Fireman's Fund Ins. Co. v. Morse Signal Devices

• Court: California Court of Appeals
• Writing for the Court: THOMPSON; SCHAUER, P.J., and JOHNSON
• Citation: 198 Cal.Rptr. 756,151 Cal.App.3d 681
• Parties: , 1984-1 Trade Cases P 65,910 FIREMAN'S FUND INSURANCE COMPANY, a corporation, Plaintiff and Appellant, v. MORSE SIGNAL DEVICES, American Protection Industries, U.S. Burglar Alarm Company, Inc., Wackenhut Protective Systems, Inc., Alarmco, Inc., and Western Burglar and Fire Alarm Association, Defendants and Respondents. Civ. 66416.
• Decision Date: 03 February 1984

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198 Cal.Rptr. 756 151 Cal.App.3d 681, 1984-1 Trade Cases P 65,910 FIREMAN'S FUND INSURANCE COMPANY, a corporation, Plaintiff and Appellant,
v.
MORSE SIGNAL DEVICES, American Protection Industries, U.S. Burglar Alarm Company, Inc., Wackenhut Protective Systems, Inc., Alarmco, Inc., and Western Burglar and Fire Alarm Association, Defendants and Respondents. Civ. 66416. Court of Appeal, Second District, Division 7, California. Feb. 3, 1984.
Hearing Denied March 29, 1984.

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Harris & MacAuley and Richard G. Harris, Marina Del Rey, for plaintiff and appellant Fireman's Fund.

Bonelli, Heib, Fuchs & O'Neal, Malcolm G. Heib and Stanley Sapiro, Encino, for defendants and respondents Morse Signal Devices, American Protection Industries, U.S. Burglar Alarm Co., Inc. and Alarmco, Inc.

Gold, Herscher, Marks & Pepper, Stephen D. Marks and Joshua L. Rosen, Beverly Hills, for defendant and respondent Wackenhut Protective Systems, Inc.

Spray, Gould & Bowers, Daniel O. Howard and Thomas H. Ott, Los Angeles, for defendant and respondent Western Burglar & Fire Alarm Ass'n.

Lawler, Felix & Hall, Robert P. Mallory and Wayne S. Grajewski, Los Angeles, as amicus curiae, for American Dist. Telegraph Co.

THOMPSON, Associate Justice.

[151 Cal.App.3d 684] Fireman's Fund Insurance Company (Fireman's) appeals from a judgment of dismissal following an order sustaining, without leave to amend, the demurrers of defendants Morse Signal Devices, American Protection Industries, U.S. Burglar Alarm Company, Inc., Wackenhut Protective Systems, Alarmco, Inc., and the Western Burglar and Fire Alarm Association (hereinafter collectively referred to as Alarm Companies). The principal issues on appeal involve the subrogation claims of Fireman's, and the enforceability of the liquidated damages provisions in the Alarm Companies' service contracts. For reasons to follow, we have concluded that the trial court properly sustained the demurrers without leave to amend.

Procedural and Factual Summary

Fireman's brought an action against the Alarm Companies claiming subrogation to losses arising from eleven property damage incidents sustained by Fireman's insureds.

Fireman's complaint alleges thirty causes of action based on breach of contract, negligence, gross negligence, or negligent misrepresentation. A thirty-first cause of action seeks declaratory relief to invalidate liquidated damage clauses contained in contracts between the Alarm Companies and Fireman's insureds. Finally, the thirty-second cause of action alleges violations under the Cartwright Act for conspiracy to fix prices by inclusion of liquidated damage provisions in the Alarm Companies' service contracts.

