Fidelity Mortgage Trustee Service, Inc. v. Ridgegate East Homeowners Assn.

• Decision Date: 04 August 1994
• Docket Number: No. B078773,B078773
• Citation: 27 Cal.App.4th 503,32 Cal.Rptr.2d 521
• Court: California Court of Appeals Court of Appeals
• Parties: FIDELITY MORTGAGE TRUSTEE SERVICE, INC., Plaintiff and Appellant, v. RIDGEGATE EAST HOMEOWNERS ASSOCIATION et al., Defendants and Respondents.

Page 521

32 Cal.Rptr.2d 521

27 Cal.App.4th 503

FIDELITY MORTGAGE TRUSTEE SERVICE, INC., Plaintiff and Appellant, v. RIDGEGATE EAST HOMEOWNERS ASSOCIATION et al., Defendants and Respondents.

No. B078773.

Court of Appeal, Second District, Division 5, California.

Aug. 4, 1994.

Friedlander & Werlin, Leslie M. Werlin, Lloyd K. Chapman, Los Angeles, for plaintiff and appellant.

Lewis, D'Amato, Brisbois & Bisgaard, Michael C. Olson, Costa Mesa, for defendants and respondents.

TURNER, Presiding Justice.

I. INTRODUCTION

Plaintiff, Fidelity Mortgage Trustee Service, Inc., ¹ appeals from a judgment following the grant of the summary issue adjudication motions of defendants, Ridgegate East Homeowners Association (Ridgegate) and Bali Management, Inc. (Bali). In granting the summary issue adjudication motions, the trial court concluded Code of Civil Procedure section 1021.6 ² applied to the facts of this case. We conclude a triable controversy exists as to the application of section 1021.6 to the present case given the showing made in the parties' separate statements of undisputed and disputed facts.

The judgment was entered pursuant to the parties' stipulation after the court, on defendants' summary issue adjudication motions, concluded plaintiff's failure to tender the defense of a third party action to Ridgegate and Bali barred it from recovering, on an implied indemnity theory, the attorney's fees it incurred in defending that lawsuit. Plaintiff contends section 1021.6 is inapplicable to a claim for indemnification arising out of an agency relationship. We find section 1021.6 applies only when an indemnitee who is innocent of wrongdoing is required, through the tort of the indemnitor, to bring an action against or defend an action by a third party. Based upon the facts averred to in the parties' separate statements of disputed and undisputed facts, there was a triable controversy as to the application of section 1021.6 to the present case. Therefore, we reverse the judgment and the summary issue adjudication order which concluded plaintiff's claim for attorney fees was barred by section 1021.6 as a matter of law.

II. BACKGROUND

A. The Underlying Action

Ridgegate was a homeowners' association. Bali was a property management company retained by Ridgegate to manage a condominium complex. Alyce Vrba was a condominium owner. ³ In 1987, a lien was recorded against Ms. Vrba's property for delinquent homeowners' fees owed to Ridgegate. Thereafter, Ridgegate, through its board of directors, decided to foreclose on the lien. Bali, as authorized by Ridgegate, retained plaintiff, a professional foreclosure trustee, to conduct the foreclosure. Bali never itself handled foreclosure proceedings; it always hired a professional foreclosure trustee. Plaintiff knew the lien was recorded by Ridgegate and not by Bali.

Following the nonjudicial foreclosure, Ms. Vrba sued plaintiff, Ridgegate, and Bali. She claimed, among other things, that Milton Katz, plaintiff's president, had been negligent and had misrepresented to her the foreclosure proceedings would be delayed. A summary judgment was entered in favor of Bali. The case against Ridgegate and plaintiff was tried by a jury on the questions whether Mr. Katz: had been negligent; had misrepresented to Ms. Vrba the foreclosure sale would be postponed; and had been acting as Ridgegate's agent. The jury found in favor of plaintiff and Ridgegate. The jury specifically found Mr. Katz: had not been negligent; did not make any misrepresentation to Ms. Vrba; and was not the agent of Ridgegate. None of the documents submitted in connection with the summary issue adjudication motions suggested Ridgegate or Bali had committed a tort.

B. Plaintiff's Indemnification Action

Plaintiff then filed an action against Ridgegate and Bali seeking reimbursement of $84,000 in attorney's fees and costs expended by it to defend Ms. Vrba's action. ⁴ Plaintiff alleged, as far as is material to this appeal that: Ridgegate and Bali had acted as the agents of each other; they "requested" that plaintiff act as a nonjudicial foreclosure trustee; and plaintiff was entitled to indemnification as the agent of Ridgegate and Bali. Plaintiff never alleged Ridgegate or Bali committed a tort against Ms. Vrba. Motions for summary judgment or summary issue adjudication were brought by Ridgegate and Bali.

