D.R. Horton L. A. Holding Co. v. Milgard Mfg., Inc.
| Decision Date | 29 March 2019 |
| Docket Number | D074889 |
| Court | California Court of Appeals |
| Parties | D.R. HORTON LOS ANGELES HOLDING COMPANY, INC., Cross-complainant and Respondent, v. MILGARD MANUFACTURING, INC., Cross-defendant and Appellant. |
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.
APPEAL from a judgment of the Superior Court of Riverside County, Sharon J. Waters, Judge. Affirmed.
Diem Law and Robin L. Diem; Hammons & Baldino and Ryan Walter Baldino for Cross-defendant and Appellant.
Plante Lebovic and Brian Christopher Plante, Ira D. Lebovic, Gregory Martin Golino for Cross-complainant and Respondent.
Cross-defendant and appellant Milgard Manufacturing, Inc. (Milgard) appeals from a judgment finding that D.R. Horton Los Angeles Holding Company, Inc. (D.R. Horton) was the prevailing party in D.R. Horton's cross-complaint for indemnity, breach of contract and declaratory relief against Milgard. In that cross-complaint, D.R. Horton sought to recover an unspecified amount of investigation expenses as well as litigation fees and costs, alleging Milgard failed to meet its duty to defend and indemnify D.R. Horton against claims in an underlying construction defect action. After a contested bench trial on the matter, the trial court found Milgard responsible for 5 percent of D.R. Horton's fees and costs, awarding D.R. Horton $11,100 and declaring it the prevailing party under Civil Code1 section 1717, subdivision (b)(1). It ruled Milgard was not a prevailing party within the meaning of section 1717, subdivision (b)(2) (hereafter section 1717(b)(2)), because Milgard did not allege that statute as an affirmative defense in its initial answer to the cross-complaint or actually tender the amount to D.R. Horton before depositing it in court.
Milgard contends the trial court erred by this ruling. It argues: (1) section 1717(b)(2) does not require the defense be alleged in the original answer, and its plain language, as well as its legislative history,2 demonstrate that the defense can be raised inan amended answer; (2) the statute does not require a tender be made before the money is deposited with the court; (3) case law supports a finding that Milgard complied with section 1717(b)(2); and (4) public policy supports the conclusion that Milgard complied with the statute and should be deemed the prevailing party.
The well-established legal definitions of a tender and a plea of tender, supported by judicial decisions construing identical tender and deposit language in other statutes as well as the legislative purpose of section 1717(b)(2), dictate a result in favor of D.R. Horton. Under these principles, it is not the timing of the plea that is dispositive, but the nature and timing of the tender. Milgard's purported tender was invalid; it was neither timely nor unconditional, and Milgard could not have made a proper tender within the meaning of the statute because D.R. Horton's damages were unliquidated and subject to court determination. Because the trial court correctly concluded that Milgard was not the prevailing party under section 1717(b)(2), we affirm the judgment.
We take the factual background in part from the parties' stipulation of facts for purposes of trial on D.R. Horton's claim for defense fees and costs. Other facts are stated in the light most favorable to D.R. Horton. (See Cassim v. Allstate Ins. Co. (2004) 33 Cal.4th 780, 787.)
In 2011, plaintiff homeowners of 52 single family homes in three Riverside County communities filed a construction defect action against D.R. Horton, the developer and general contractor for the projects. D.R. Horton had subcontracted with Milgard to supply windows and to supply and install sliding glass doors. Plaintiffs' first amended complaint alleged defects in 57 homes. Plaintiffs thereafter agreed to stay the litigation to commence construction defect pre-litigation notice procedures, and during that process increased the number of homes at issue to 75.
In late 2011, D.R. Horton tendered its defense to Milgard under their subcontracts, which required Milgard to defend and indemnify D.R. Horton from claims arising out of or relating to Milgard's scope of work. Milgard did not accept the tender or offer to defend D.R. Horton. D.R. Horton performed repairs to 37 homes in 2012, and observed destructive testing at 27 of the homes in 2013 and 2014.