Prior to filing the third amended complaint before us, the court below ruled that recovery of money damages by Fireman's was legally limited to amounts provided in liquidated damage provisions. Since the liquidated damage amounts were below the

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jurisdictional requirements of the superior court, the superior court transferred the action to the municipal court. Fireman's filed a petition for writ of mandamus. Division One of this court issued a writ directing the superior court to accept jurisdiction, noting that "Respondent court erred in finding, on demurrer, that the damages recoverable by petitioner are limited by the liquidated damage clauses in the contracts." The Alarm Companies then demurred to the third amended complaint for failure to state a cause of action. The court below again transferred the action to the municipal court. Fireman's again petitioned to [151 Cal.App.3d 685] Division One of this court to compel the superior court to assume jurisdiction. Division One issued a writ of mandamus again ordering the superior court to assume jurisdiction. Division One, however, did not review the nonjurisdictional basis for the demurrer, stating that "petitioner has not established that this matter is within the narrow exception for writ review of pleading matters set forth in Taylor v. Superior Court [1979] 24 Cal.3d 890 [157 Cal.Rptr. 693, 598 P.2d 854], and Coulter v. Superior Court [1978] 21 Cal.3d 144 [145 Cal.Rptr. 534, 577 P.2d 669] ...."

The court below then modified its order and sustained the Alarm Companies' demurrers "on all grounds except jurisdictional; ..." Subsequently, the court below entered a judgment of dismissal. It is from that judgment of dismissal that Fireman's now appeals.

Fireman's insureds (insureds) operate various commercial establishments. Each of the insureds had contracted with one of the Alarm Companies to have burglar or fire alarm systems maintained. The Alarm Companies' contracts with each of the insureds provide "liquidated damages" for any breach. An example of the language contained in the contracts is as follows:

"Morse does not represent or warrant that the alarm system may not be compromised or circumvented, that the system will prevent any loss by burglary, hold-up, fire or otherwise; or that the system will in all cases provide the protection for which it is installed or intended. Subscriber acknowledges that Morse is not an insurer, that Subscriber assumes all risk for loss or damage to Subscriber's premises or to its contents; that Morse has made no representation or warranties, nor has Subscriber relied on any representations or warranties, express or implied, except as set forth herein and Subscriber acknowledges that he has read and understands particularly paragraphs 18 and 19 of this agreement which sets forth Morse's obligation and maximum liability in the event of any loss or damage ...

"...

"(18) MORSE'S OBLIGATION Morse's obligation hereunder relates solely to the servicing of the specified protective signaling system and Morse is in no way obligated to maintain, repair, service, or to assure the operation of the property ....

"(19) MORSE NOT AN INSURER AND LIQUIDATED DAMAGES It is understood and agreed by and between the parties hereto that Morse is not an insurer. Insurance, if any, will be obtained by the Subscriber. Charges are based solely upon the value of the services provided for, and are unrelated to the value of the Subscriber's property ... The Subscriber does not desire [151 Cal.App.3d 686] this contract to provide for the liability of Morse and Subscriber agrees that Morse shall not be liable for loss or damage due directly or indirectly to any occurrence or consequences therefrom, which the system is designed to detect or avert. From the nature of the service performed, it is impractical and extremely difficult to fix the actual damages, if any, which may proximately result from the failure on the part of Morse to perform any of the obligations hereunder, or the failure of the system to properly operate with the resulting loss to the Subscriber. If Morse should be found liable for loss or damage due to a failure on the part of Morse or its system, in any respect, its liability shall be limited to the refund to Subscriber of an amount equal to the aggregate of six (6) monthly payments or the sum of Two Hundred Fifty ($250.00)

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Dollars, whichever sum shall be less, as liquidated damages and not as a penalty...." (Italics in original.)

In each of 11 separate incidents a fire or burglary occurred at the insured's premises. The alarm system failed to function properly, either because of mechanical failure or because of the failure of the Alarm Companies' personnel to notify police or fire departments upon receiving signals from otherwise properly functioning systems. Fireman's alleges that where the Alarm Companies received alarm signals but failed to notify the proper officials, such "knowing" failure amounted to gross negligence. Fireman's further alleges that as a proximate result of the Alarm Companies' breach of its contractual duty or its negligent or grossly negligent acts, the fires or burglaries were not aborted. Fireman's seeks invalidation of the liquidated damage provisions.

Equitable Subrogation

" ' "Subrogation is equity's second method of compelling the ultimate payment by one who in justice and good conscience ought to make it--of putting the charge where it justly belongs. [Citation.] It is not an absolute right, but depends upon the superiority of the equities of him who asserts it over those of the one against whom it is sought. It will never be enforced when the equities are equal or the rights...