Heppler v. J.M. Peters Co.

• Decision Date: 04 August 1999
• Docket Number: Nos. D026292,D027470,s. D026292
• Citation: 87 Cal.Rptr.2d 497,73 Cal.App.4th 1265
• Parties: , 99 Cal. Daily Op. Serv. 6276, 1999 Daily Journal D.A.R. 8008 Charles HEPPLER et al., Plaintiffs and Appellants, v. J.M. PETERS COMPANY, INC., Defendant, Cross-Complainant and Respondent, Signs & Pinnick et al., Cross-Defendants and Respondents. Charles Heppler et al., Plaintiffs and Respondents, v. Martin Roofing Company, Inc., Defendant and Appellant, J.M. Peters Company, Inc., Defendant and Respondent.
• Court: California Court of Appeals Court of Appeals

Page 497

87 Cal.Rptr.2d 497

73 Cal.App.4th 1265, 99 Cal. Daily Op. Serv. 6276,

1999 Daily Journal D.A.R. 8008

Charles HEPPLER et al., Plaintiffs and Appellants, v. J.M. PETERS COMPANY, INC., Defendant, Cross-Complainant and Respondent, Signs & Pinnick et al., Cross-Defendants and Respondents.

Charles Heppler et al., Plaintiffs and Respondents, v. Martin Roofing Company, Inc., Defendant and Appellant, J.M. Peters Company, Inc., Defendant and Respondent.

Nos. D026292, D027470.

Court of Appeal, Fourth District, Division 1, California.

Aug. 4, 1999.

Perwich, Goff, Karavatos, Daniel J. Perwich; Duke, Gerstel, Shearer & Bregante and Michelle Le Roux Burton, San Diego, for Plaintiffs and Appellants and for Plaintiffs and Respondents.

Hawkins, Schnabel, Lindahl & Beck and Timothy A. Gonzales, Los Angeles, for Defendant and Appellant Martin Roofing Company, Inc.

Shifflet, Kane & Konoske, Gary P. Sinkeldam and Amy E. Volk, Los Angeles, for Defendant, Cross-Complainant and Respondent and for Defendant and Respondent J.M. Peters Company, Inc.

Parker & Stanbury, Timothy D. Lucas, San Diego; Mower, Koeller, Nebeker, Carlson & Haluck and Robert C. Carlson Borton, Petrini & Conron and Steven M. Shewry, San Diego, for Cross-Defendants and Respondents Mueller-Lewis Concrete and Martin Roofing Company.

Yuma, AZ., for Cross-Defendant and Respondent Signs & Pinnick, Inc.

Elisa J. Nemeth, San Diego, for Cross-Defendant and Respondent Art Torres Landscaping, Inc.

HALLER, J.

These two appeals arise from construction defect litigation involving a residential development in northeast San Diego, in which the developer, J.M. Peters Company, Inc. (Peters), as part of a global settlement, assigned its indemnification rights against nonsettling subcontractors to plaintiffs--a certified class of homeowners, including Charles Heppler. In the first appeal, plaintiffs appeal from a judgment entered after special verdicts that they take nothing from three of four nonsettling subcontractors whose contracts contained express indemnity clauses: Signs & Pinnick, Inc. (Signs); Art Torres Landscaping, Inc. (Torres); and Mueller-Lewis Concrete (Mueller). Plaintiffs also appeal the award of attorney fees and costs to the prevailing subcontractors. In the second appeal, the fourth subcontractor, Martin Roofing Company, Inc. (Martin), appeals the trial court's award of attorney fees and costs in favor of plaintiffs. For the reasons to be explained, we affirm the judgments related to plaintiffs' appeal. With respect to Martin's appeal, we affirm in part and reverse in part and remand with directions.

PROCEDURAL AND FACTUAL BACKGROUND

In 1986, Peters and three other developers ¹ entered into an agreement to grade a large tract of land and to landscape the common area for a development commonly known as Crestmont. On its quadrant of the tract, Peters developed Black Mountain Vistas North, Unit II, which consists of 152 single family residences.

On February 6, 1987, Signs entered into a subcontract with Peters and the other developers to perform mass grading operations. On August 27, 1987, Peters and the other developers subcontracted with Torres to install irrigation and landscaping on the common area slopes owned by the homeowners association. ² On July 20, 1987, Peters subcontracted with Martin to construct the roofs on all houses in its development. On October 1, 1987, Peters subcontracted with Mueller to design and build post-tension concrete foundations and slabs for the residences in four of the five phases of the development.

Peters's subcontracts with Signs and Torres contained the following indemnification provision:

"To the fullest extent permitted by law, Subcontractor hereby agrees to defend, indemnify and hold Contractor harmless from all claims, demands or liability for death or injury to persons or damage to property arising out of or in connection with Subcontractor's ... performance of the Work and for any breach or default of the Subcontractor in the performance of its obligations under this Agreement. However this indemnification shall not apply if such claims, demands or liability are ultimately determined to have arisen through the sole negligence of Contractor."

