Angelus Associates Corp. v. Neonex Leisure Products, Inc.

• Decision Date: 29 April 1985
• Citation: 167 Cal.App.3d 532,213 Cal.Rptr. 403
• Court: California Court of Appeals Court of Appeals
• Parties: , Prod.Liab.Rep. (CCH) P 10,615 ANGELUS ASSOCIATES CORPORATION dba Empire Camper Sales, Cross-Complainant and Appellant, v. NEONEX LEISURE PRODUCTS, INC., Cross-Defendant and Respondent. G000178.

Page 403

213 Cal.Rptr. 403

167 Cal.App.3d 532, Prod.Liab.Rep. (CCH) P 10,615

ANGELUS ASSOCIATES CORPORATION dba Empire Camper Sales, Cross-Complainant and Appellant, v. NEONEX LEISURE PRODUCTS, INC., Cross-Defendant and Respondent.

G000178.

Court of Appeal, Fourth District, Division 3, California.

April 29, 1985.

[167 Cal.App.3d 533] Haight, Dickson, Brown & Bonesteel, Dennis K. Wheeler, Roy G. Weatherup and Robert L. Kaufman, Santa Monica, for cross-complainant and appellant.

[167 Cal.App.3d 534] Kinkle, Rodiger & Spriggs, A.J. Pyka and Gayle K. Tonon, San Diego, for cross-defendant and respondent.

OPINION

CROSBY, Associate Justice.

May a nonsettling defendant retailer in a products liability action pursue a cross-complaint for total equitable indemnity against the defendant manufacturer despite the latter's good faith settlement with the plaintiff (Code Civ.Proc., § 877.6)? Yes.

I

Larry Wilkerson and Anthony Hewitson were injured in a motorhome explosion in 1977, allegedly caused by a propane gas leak in a defective heating unit. They sued numerous defendants, including the manufacturer of the vehicle, Neonex Leisure Products, Inc.; the manufacturer of the heating unit, Essex Group, Inc.; the supplier of the heating unit, Suburban Manufacturing Company; and the retailer, Angelus Associates Corporation dba Empire Camper Sales. Against Neonex and Empire, plaintiffs sought recovery on both negligence and strict products liability theories. As is typical in civil actions of this kind, all defendants cross-complained against each of the others for implied indemnity and contribution.

Six months before trial, Neonex, the motorhome manufacturer, settled with both plaintiffs. The court determined the settlement was in good faith and granted summary judgment for Neonex on all the cross-complaints against it (Code Civ.Proc., § 877.6). ¹

After the settlement was approved, Empire tendered its defense to Neonex. The tender was rejected; and the underlying personal injury action proceeded to trial against Empire and Essex, the manufacturer of the allegedly defective heating unit. ² Judgment was for defendants on a special verdict, although plaintiffs' appeal is pending.

In this appeal, Empire attacks the judgment in favor of Neonex on its cross-complaint for total equitable indemnity, claiming this form of indemnity lives after American Motorcycle Assn. v. Superior Court (1978) 20 Cal.3d 578, 146 Cal.Rptr. 182, 578 P.2d 899 and is not barred by a Code of Civil Procedure section 877.6, subdivision (c) good faith settlement. ³

II

Under the doctrine of strict products liability, all persons and entities in the manufacturing and marketing chain are liable to the plaintiff even if they are not responsible for the defect proximately causing the loss. (Vandermark v. Ford Motor Co. (1964) 61 Cal.2d 256, 261, 37 Cal.Rptr. 896, 391 P.2d 168.) Between themselves, however, persons not at fault for the defect are entitled to indemnity from those who are, based on equitable principles. (Davis v. Air Technical Industries, Inc. (1978) 22 Cal.3d 1, 3, fn. 1, 148 Cal.Rptr. 419, 582 P.2d 1010.) ⁴

Before 1978, implied indemnity was based on common law equitable principles; and if the right to implied indemnity existed at all, the indemnitee was entitled to total indemnity. However, if any degree of fault was attributed to the proposed indemnitee, e.g., a retailer who negligently failed to discover the injury-causing defect, indemnity was denied completely. (Pearson Ford Co. v. Ford Motor Co. (1969) 273 Cal.App.2d 269, 276, 78 Cal.Rptr. 279.) The principle of implied indemnity was explained as follows: "[It] permits one of two tortfeasors to shift the entire loss to the other when, without active fault on the claimant's part, he has been compelled by reason of some legal obligation to pay damages occasioned by the immediate fault of the other.... The standard most frequently applied by the California appellate courts is one drawn from an opinion of the Pennsylvania Supreme Court in Builders Supply Co. v. McCabe [1951] 366 Pa. 322, 325-326, : 'The right of indemnity rests upon a difference between the primary and secondary liability of two persons each of whom is made responsible by the law to an injured party.... But the important point to be noted ... is that secondary as distinguished from primary liability rests upon a fault that is imputed or constructive only, being based on some legal relation between the parties, or arising from some positive rule of common or statutory law or because of a failure to discover or correct a defect or remedy a dangerous condition caused by the act of the one primarily responsible.' [Fn. omitted.]" (Ford Motor Co. v. Robert J. Poeschl, Inc. (1971) 21 Cal.App.3d 694, 696-697, 98 Cal.Rptr. 702.)

