Centex Homes v. St. Paul Fire & Marine Ins. Co.

• Decision Date: 22 January 2018
• Docket Number: C081266
• Citation: 19 Cal.App.5th 789,228 Cal.Rptr.3d 228
• Court: California Court of Appeals Court of Appeals
• Parties: CENTEX HOMES et al., Cross-complainants and Appellants, v. ST. PAUL FIRE AND MARINE INSURANCE COMPANY, Cross-defendant and Respondent.

19 Cal.App.5th 789

228 Cal.Rptr.3d 228

CENTEX HOMES et al., Cross-complainants and Appellants,

v.ST. PAUL FIRE AND MARINE INSURANCE COMPANY, Cross-defendant and Respondent.

C081266

Court of Appeal, Third District, California.

Filed January 22, 2018

Payne & Fears, J. Kelby Van Patten, Jared De Jong, Irvine; Kendall Brill & Kelly, Laura W. Brill and Nicholas F. Daum, Los Angeles, for Cross-complainants and Appellants.

The Aguilera Law Group, A. Eric Aguilera, Raymond E. Brown and Lindsee B. Falcone, Costa Mesa, for Cross-defendant and Respondent.

RENNER, J.

Cross-complainants and appellants Centex Homes and Centex Real Estate Corporation (Centex) and cross-defendant and respondent St. Paul Fire and Marine Insurance Company (St. Paul) have a history of insurance coverage disputes. This particular dispute arises out of construction defect litigation between certain Rocklin homeowners and Centex, the developer of their homes. St. Paul was an insurer for subcontractor Ad Land Venture (Ad Land), and agreed to defend Centex as an additional insured subject to a reservation of rights. Centex filed a cross-complaint against its subcontractors and St. Paul that sought, as the seventh cause of action, a declaration that Centex was entitled to independent counsel under Civil Code section 2860¹ because St. Paul's reservation of rights created significant conflicts of interest.²

Centex appeals from a final judgment after the trial court granted St. Paul's motion for summary adjudication of Centex's seventh cause of action. Centex argues any possible or potential conflict is legally sufficient to require St. Paul to provide independent counsel. We disagree. Alternatively, Centex contends independent counsel was required because counsel appointed by St. Paul could influence the outcome of the coverage dispute and St. Paul controlled both sides of the litigation. Because Centex has failed to establish a triable issue of material fact regarding these assertions, we affirm the judgment.

I. BACKGROUND

The underlying action was initiated by homeowners from two residential developments in Rocklin against Centex for alleged defects to their homes. Centex did not directly perform any of the construction on these homes. On March 30, 2012, Centex tendered its defense of the action to St. Paul as an additional insured pursuant to Ad Land's policy. St. Paul agreed to defend Centex subject to a reservation of rights. The reservation of rights reserved St. Paul's right to deny indemnity to Centex for any claims by the homeowners not covered by the policy, including claims of damage to Ad Land's work and damage caused by the work of other subcontractors not insured by St. Paul. St. Paul also reserved its right to reimbursement of costs incurred defending uncovered claims. St. Paul appointed attorney David Lee to represent Centex and defend against the homeowners' claims.

On July 12, 2012, Centex filed a cross-complaint against subcontractors including Ad Land alleging breaches of written, oral and implied contracts to indemnify, defend and obtain insurance, as well as causes of action for equitable indemnity, contribution and repayment, and declaratory relief. The cross-complaint included a seventh cause of action for declaratory relief against St. Paul that sought a declaration that Centex was entitled to independent counsel under section 2860 because St. Paul's reservation of rights created significant conflicts of interest.

St. Paul moved for summary adjudication of Centex's seventh cause of action. In support of its motion, St. Paul introduced evidence that Lee only represents Centex with respect to its defense of the complaint, and does not represent Centex, Ad Land or St. Paul in connection with the cross-complaint. Lee also does not represent St. Paul regarding its separate actions against Centex or claims for contribution. St. Paul relied on testimony from Lee's deposition explaining that St. Paul did not place any limitations on his representation of Centex and never dictated or controlled what he could do regarding the prosecution of Centex's cross-complaints. Additionally, St. Paul never asked Lee to settle claims against the named insured while he represented Centex.

The trial court granted St. Paul's motion for summary adjudication. The court held that St. Paul met its initial burden by establishing that its reservation of rights did not create a conflict of interest and did not affect coverage issues that could be controlled by Lee. Additionally, St. Paul sufficiently established that Lee does not have a conflict of interest. "St. Paul has also established that the other lawsuits and claims for reimbursement, subrogation, and contribution do not create a conflict of interest. St. Paul has retained separate counsel, The Aguilera Law Group, to pursue its claims against Centex. [Citation.] Mr. Lee ... does not represent St. Paul."