The contracts between Peters and Martin and Mueller contained the following indemnification provision:

"Contractor does agree to indemnify and save Owner [Peters] harmless against all claims for damages to persons or to On September 17, 1991, Heppler and other homeowners, filed a complaint for breach of implied warranty, strict liability, negligence and nuisance against Peters alleging defective roofs, foundations and soil-related claims on behalf of themselves and all persons similarly situated. ⁴ On June 9, 1992, Peters filed a cross-complaint for indemnity against various subcontractors, including Signs, Mueller and Martin. On February 22, 1994, the Penasquitos Crestmont Homeowners Association (Association) filed a complaint against Peters for breach of implied warranties, strict liability, negligence and breach of contract alleging damage to the common area slopes. With respect to Association's lawsuit, Peters filed a cross-complaint for indemnity against Torres and Signs. On April 15, 1994, the trial court consolidated the class action lawsuit with Association's lawsuit. Neither the class action plaintiffs nor Association directly sued the subcontractors named in Peters's cross-complaints.

property growing out of the execution of the work, and at his own expense to defend any suit or action brought against Owner founded upon a claim of damage...." ³

Peters tendered its defense in the class action and Association lawsuits to Mueller, Martin, Signs and Torres, which either refused or did not respond to the tender.

In August 1995, Peters settled the class action lawsuit by agreeing to pay $5.3145 million and to assign its indemnity rights against nonsettling subcontractors to plaintiffs. The class action settlement made the following allocations: $900,000 toward roofing claims; $300,000 toward structural claims; and $4.1145 million toward soil claims. On September 5, 1995, the trial court determined the settlement was made in good faith. (Code Civ. Proc., § 877.6.) ⁵

On December 22, 1995, Martin submitted a Code of Civil Procedure section 998 offer to compromise to Peters's cross-complaint against it for $220,000. The offer was deemed rejected after the jury was impaneled the following month.

The class action plaintiffs, standing in the shoes of Peters, proceeded to seek indemnity from the nonsettling subcontractors. In a series of pre-trial rulings, the trial court

determined plaintiffs would have to prove negligence and causation to trigger each subcontractor's indemnity obligation.

established the order of proof with plaintiffs going first.

obtained stipulations from the parties that Peters had tendered its defense in the underlying complaints to the subcontractors and received rejections.

refused plaintiffs' request for evidentiary presumptions regarding plaintiffs' burden to show negligence, causation and damages against nonsettling subcontractors; refused to tell the jury the court had previously issued an order finding the settlement and allocations were in good faith; and ruled the only effect of the good faith settlement order would be to establish the allocations as the "cap" of the indemnity obligation.

characterized the indemnity language in the Peters-Signs subcontract and the reserved jurisdiction to decide the effect of the indemnity provisions, post-jury verdict, if the jury found negligence and causation as to any of the nonsettling subcontractors, and attorney fees and costs.

Peters-Torres subcontract as Type I indemnity provisions and the language in the Peters-Martin subcontract and the Peters-Mueller subcontract as Type II indemnity provisions. (See MacDonald & Kruse, Inc. v. San Jose Steel Co. (1972) 29 Cal.App.3d 413, 105 Cal.Rptr. 725.)

The jury heard the case between January 3, 1996 and February 21, 1996. On February 22, the jury returned special verdicts in favor of all the cross-defendants with the exception of Martin. The jury found Martin had been negligent and the negligence had caused damages totaling $117,000.

In post-verdict proceedings, the trial court awarded the class action plaintiffs $139,652.23 as contractual damages for Martin's failure to defend Peters pursuant to the indemnity provision, in addition to the $117,000 negligence jury verdict. The trial court also awarded plaintiffs, as prevailing party in the indemnity action, attorney fees and costs totaling $156,775.33, for a total judgment against Martin of $413,427.56. (Civ.Code, § 1717; Code Civ. Proc., § 1032.)

With respect to Mueller, Signs and Torres, the trial court awarded these subcontractors attorney fees and costs and ordered plaintiffs to pay these fees and costs from the time the cross-complaint was filed. ⁶

DISCUSSION

I. Appeal by Class Action Plaintiffs

Plaintiffs broadly attack a series of rulings, which they claim resulted in the jury hearing a negligence case rather than a breach of contract case. In essence, plaintiffs' appeal revolves around the trial court's ruling that the indemnity provisions at issue did not apply unless plaintiffs proved the subcontractors were at fault.

In addition to attacking the court's legal determination that subcontractor fault (negligence plus causation) was a prerequisite to trigger the contractual obligation to indemnify under these subcontracts, plaintiffs contend: (1) it was error to refuse to instruct the jury plaintiffs were entitled to a rebuttable evidentiary presumption that Peters was liable for the amount it paid to settle the claims against it and the allocations of the good faith settlement were reasonable; (2) they were denied their constitutional right to have the jury decide whether defendants breached the indemnity provisions of the subcontracts by the court's refusal to allow...