Four Star Electric, Inc. v. F & H Construction, C009168

• Decision Date: 08 July 1992
• Docket Number: No. C009168,C009168
• Citation: 10 Cal.Rptr.2d 1,7 Cal.App.4th 1375
• Court: California Court of Appeals Court of Appeals
• Parties: FOUR STAR ELECTRIC, INC., Plaintiff and Appellant, v. F & H CONSTRUCTION, Defendant and Respondent.

Page 1

10 Cal.Rptr.2d 1

7 Cal.App.4th 1375

FOUR STAR ELECTRIC, INC., Plaintiff and Appellant, v. F & H CONSTRUCTION, Defendant and Respondent.

No. C009168.

Court of Appeal, Third District, California.

July 8, 1992.

As Modified on Denial of Rehearing Aug. 4, 1992.

Review Denied Oct. 16, 1992.

[7 Cal.App.4th 1377] Howard M. Hoffman, Sacramento, for plaintiff and appellant.

Macey & Macey and Richard E. Macey, Stockton, for defendant and respondent.

SCOTLAND, Acting Presiding Justice.

In June 1987, the California Department of Corrections (CDC) contracted with F & H Construction (F & H) for a construction project at CDC's Jamestown facility. In October of that year, F & H subcontracted with Four Star Electric, Inc. (Four Star) for electrical work on the prison project.

The subcontract contained an indemnification clause which provided in pertinent part: "The Sub-Contractor ... agrees to protect and fully indemnify the Owner and Contractor against all liability for claims and liens for labor, materials, equipment and supplies, including attorneys fees, resulting therefrom which may accrue from labor employed by, or materials, equipment and supplies ordered by the Sub-Contractor."

Four Star failed to pay three of its suppliers, who then filed stop notices with CDC and filed superior court actions Four Star did not defend itself, and F & H obtained a default judgment in each case.

                against both Four Star and F & H. 1  In each supplier's action, F & H cross-complained against Four Star for indemnification.  The cross-complaints alleged that F & H "has complied with all the terms, covenants and conditions of its Subcontract with [Four Star] and has paid [Four Star] any and all monies due [Four Star] on account of any work, labor or material supplied by [Four Star] in accordance with the Contract between [F & H] and [Four Star]."
                

In February 1990, Four Star filed the action which is now before us. The complaint alleged that Four Star had fully performed the subcontract but that F & H had paid only a portion of the compensation called for by the subcontract. ² F & H demurred, claiming the action is precluded by the collateral estoppel effect of the default judgments in the aforesaid indemnification actions wherein F & H alleged it had complied with the subcontract in its entirety and had paid Four Star all monies due under the subcontract.

The trial court agreed, sustaining the demurrer on the ground "the Complaint does not state facts sufficient to constitute a cause of action in that the material issues alleged in the Complaint of Plaintiff have been determined in previous legal proceedings between the parties hereto adverse to Plaintiff resulting in Judgments in favor of Defendant and as such are Res Judicata." A judgment of dismissal was entered.

On appeal, Four Star contends the allegations that F & H fully performed the subcontract are not entitled to collateral estoppel effect because they were neither material nor necessary to the indemnification judgments. We agree and reverse the judgment of dismissal.

As we shall explain, an indemnitee seeking to recover on an agreement for indemnification must allege the parties' contractual relationship, the indemnitee's performance of that portion of the contract which gives rise to the indemnification claim, the facts showing a loss within the meaning of the parties' indemnification agreement, and the amount of damages sustained. The indemnitee need not allege the underlying contract had been performed in its entirety, i.e., that the indemnitee owed no indebtedness to the indemnitor which would act as a set-off against the request for indemnification, because set off is a defense which the indemnitor must plead and prove.

Since its cross-complaints for indemnification did not have to anticipate and negate a defense of set-off, F & H's allegation that it had performed the subcontract in its entirety and had paid Four Star all monies due under the subcontract was surplusage. Hence, the allegation was not material to the cross-complaint for indemnification and was not entitled to collateral estoppel effect.

DISCUSSION

Ordinarily, a demurrer tests the sufficiency of the complaint alone and not the evidence or other extrinsic matters. "However, a complaint may be read as if it included matters judicially noticed. (Code Civ.Proc., § 430.30, subd. (a); see 5 Witkin, Cal.Procedure [ (3d ed. 1985) Pleading], § 896, p. 337.) Such matters may show the complaint fails to state a cause of action though its bare allegations do not disclose the defect." (Lazzarone v. Bank of America (1986) 181 Cal.App.3d 581, 590, 226 Cal.Rptr. 855.)

Here, F & H requested the trial court to take judicial notice of pertinent portions of court files in the prior actions.

