C. L. Peck Contractors v. Superior Court

Decision Date29 August 1984
Citation205 Cal.Rptr. 754,159 Cal.App.3d 828
CourtCalifornia Court of Appeals Court of Appeals
PartiesC.L. PECK CONTRACTORS and Century 98 Associates, Petitioners, v. SUPERIOR COURT of the State of California for the County of Los Angeles, Respondent. PIERCE ENGINEERING COMPANY, Real Party in Interest. Civ. B 005096.

David L. Winter, Hagenbaugh & Murphy, Los Angeles, for petitioners.

No appearance for respondent.

Stephen L. Thomas, Jay J. Elliott, Thomas & Elliott, Los Angeles, for real party in interest.

ROTH, Presiding Justice.

In this case we decide that a good faith settlement between a plaintiff and a defendant under Code of Civil Procedure section 877.6 does not bar the remaining co-defendants from seeking indemnity from the settling defendant based on an express contract.

On July 17, 1980, Joseph Ventura was injured while working at a construction site. He sued C.L. Peck Contractors, the general contractor; Century 98 Associates, the owner (Petitioners); and Pierce Engineering Co. (Real Party in Interest), a subcontractor.

Mr. Ventura settled his claim against Pierce. Pursuant to Code of Civil Procedure section 877.6, Pierce sought from the trial court a declaration that the settlement was in good faith, and a dismissal of all cross-claims for indemnification. Petitioners opposed dismissal of their cross-claim to the extent the claims were provided for by contract with Pierce. 1 The court granted Pierce's motion, reasoning that an 877.6 settlement extinguishes all claims for indemnity, even those provided for by contract. Petitioners filed their petition for a writ of mandate with this court. We issued the alternative writ to definitively settle this important question.

The California Supreme Court in Li v. Yellow Cab Co. (1975) 13 Cal.3d 804, 119 Cal.Rptr. 858, 532 P.2d 1226 announced the rule of comparative negligence in California. American Motorcycle Assn. v. Superior Court (1978) 20 Cal.3d 578, 146 Cal.Rptr. 182, 578 P.2d 899 extended the new rule to multiple defendants, and we were taught that equitable indemnity was not to be an all or nothing affair, but would also be based on comparative negligence. The court stated: "[W]e conclude ... that a tortfeasor who has entered into a 'good faith' settlement [citation] with the plaintiffs must also be discharged from any claim for partial or comparative indemnity that may be pressed by a concurrent tortfeasor." (Id., at p. 604, 146 Cal.Rptr. 182, 578 P.2d 899.) Code of Civil Procedure section 877.6, enacted in 1980, is the legislative incarnation of this pronouncement. (Turcon Construction Inc. v. Norton-Villiers, Ltd. (1983) 139 Cal.App.3d 280, 283, 188 Cal.Rptr. 580.) It 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 claim against the settling tortfeasor for equitable comparative contribution, or partial or comparative indemnity based on comparative negligence or comparative fault." (Emphasis added.)

Whether Code of Civil Procedure section 877.6 bars claims of indemnity grounded in contract has not yet been squarely faced and answered, but it is not new. It was raised in Kohn v. Superior Court (1983) 142 Cal.App.3d 323, 191 Cal.Rptr. 78. The court there did not decide the issue, finding that it was not properly presented for decision. Several cases in dicta have assumed, without deciding, that contractually assumed liability is unaffected by section 877.6. In Pappert v. San Diego Gas & Electric Co. (1982) 137 Cal.App.3d 205, 186 Cal.Rptr. 847, the court's factual summary included this statement: "When pre-trial settlement resulted in a dismissal of plaintiff's complaint against Asplundh, SDG & E's cross complaint against Asplundh was dismissed as to the equitable indemnity action, leaving only its claim for express contractual indemnity." (Id. at p. 208-209, 186 Cal.Rptr. 847; emphasis added.)