The trial court determined Centex and Ad Land had similar interests to limit liability. "St. Paul has successfully negated the existence of a conflict between Mr. Lee and Centex that would put ‘appointed counsel in the position of having to choose which master to serve.’ "

Conversely, the trial court held Centex did not establish a triable issue of material fact. "The evidence clearly shows a conflict between St. Paul and Centex. It does not extend, however, to include Mr. Lee so as to invoke a triable issue regarding the appointment of independent counsel." In light of its decision to grant St. Paul's motion for summary adjudication, the trial court explained Centex's own motion for summary adjudication on its seventh cause of action was "dropped as moot."

A final judgment on the entire action was entered on November 18, 2015,³ and Centex timely appealed.

II. DISCUSSION

A. Standard of Review

We begin by summarizing several principles that govern the grant and review of summary judgment motions under section 437c of the Code of Civil Procedure. "A trial court properly grants summary judgment where no triable issue of material fact exists and the moving party is entitled to judgment as a matter of law." ( Merrill v. Navegar, Inc . (2001) 26 Cal.4th 465, 476, 110 Cal.Rptr.2d 370, 28 P.3d 116 ; see also Code Civ. Proc., § 437c, subd. (c).) A defendant or cross-defendant moving for summary judgment "bears the burden of persuasion that ‘one or more elements of’ the ‘cause of action’ in question ‘cannot be established,’ or that ‘there is a complete defense’ thereto." ( Aguilar v. Atlantic Richfield Co . (2001) 25 Cal.4th 826, 850, 107 Cal.Rptr.2d 841, 24 P.3d 493 ; see also Code Civ. Proc., § 437c, subd. (p)(2).) The cross-defendant "bears an initial burden of production to make a prima facie showing of the nonexistence of any triable issue of material fact." ( Aguilar v. Atlantic Richfield Co., supra , at p. 850, 107 Cal.Rptr.2d 841, 24 P.3d 493.) Once the cross-defendant meets its initial burden, the burden shifts to the plaintiff to demonstrate the existence of a triable issue of material fact. ( Ibid . ) "The plaintiff or cross-complainant shall not rely upon the allegations or denials of its pleadings to show that a triable issue of material fact exists but, instead, shall set forth the specific facts showing that a triable issue of material fact exists as to the cause of action or a defense thereto." ( Code Civ. Proc., § 437c, subd. (p)(2).)

"Although we independently assess the grant of summary judgment, our inquiry is subject to two constraints. Under the summary judgment statute, we examine the evidence submitted in connection with the summary judgment motion, with the exception of evidence to which objections have been appropriately sustained. [Citations.] ... [¶] Furthermore, our review is governed by a fundamental principle of appellate procedure, namely, that ‘ "[a] judgment or order of the lower court is presumed correct," ’ and thus, ‘ "error must be affirmatively shown." ’ [Citations.] Under this principle, the [appellants] bear the burden of establishing error on appeal, even though [the respondent] had the burden of proving its right to summary judgment before the trial court. [Citation.] For this reason, our review is limited to contentions adequately raised in the [appellants'] briefs." ( Paslay v. State Farm General Ins. Co . (2016) 248 Cal.App.4th 639, 644-645, 203 Cal.Rptr.3d 785.)

Centex's appellate briefing cites to evidence to which the trial court sustained objections. Centex neither acknowledges these evidentiary rulings nor argues they were improper. "Because the [appellants] do not challenge these rulings on appeal, our review is limited to the evidence considered by the trial court." ( Paslay v. State Farm General Ins. Co ., supra , 248 Cal.App.4th at p. 645, 203 Cal.Rptr.3d 785.)

Centex also fails to support much of its briefing with necessary citations to authority or the record. (See In re S.C . (2006) 138 Cal.App.4th 396, 408, 41 Cal.Rptr.3d 453 ["When a point is asserted without argument and authority for the proposition, ‘it is deemed to be without foundation and requires no discussion by the reviewing court’ "].) With respect to the record, in particular, " ‘[t]he reviewing court is not required to make an independent, unassisted study of the record in search of error or grounds to support the judgment.’ [Citations.] It is the duty of counsel to refer the reviewing court to the portion of the record which supports appellant's contentions on appeal. [Citation.] If no citation ‘is furnished on a particular point, the court may treat it as waived.’ " ( Guthrey v. State of California (1998) 63 Cal.App.4th 1108, 1115, 75 Cal.Rptr.2d 27.) With these principles in mind, we will address the merits of Centex's appeal.

B. The Right to Independent Counsel

"Generally, an insurer owing a duty to defend an insured, arising because there exists a potential for liability under the policy, ‘has the right to control defense and settlement of the third party action against its insured, and is ... a direct...