In December 2012, D.R. Horton filed a cross-complaint against Milgard for indemnity and breach of contract for Milgard's failure to defend it in the underlying action. Among other relief, it sought an unspecified amount of damages as well as a judicial determination that Milgard "reimburse [it] for all fees and costs incurred in defending against Plaintiffs' claims, including, but not limited to, investigation expenses,attorneys' fees, and costs." Thereafter, the plaintiffs filed a second amended complaint reducing the number of homes at issue to 40. They later added Milgard as a defendant. In March 2013, Milgard answered D.R. Horton's cross-complaint, denying generally and specifically its allegations.
In 2014, Milgard settled claims with 26 plaintiffs for $2,700. D.R. Horton settled the remaining claims in January 2015 for $132,600. At some point, the matter was set for trial on D.R. Horton's cross-complaint.
In April 2015, Milgard filed a Code of Civil Procedure section 998 offer to compromise the matter for $75,000, which D.R. Horton did not accept.3
About one month before trial, Milgard applied ex parte to file a first amended answer in which it sought to assert an affirmative defense under section 1717(b)(2) based on Karton v. Dougherty (2014) 231 Cal.App.4th 600 (Karton). Milgard asserted that it was not until it received D.R. Horton's trial brief that it could evaluate D.R. Horton's claim for defense fees and costs. On June 5, 2015, the trial court granted Milgard's application and deemed filed an amended answer. The amended answer's forty-first affirmative defense alleged that Milgard (Some italics omitted.)
On June 23, 2015, Milgard filed a "Notice of Deposit of Contract Damage Funds Pursuant to Civil Code [section] 1717(b)(2)" stating that Milgard
The parties tried D.R. Horton's cross-complaint to the court on the pleadings, a joint stipulation of facts, and declarations. The main trial issue, which was highly contested, was how much of D.R. Horton's defense attorney fees and costs were attributable to Milgard's scope of work, including whether Milgard would be responsible for "building envelope" or flashing defects. D.R. Horton initially sought $89,331.74 in defense fees and costs that it claimed were attributable to Milgard, which included $51,581.91 in fees and costs pursuing its cross-complaint. In a supplemental trial brief, it raised its demand to $98,305.34. Milgard argued its defense obligation was only 4 percent of the money D.R. Horton paid in defending the plaintiffs' construction defect claims, which Milgard stated was $164,467.67 based on attorney invoices, and thus the sum properly allocated to it was $6,445.83.
The trial court found that D.R. Horton had properly tendered its defense to Milgard and Milgard had a contractual duty to defend D.R. Horton, which had submitted sufficient evidence to establish its payment of defense fees and costs and had not failed to mitigate its damages. It ruled Milgard was responsible for 5 percent of D.R. Horton's fees and costs incurred from November 2011 to November 2014, and left it to the parties to figure the dollar amount. D.R. Horton and Milgard thereafter agreed that 5 percent of the fees and costs equaled $11,100.
The parties filed cross-motions to be deemed the prevailing party for purposes of an award of attorney fees and costs in the breach of contract cross-complaint. D.R. Horton argued it was the prevailing party under section 1717 since it had obtained a simple, unqualified win on its contract claim and was in the superior equitable position, as Milgard had failed to comply with its contractual obligations and recovered nothing. D.R. Horton maintained Milgard's deposit of money with the court did not qualify it for prevailing party status because (1) the deposit was insufficient in that D.R. Horton was owed at least $62,681, which included its attorney fees and costs through January 2015; (2) Milgard's defense obligation was not a liquidated sum and subject to a court determination, unlike the damages in Karton, supra, 231 Cal.App.4th 600; and (3) Milgard did not deposit funds contemporaneously with its original 2012 answer, which according to D.R. Horton was a condition precedent for invoking section 1717(b)(2). D.R. Horton argued to hold otherwise would be contrary to the "letter and spirit" of the statute, and allow "a party who...
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