In the case of Turcon Construction, Inc. v. Norton-Villiers, Ltd., supra, 139 Cal.App.3d at p. 284, 188 Cal.Rptr. 580, this Division noted: "Appellant's Cross-Complaint does not rest on any contractual indemnity nor does it allege that its liability vis-a-vis respondents is one imposed as a matter of law because of its relationship with respondent. [Citation.] In summary the complaint contains no allegations which would provide the basis for shifting of total liability to respondent."

In City of Sacramento v. Gemsch Investment Co. (1981) 115 Cal.App.3d 869, 171 Cal.Rptr. 764, the court stated: "Where the transaction rests upon related facts, either concurrent or successive, joint or several, which legally created detriment compensable against multiple actors, the right of indemnity should follow AMA guidelines, unless the contract or statute otherwise provides." (Id. at p. 877, 171 Cal.Rptr. 764; emphasis added.)

In Rodriguez v. McDonnell Douglas Corp. (1978) 87 Cal.App.3d 626, 151 Cal.Rptr. 399 the court points out: "None of the discussion in American Motorcycle leads to the slightest suggestion that the court was addressing itself to the all or nothing right of indemnification that is created by the parties to an indemnity contract." (Id., at p. 676, 151 Cal.Rptr. 399.)

Finally, this court in County of Los Angeles v. Superior Court (1984) 155 Cal.App.3d 798, 202 Cal.Rptr. 444, stated: "[T]hose sections [Code Civ.Proc., §§ 877 and 877.6] do not operate to bar otherwise valid claims by express or implied indemnity arising out of a contractual relationship." (Id. at p. 803, 202 Cal.Rptr. 444.) This statement has the character of an alternate holding; as we declared, the decision actually depends on the conclusion that "[t]hose sections apply only to joint tortfeasors and in our opinion County's role is not that of a tortfeasor." (Id.)

We recognize that Code of Civil Procedure section 877 presents a problem. Subdivision (b) of that section provides that settlement "shall discharge the tortfeasor to whom it is given from all liability for any contribution to any other tortfeasors." (Emphasis added.) This language does not fit comfortably with that of section 877.6, and suggests the result urged by Pierce. Section 877 was enacted in 1957, well before the introduction of comparative negligence into California jurisprudence. It has not been amended since then. We believe that the Legislature, when it enacted section 877.6, simply neglected to amend 877 to conform to the new rule of comparative negligence. We therefore resolve the ambiguity by holding that the more general language of section 877, subdivision (b) is subordinated to section 877.6, subdivision (c), the more recent and more specific expression of the legislative will.

We are mindful of the differences between indemnity based on contract and indemnity based on equitable considerations. "The obligation of indemnity ... may arise under the laws of this state from either of two general sources. First, it may arise by virtue of express contractual language.... Second, it may find its source in equitable considerations brought into play either by contractual language not specifically dealing with indemnification or by the equities of the particular case. [Citations.] [p] Each of these two basic forms of indemnity is subject to its own distinctive legal rules and limitations. Those governing so-called 'express' indemnity reflect its contractual nature, permitting great freedom of action to the parties in the establishment of the indemnity arrangement while at the same time subjecting the resulting contractual language to established rules of construction.... [p] Within the limitations of the language used, however, an express indemnity clause is accorded a certain preemptive effect, displacing any implied rights which might otherwise arise within the scope of its operation. Thus, as we stated in Markley v. Beagle (1967) 66 Cal.2d 951 at page 971, [59 Cal.Rptr. 809, 429 P.2d 129], when parties by express contractual provision establish a duty in one party to indemnify another, 'the extent of that duty must be determined from the contract and not from the independent doctrine of equitable indemnity.' (Italics added.) [Citations.] When, however, the...

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    ...relieve the settling defendant from performing the contractual indemnification obligations. (See C.L. Peck Contractors v. Superior Court (1984) 159 Cal.App.3d 828, 834, 205 Cal.Rptr. 754.) The issue here is whether a good faith settlement by a defendant who has not entered into an indemnifi......
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