C3 v. Arthur J. Gallagher & Co.

• Citation: 23 Cal.Rptr.3d 258,125 Cal.App.4th 1022
• Decision Date: 13 January 2005
• Docket Number: No. B174518.,B174518.
• Court: California Court of Appeals Court of Appeals
• Parties: C3 ENTERTAINMENT, INC. et al., Plaintiffs and Appellants, v. ARTHUR J. GALLAGHER & CO., Defendant and Respondent.

23 Cal.Rptr.3d 258

125 Cal.App.4th 1022

C3 ENTERTAINMENT, INC. et al., Plaintiffs and Appellants, v. ARTHUR J. GALLAGHER & CO., Defendant and Respondent.

No. B174518.

Court of Appeal, Second District, Division 5.

January 13, 2005.

As Modified February 10, 2005.

Robert N. Benjamin, Glendale; Rovens Lamb and Douglas J. Rovens, Los Angeles, for Plaintiffs and Appellants.

Musick, Peeler & Garrett, Lawrence A. Tabb and Cheryl A. Orr, Los Angeles, for Defendant and Respondent.

ARMSTRONG, J.

Summary

This case raises an issue under the one final judgment rule: consistent with that rule, may a trial court enter judgment in favor of one defendant, triggering an appeal, if that judgment is based on an interim ruling against another defendant, which is not yet subject to appeal? We conclude that the court cannot do so.

Discussion

Plaintiffs and appellants C3 Entertainment, Knuckleheads, Inc., and Earl Benjamin (collectively, "C3") bought insurance coverage through respondent Arthur J. Gallagher & Co., an insurance agency. The coverage was with Hartford Casualty Insurance Company. C3 was subsequently sued in federal court in a case referred to by the parties as the "Howard Action." It tendered the case to Hartford, which denied coverage.

C3 then sued Hartford and Gallagher, bringing causes of action against Hartford for insurance bad faith and breach of contract, and against Gallagher for professional negligence. Hartford cross-complained for declaratory relief.

The cause of action against Gallagher alleged that "In the event that Hartford's contention that its policies do not obligate Hartford to provide a defense to Plaintiffs in the Howard Action is upheld, Gallagher ... breached their duty...." (Italics added.)

C3 moved for summary adjudication against Hartford on the issue of duty to defend in the Howard Action. (That action was resolved in a manner which made the question of duty to indemnify irrelevant.) C3 prevailed on the motion: the trial court found that Hartford had a duty to defend in the Howard Action. The bad faith cause of action remained, as did a determination of damages.

After the ruling on duty to defend, Gallagher moved for summary judgment on the ground that the ruling established that it had not breached any duty to C3, that is, that it had obtained the right coverage. The trial court agreed and entered summary judgment and judgment in Gallagher's favor. Faced with entry of judgment, C3 appealed, contending inter alia, that the judgment in favor of Gallagher was premature because there has been no final judicial determination of the coverage issue. We agree.

"A judgment is the final determination of the rights of the parties. (Code Civ. Proc., § 577.)" (Griset v. Fair Political Practices Com. (2001) 25 Cal.4th 688, 697, 107 Cal.Rptr.2d 149, 23 P.3d 43.) There can be only one final judgment in a single action, and only such a judgment is appealable. (Code Civ. Proc., § 904.1, Cuevas v. Truline Corp. (2004) 118 Cal. App.4th 56, 60, 12 Cal.Rptr.3d 706.) The one final judgment rule is a "fundamental principle of appellate practice that prohibits review of intermediate rulings by appeal until final resolution of the case." (Griset v. Fair Political Practices Com., supra, 25 Cal.4th at p. 697, 107 Cal. Rptr.2d 149, 23 P.3d 43.) "[A]n appeal cannot be taken from a judgment that fails to complete the disposition of all causes of action between the parties...." (Morehart v. County of Santa Barbara (1994) 7 Cal.4th 725, 743, 29 Cal.Rptr.2d 804, 872 P.2d 143.)

Here, the sole ground for Gallagher's summary judgment motion was the trial court's ruling that Hartford had a duty to defend. Gallagher's liability was thus intertwined with, and dependent on, the earlier, nonfinal, ruling against Hartford. The judgment in favor of Gallagher was entirely contingent on that ruling, which had not been reduced to a judgment. Under those circumstances, entry of judgment in Gallagher's favor was premature, and violated the one final judgment rule.

This case demonstrates the wisdom of that rule. Entry of judgment for Gallagher left plaintiffs with no practical choice but to appeal. That appeal presents us with the task of reviewing the trial court's ruling in favor of Gallagher, something we cannot do, because the underlying ruling against Hartford has not yet been reduced to a judgment and is not before us.

The appeal presents us with an impossible judicial task. If the trial court was wrong in ruling that Hartford had a duty to defend, C3 would have a good case for reversal of the judgment in favor of Gallagher — but the duty to defend ruling has not been entered as a judgment and has not been appealed. Moreover, Hartford is not a party to this appeal. We cannot decide whether the ruling in favor of Gallagher was error without deciding whether the ruling against Hartford was error, and we cannot look at the ruling against Hartford. That tells us that we...