of about $11.6, approximately $2.1 million more than the actual amount of the settlement between HOA and Treetops.

DISCUSSION

IWESTERN'S APPEAL

Western contends the trial court committed reversible error in dismissing its causes of action for implied equitable indemnity and contribution as well as its cause of action for declaratory relief.   Western also seeks sanctions for a frivolous appeal on the part of HOA.

 Concerning the court's ruling on the matter of indemnity and contribution, section 428.10, subdivision (b), permits “[a] party against whom a cause of action has been asserted in a complaint or cross-complaint” to file a cross-complaint setting forth “[a]ny cause of action he has against a person alleged to be liable thereon, whether or not such person is already a party․”   Under this section a defendant may file a cross-complaint against any person from whom the defendant seeks total or partial indemnity on the basis of comparative fault.  (American Motorcycle Assn. v. Superior Court (1978) 20 Cal.3d 578, 584, 146 Cal.Rptr. 182, 578 P.2d 899;  Daon Corp. v. Place Homeowners' Assn. (1989) 207 Cal.App.3d 1449, 1454–1455, 255 Cal.Rptr. 448.)   Under the quoted language of section 428.10, the rule applies equally to a cause of action asserted by a party first named as a cross-defendant, such as Western.   Such a cross-defendant may assert a cause of action “against a person alleged to be liable thereon, whether or not such person is already a party․”  (§ 428.10, subd. (b).)

In Daon, supra, 207 Cal.App.3d 1449, 255 Cal.Rptr. 448, the court viewed as proper a cross-complaint by the defendant developer, Daon Corporation (Daon),⁵ against the homeowners association seeking indemnity for a portion of the damage to the condominium premises, which injury is the “ ‘direct and proximate result of the wrongful conduct’ of the Association.”  (207 Cal.App.3d at p. 1455, 255 Cal.Rptr. 448.)   The court said:

“Daon has, under the rule set out in American Motorcycle, cross-complained against the Association for indemnity on the theory that the Association's own negligence in performing its management duties makes it a joint tortfeasor.   In this context the Association acts, sues, and is liable solely in its own right and not as a surrogate for its members, the unit owners.   Thus, because the Association's second amended complaint states causes of action to which Daon may appropriately seek partial or total indemnity from the Association, Daon's cross-complaint against the Association was proper.”   (Daon, supra, 207 Cal.App.3d at p. 1455, 255 Cal.Rptr. 448.)

 The Daon principle applies equally to Western's cross-complaint against HOA.   In light of the circumstance that the September 1985 settlement agreement and dispute concerning the total cost estimate of the amount of repair involved only the parties to the original lawsuit and did not include subcontractors such as Western who were not brought into the action until the cross-complaint was filed in October 1987, it is clear Western and the other original cross-defendants had no input as to the matter of the extent of HOA's negligence before the settlement amount was established in March 1988.   Under these circumstances, in order to accord Western its day in court pursuant to the American Motorcycle principle as applied in Daon, Western must be permitted to pursue its cross-complaint against HOA.

 HOA's argument that this case “does not call for the application of the equitable indemnity doctrine because WESTERN will be liable only for the damages caused by its own negligence” is without merit.   While it is true that Western will be liable only for damages caused by its own negligence (see Woodward–Gizienski & Associates v. Geotechnical Exploration, Inc. (1989) 208 Cal.App.3d 64, 67–68, 255 Cal.Rptr. 800), it does not follow that Western should be precluded from directly showing the extent to which HOA's negligence impacted on Western's portion of liability.   Such a determination, of course, is the essence of the doctrine of equitable indemnity in this state allowing “a concurrent tortfeasor to obtain partial indemnity from other concurrent tortfeasors on a comparative fault basis.” ⁶  (See American Motorcycle Assn., supra, 20 Cal.3d at p. 598, 146 Cal.Rptr. 182, 578 P.2d 899;  and see Yamaha Motor Corp. v. Paseman (1990) 219 Cal.App.3d 958, 971, 268 Cal.Rptr. 514.)

We conclude Western is entitled to seek equitable indemnity from HOA.   Accordingly, it was error to grant HOA's motion for judgment on the pleadings.   This conclusion attaches to Western's cause of action for declaratory relief which also must be reinstated.

 In this connection it is appropriate to point out the trial court's characterization of HOA as a “successive” tortfeasor, and not a joint tortfeasor, is incorrect.   In GEM Developers v. Hallcraft Homes of San Diego, Inc. (1989) 213 Cal.App.3d 419, 431, 261 Cal.Rptr. 626, this court states the appropriate rule as follows:

“The term ‘joint tortfeasor’ as used in the comparative equitable indemnity context does not mean the defendants were ‘joined’ as tortfeasors by the plaintiff;  it is a broad term which includes joint, concurrent and successive tortfeasors.  (See Considine Co. v. Shadle, Hunt & Hagar (1986) 187 Cal.App.3d 760, 767 [232 Cal.Rptr. 250].)  ‘Where the transaction rests upon related facts, either concurrent or successive, joint or several, which legally create a detriment compensable against multiple actors, the right of indemnity should follow [American Motorcycle v. Superior Court, supra, 20 Cal.3d 578, 146 Cal.Rptr. 182, 578 P.2d 899] guidelines, unless a contract or statute otherwise provides.’  (City of Sacramento v. Gemsch Investment Co. (1981) 115 Cal.App.3d 869, 877 [171 Cal.Rptr. 764].)”  (Emphasis added.)