                The trial court was required to do so upon request (Evid.Code, §§ 452, subd.  (d), 453), and we must do likewise on appeal.  (Evid.Code, § 459, subd.  (a)(1);  Lazzarone, supra, 181 Cal.App.3d at p. 590, 226 Cal.Rptr. 855).   If the collateral estoppel bar appears on the face of the documents judicially noticed, the defense is properly considered in reviewing the demurrer.  (Code Civ.Proc., § 430.30;  Lazzarone, supra, at p. 590, 226 Cal.Rptr. 855.)
                

"Collateral estoppel precludes parties from litigating an issue previously determined in another cause of action between them or their privities. As a prerequisite for asserting this doctrine, it must be shown that the issue was, in fact, litigated and decided in the prior action." (Hulsey v. Koehler (1990) 218 Cal.App.3d 1150, 1156, 267 Cal.Rptr. 523, citations omitted.) A second prerequisite is that the issue must have been necessary to the prior judgment. (Code Civ.Proc., § 1911; Stanson v. Mott (1976) 17 Cal.3d 206, 213, 130 Cal.Rptr. 697, 551 P.2d 1; Albertson v. Raboff (1956) 46 Cal.2d 375, 384-385, 295 P.2d 405; Bronco Wine Co. v. Frank A. Logoluso Farms (1989) 214 Cal.App.3d 699, 712, 262 Cal.Rptr. 899; In re Marriage of Rabkin (1986) 179 Cal.App.3d 1071, 1082-1083, 225 Cal.Rptr. 219; 7 Witkin, Cal.Procedure (3d ed. 1985) Judgment, § 268, pp. 710-711.) For example, a trial court's finding that parties intended to create a valid lien was unnecessary to its decision that the writing was insufficient to create a lien; thus, the finding regarding the parties' intent and understanding did not preclude a later proceeding alleging that the lien had not been asserted in good faith. (Albertson, supra, 46 Cal.2d at pp. 384-385, 295 P.2d 405.)

Four Star does not challenge the general principle that the doctrine of collateral estoppel may be applied based upon a prior default judgment. (See, e.g., English v. English (1937) 9 Cal.2d 358, 363-364, 70 P.2d 625; Brown v. Brown (1915) 170 Cal. 1, 5, 147 P. 1168; Mitchell v. Jones (1959) 172 Cal.App.2d 580, 586-587, 342 P.2d 503; O'Brien v. Appling (1955) 133 Cal.App.2d 40, 42, 283 P.2d 289.) "[A] default judgment conclusively establishes, between the parties so far as subsequent proceedings on a different cause of action are concerned, the truth of all material allegations contained in the complaint in the first action, and every fact necessary to uphold the default judgment; but such judgment is not conclusive as to any defense or issue which was not raised and is not necessary to uphold the judgment." (Mitchell, supra, 172 Cal.App.2d at pp. 586-587, 342 P.2d 503.)

Rather, Four Star argues the three default judgments entered against it should not be given collateral estoppel effect because the allegations that F & H had paid Four Star "any and all monies due" under the subcontract were not "material allegations" of the cross-complaints for indemnification and, thus, were not necessary to the default judgments. (Mitchell, supra, 172 Cal.App.2d at pp. 586-587, 342 P.2d 503.) We agree.

An indemnitee seeking to recover on an agreement for indemnification must allege the parties' contractual relationship, the indemnitee's performance of that portion of the contract which gives rise to the indemnification claim, the facts showing a loss within the meaning of the parties' indemnification agreement, and the amount of damages sustained. (Piggly Wiggly Yuma Co. v. Indemnity Co. (1931) 116 Cal.App. 541, 544, 3 P.2d 15; Civ.Code, § 1439; Code Civ.Proc., § 457; 4 Witkin, Cal.Procedure (3d ed. 1985) Pleading, §§ 479-482, pp. 515-519; 14 Cal.Jur.3d, Contribution and Indemnification, § 65, p. 727.)

To show the parties' contractual relationship, F & H appended the subcontract to its cross-complaints for indemnification and alleged in substance that it had performed the subcontract to the extent it paid Four Star sufficient funds to pay the suppliers. ³ To show a loss within the meaning However, the pleadings went beyond this by alleging that F & H paid Four Star all sums due to Four Star under the subcontract, which would include the monies presently at issue (monies assertedly owed by F & H for subcontract work performed after the indemnification action). Claiming this greater allegation was necessary for the default judgments, F & H asserts it "could not have obtained a judgment in any of the three cases referred to herein if it owed any monies to [Four Star]...." "[T]here is no way ... that the three Superior Courts that granted a judgment to [F & H] could have awarded [F & H] a judgment without making a determination that between [Four Star] and [F & H] there were no monies owed from [F & H] to [Four Star] but only from [Four Star] to [F & H]. Any monies awarded [F & H] would have had to have been in excess of any monies owed by [F & H] to [Four Star]...." F & H is wrong.

of the indemnification agreement, F & H alleged that Four Star failed to compensate the suppliers and, as a consequence, the suppliers filed stop notices...