C. The Summary Judgment or Summary Issue Adjudication Motions

Bali sought summary adjudication that plaintiff's cause of action for implied indemnity was "without merit." Bali argued plaintiff's failure to tender to it the defense of Ms. Vrba's action barred its claim for attorney's fees; plaintiff was not Bali's agent; and even if an agency relationship existed, plaintiff had no right to indemnity in the absence of any wrongdoing on Bali's part. Bali assumed, for purposes of its motion, that plaintiff was "someone's" agent.

Ridgegate sought summary adjudication that it had "no obligation to impliedly indemnify" plaintiff. Ridgegate argued plaintiff's failure to tender to it the defense of Ms. Vrba's action barred its claim for attorney's fees. Ridgegate further contended plaintiff could not recover on its implied indemnity claim as it could not show "that liability was imposed upon it because of [Ridgegate's] failure to perform a duty owed to [Ms.] Vrba." Ridgegate assumed, for purposes of its motion, that plaintiff was its agent.

It was undisputed: there was no express written or oral indemnity agreement between plaintiff and Bali; likewise, no such agreement existed between plaintiff and Ridgegate; and plaintiff did not tender its defense of Ms. Vrba's action to Bali or Ridgegate. The court: concluded Ridgegate, as the principal, had a duty to indemnify plaintiff as its agent; assumed, for purposes of the motion, that Bali also owed a duty to indemnify plaintiff but had "rights over against" Ridgegate; but found plaintiff's claim for attorney's fees (but not costs) was barred under section 1021.6 because it failed to tender the defense of Ms. Vrba's action to Ridgegate and Bali. ⁵ The heart of the trial court's ruling was that section 1021.6 barred plaintiff's claim for reimbursement of its attorney's fees. The court stated: "To the extent, if at all, that [plaintiff's] damages consist of costs other than attorney['s] fees, those damages are not barred by [section 1021.6], and accordingly, the alternative motions of Bali and Ridgegate for summary judgment are denied." (Original italics.) The parties then stipulated to the entry of a judgment adverse to plaintiff on the condition that "should plaintiff appeal and the appellate court reverse, plaintiff's claim for costs will be automatically reinstated in this action[.]" ⁶

III. DISCUSSION

A. Standard of Review

The law, as it was in effect in 1993 when the summary issue adjudication motions were filed and granted, described how a trial court was to consider a request for summary issue adjudication by a defendant as follows. A motion for summary judgment would be granted if the moving papers established that there was no triable issue of material fact and the moving party was entitled to judgment as a matter of law. (§ 437c, subd. (c).) With respect to summary issue adjudication, the statute provided in relevant part: "If it is contended that one or more causes of action within an action has no merit or that there is no defense thereto, ... any party may move for summary adjudication as to that cause or causes of action, ... A cause of action has no merit if one or more of the elements of the cause of action, even if not separately pleaded, cannot be established, or if there is a complete defense to the cause of action." (§ 437c, subd. (f).) Further, the summary judgment law as it was in effect in 1993, provided in pertinent part: "For purposes of motions for summary judgment and summary adjudication: ... [p] (2) A defendant or cross-defendant has met his or her burden of showing that a cause of action has no merit if that party has shown that one or more elements of the cause of action, even if not separately pleaded, cannot be established, or that there is a complete defense to that cause of action. Once the defendant or cross-defendant has met that burden, the burden shifts to the plaintiff or cross-complainant to show that a triable issue of one or more material facts exists as to that cause of action." (§ 437c, subd. (n)(2) as amended by Stats.1992, ch. 1348.) An appellate court determines de novo whether there is a genuine issue of material fact and the moving party was entitled to summary judgment or summary adjudication as a matter of law. (Jambazian v. Borden (1994) 25 Cal.App.4th 836, 844, 30 Cal.Rptr.2d 768; Daniels v. DeSimone (1993) 13 Cal.App.4th 600, 607, 16 Cal.Rptr.2d 615; Wilson v. Blue Cross of So. California (1990) 222 Cal.App.3d 660, 670, 271 Cal.Rptr. 876.)

B. A Cause of Action for Indemnification Can Arise Out of a Principal-Agent Relationship

The statutory definition of an "agent" is as follows: "An agent is one who represents another, called the principal, in dealings with third persons." (Civ.Code, § 2295.) As a general rule, an agent is entitled to indemnification by its principal for losses incurred by the agent in the execution of the agency. (Rest.2d Agency, § 438, p. 322; 3 Cal.Jur.3d, Agency, § 109, p. 151; cf. Lab.Code, § 2802.) ⁷ For example, an agent which becomes personally liable for the performance of a contract entered into for its principal is entitled to indemnification by the principal for damages sustained because of the breach of that agreement. (Sunset-Sternau Food Co. v. Bonzi (1964) 60 Cal.2d 834, 837, 36 Cal.Rptr. 741, 389 P.2d 133; Rimington v. General Accident Group of Ins. Cos. (1962) 205 Cal.App.2d 394, 397, 23 Cal.Rptr. 40.) The Restatement Second of Agency provides that a principal has a duty to its agent "who is not barred by the illegality of [her or] his conduct" to indemnify the agent for ...