Thus, to the extent, if any, the trial court's determination of the equitable indemnity issue depended on the concept of “successive,” not joint, tortfeasor, that was an erroneous basis for the decision.

II

HOA's CROSS–APPEAL

HOA contends the trial court's ruling denying its motion for a determination its settlement with Treetops was in good faith should be reversed because Western did not meet its burden of proving HOA's settlement was not in good faith.

 Preliminarily, HOA claims that although it recognizes the section “877.6 good faith determination is an intermediate ruling which affects the moving party's right and is not appealable,” it nevertheless may appeal the order as an “intermediate ruling, proceeding, order or decision which involves the merits or necessarily affects the judgment or order appealed from or which substantially affects the rights of a party․”  (§ 906.)   HOA cites no authority to support its conclusion it may appeal.

In accordance with HOA's understanding it is well established that the determination of whether a settlement is in good faith is not appealable.   (Chernett v. Jacques (1988) 202 Cal.App.3d 69, 71, 248 Cal.Rptr. 63;  Barth–Wittmore Ins. v. H.R. Murphy Enterprises, Inc. (1985) 169 Cal.App.3d 124, 130, 214 Cal.Rptr. 894, “Although section 904.1 sets forth several instances in which an interlocutory judgment may be appealed, the good faith determination is not among them.”)   When consideration is given to the fact the Legislature has conferred a right to review the good faith determination by writ of mandate “filed within 20 days after service of written notice of the determination, or within such additional time not exceeding 20 days as the trial court may allow,” (§ 877.6, subd. (e)) and no authority supports HOA's theory of appealability, it becomes clear the good faith determination is nonappealable.   HOA's cross-appeal must be dismissed.

Finally, on the matter of Western's request for sanctions, we do not find record support for Western's conclusion HOA's cross-appeal of the denial of its good faith settlement motion “is an obvious and unmeritorious attempt to cloud the true issues in WESTERN's appeal.”   Accordingly, we deny sanctions.

DISPOSITION

The order granting judgment on the pleadings to HOA is reversed.   HOA's cross-appeal is dismissed.   Western shall recover its costs on appeal.

FOOTNOTES

1.   As in the case of an order sustaining a demurrer without leave to amend, we amend the order to incorporate a judgment of dismissal and treat the appeal as from the judgment.  (See Myers v. Quesenberry (1983) 144 Cal.App.3d 888, 890, fn. 1, 193 Cal.Rptr. 733;  and see Tiffany v. Sierra Sands Unified School Dist. (1980) 103 Cal.App.3d 218, 225, 162 Cal.Rptr. 669.)   Since the judgment terminates the litigation between the parties on the merits of the case, it is appealable under the one judgment rule.  (See Lemaire v. All City Employees Assn. (1973) 35 Cal.App.3d 106, 109, 110 Cal.Rptr. 507.)

2.   Three cross-defendants to Treetops's cross-complaint other than Western had already served cross-complaints against HOA.

FN3. All statutory references are to the Code of Civil Procedure unless otherwise specified..  FN3. All statutory references are to the Code of Civil Procedure unless otherwise specified.

4.   Although the trial court did not rule on the merits as to whether there was a good faith settlement between HOA and Treetops, it also appears the court was less than satisfied with the settlement under the standards of Tech–Bilt, Inc. v. Woodward–Clyde & Associates (1985) 38 Cal.3d 488, 499–500, 213 Cal.Rptr. 256, 698 P.2d 159, when it stated:  “I do not believe on the evidence that's been presented that I can really make a finding that there was a ballpark reduction of the settlement based on the plaintiff's negligence.   In any event, based on the evidence that I had.”

5.   Technically, Daon was a joint owner of an apartment complex which the owners converted into a condominium complex.   The main action by the homeowners' association alleged Daon was liable for foundation, plumbing and other structural defects in the complex and for failing to establish and maintain an adequate repair and maintenance fund for the association.   Daon thus stood in a legal posture indistinguishable from a developer for purposes of the issues raised in this case.

6.   To the extent HOA relies upon this court's decisions in Jaffe v. Huxley Architecture (1988) 200 Cal.App.3d 1188, 246 Cal.Rptr. 432 and Woodward–Gizienski, supra, 208 Cal.App.3d 64, 255 Cal.Rptr. 800, for the proposition Western is not entitled to equitable indemnity from HOA, that reliance is misplaced.   The cases are not factually analogous to this case.Jaffe involved a question of whether individual directors of a homeowners association could be sued for equitable indemnity after the developer and association had settled and the developer had available the relief sought by way of an affirmative defense.  (See Woodward–Gizienski, supra, 208 Cal.App.3d at p. 67, 255 Cal.Rptr. 800;  and see Platt v. Coldwell Banker Residential Real Estate Service (1990) 217 Cal.App.3d 1439, 1445–1446, 266 Cal.Rptr. 601.)Woodward–Gizienski involved a developer's claim for equitable indemnity against an engineering firm for having recommended excessive repairs which the homeowners association made without notice to the developer who settled for less than the amount of the repairs that were made but more than the amount of repairs needed.

TODD, Acting Presiding Justice.

BENKE and NARES, JJ., concur.