In 1978 the Supreme Court modified "the California common law equitable indemnity doctrine ... to permit a concurrent tortfeasor to obtain partial indemnity from other concurrent tortfeasors on a comparative fault basis." (American Motorcycle Assn. v. Superior Court, supra, 20 Cal.3d 578, 591, 146 Cal.Rptr. 182, 578 P.2d 899.) This change in the law was a response to California's adoption in 1975 of the system of comparative fault where "liability for damage [would] be borne by those whose negligence caused it in direct proportion to their respective fault." (Li v. Yellow Cab Co. (1975) 13 Cal.3d 804, 813, fn. omitted, 119 Cal.Rptr. 858, 532 P.2d 1226.)

But American Motorcycle did more than herald the arrival of comparative partial indemnity. The Supreme Court also suggested the goal of apportioning fiscal responsibility according to a tortfeasor's degree of fault should yield to the competing policy of encouraging pretrial settlements: "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 [1972] 26 Cal.App.3d 986, ) with the plaintiff must also be discharged from any claim for partial or comparative indemnity that may be pressed by a concurrent tortfeasor." (American Motorcycle Assn. v. Superior Court, supra, 20 Cal.3d at p. 604, 146 Cal.Rptr. 182, 578 P.2d 899.) The Legislature codified the rule in 1981 (Code Civ.Proc., § 877.6).

In permitting a settling tortfeasor to pay less than his proportionate share of the plaintiff's damages under comparative fault principles, section 877.6 provides a powerful incentive to settle before trial. But subdivision (c) expressly applies only to cross-complaints against a good faith settling tortfeasor for "equitable comparative contribution, or partial or comparative indemnity, based on comparative negligence or comparative fault." (Emphasis added.) As noted above, before American Motorcycle Assn. v. Superior Court, supra, 20 Cal.3d 578, 146 Cal.Rptr. 182, 578 P.2d 899, implied indemnity was an all or nothing proposition based on common law equitable principles. Does common law, or total, equitable indemnity exist today? And if so, does a cross- complaint seeking this form of indemnity, as opposed to comparative equitable indemnity, survive a tortfeasor's good faith settlement? In our view, the answer to both questions is yes.

III

The Supreme Court has yet to consider the issues presented in this appeal. However, the court hinted in Safeway Stores, Inc. v. Nest-Kart (1978) 21 Cal.3d 322, 146 Cal.Rptr. 550, 579 P.2d 441 that American Motorcycle may not have abolished common law equitable indemnity. The issue there was whether the comparative fault doctrine applied to apportion liability between one defendant sued on a negligence theory and another for strict products liability. The court cautioned in a footnote: "In the instant case the jury found that Safeway was itself negligent in failing to safely maintain its carts, and thus Safeway's liability is in no sense solely derivative or vicarious. Accordingly, we have no occasion to determine in this case whether the comparative indemnity doctrine should be applied in a situation in which a party's liability is entirely derivative or vicarious in nature. [Citations.]" (Id., at p. 332, fn. 5, 146 Cal.Rptr. 550, 579 P.2d 441.)

A division of the Second District considered the question in a recent opinion, however, and unanimously concluded total equitable indemnity survives American Motorcycle. In Huizar v. Abex Corp. (1984) 156 Cal.App.3d 534, 203 Cal.Rptr. 47, plaintiff was injured by an allegedly defective punch press and sued the machine's manufacturer and distributor. The manufacturer settled with plaintiff, and the court determined the settlement was in good faith (Code Civ.Proc., § 877.6). The distributor's cross-complaint against the manufacturer for indemnity was dismissed (Code Civ.Proc., § 877.6, subd. (c)). The distributor then settled with plaintiff, and the manufacturer's cross-complaint was similarly dismissed. Both defendants appealed from the dismissal of their respective cross-complaints.

The court agreed the manufacturer's cross-complaint was properly dismissed because it did "not contend that its liability to plaintiff was premised solely upon any act or omission of [the distributor]...." (Id. at p. 540, 203 Cal.Rptr. 47, emphasis added.) The distributor's cross-complaint, on the other hand, sought "total indemnification on the basis of alleged implied and expressed warranties and also on the theory of implied indemnity, alleging that any liability on its part would be premised solely upon its status as a distributor of the press, i.e., that it served as a mere conduit in the chain of distribution of a defectively manufactured or designed product." (Id., at p. 538, 203 Cal.Rptr. 47.) Dismissal of that cross-complaint was reversed. The court explained, "we are of the opinion that,...