Irm Corp. v. Carlson

• Decision Date: 26 March 1986
• Citation: 179 Cal.App.3d 94,224 Cal.Rptr. 438
• Court: California Court of Appeals Court of Appeals
• Parties: IRM CORPORATION, Cross-Complainant and Appellant, v. Nels CARLSON dba Merritt Construction Company and Western Shower Door, Inc., Cross-Defendants and Respondents. A025872.

Page 438

224 Cal.Rptr. 438

179 Cal.App.3d 94

IRM CORPORATION, Cross-Complainant and Appellant, v. Nels CARLSON dba Merritt Construction Company and Western Shower Door, Inc., Cross-Defendants and Respondents.

A025872.

Court of Appeal, First District, Division 4, California.

March 26, 1986.

Carniato & Allen, John J. Carniato, Lafayette, McNamara, Houston, Dodge, McClure & Ney, J. Thomas Deal, Walnut Creek, for cross-defendants and respondents.

Kincaid, Gianunzio, Caudle & Hubert, Robert W. Brower, Oakland, for cross-complainant and appellant.

SABRAW, Associate Justice.

In this matter we decide an issue which has already been considered with conflicting results by a number of the other Courts of Appeal a good faith settlement between alleged joint tortfeasors and a plaintiff bar a cross-complaint by another alleged joint tortfeasor who seeks total equitable indemnity from the settling tortfeasors on a theory, inter alia, of active/passive negligence. We conclude that it does. We further conclude that claims for implied contractual indemnity are subject to the same rule. Finally, we address a related due process issue raised by cross-complainant IRM Corporation, find it is without merit, and affirm the judgment.

I. STATEMENT OF FACTS

IRM appeals from a judgment of dismissal of its cross-complaint for indemnity against Western Shower Door, Inc., and Nels Carlson dba Merritt Construction Company ("Merritt Construction"). The facts which led to that dismissal are relatively simple.

A. The Genesis of IRM's Cross-Complaint

In 1974, IRM apparently assumed management of an apartment complex located in Moraga. In 1978, one of IRM's tenants, George Becker, sustained serious injuries when he struck the glass shower door in the bathroom of his apartment, breaking the glass and cutting his hand. The glass in the shower door was untempered; the building code in effect in 1962 required that glass shower doors installed at that time be made of tempered glass. The shower door was installed in 1962 by Western Shower Door, acting as a subcontractor during construction of the apartment complex. The component parts of the door were obtained from Pioneer Shower Door, Inc. Merritt Construction was the general contractor on the apartment construction project.

B. The Litigation

After he was injured, Becker filed suit against his landlord IRM seeking personal injury damages based on theories of negligence and strict products liability. IRM, in turn, filed a cross-complaint against Merritt Construction and Western Shower Door. IRM alleged four different theories as the bases for its cross-claims: (1) total indemnity "by operation of law"; (2) total equitable indemnity arising out of the claim that the cross-defendants' alleged negligence was "active" while the alleged negligence of IRM, if any, was "passive"; (3) total indemnity based on cross-defendants' breach of express and implied warranties (contractual indemnity); and (4) comparative equitable contribution under the doctrine of comparative negligence. Thereafter, plaintiff Becker joined Merritt Construction, Western Shower Door and Pioneer Shower Door, Inc., as parties defendant. ¹

IRM was granted summary judgment against plaintiff Becker in 1981. Becker appealed the summary judgment. ² The remaining litigation between the parties continued during Becker's appeal from the IRM summary judgment. In 1983, Western Shower Door and Merritt Construction, while denying any liability, entered into a sliding scale settlement agreement (a so-called "Mary Carter" agreement) with plaintiff Becker. In the agreement, Merritt Construction and Western Shower Door agreed to pay Becker $150,000 initially and an additional $50,000 if he recovered less than $200,000 against the remaining defendants IRM and Pioneer Shower Door. By the agreement, Merritt Construction and Western Shower Door hoped to limit their maximum liability to $200,000.

Code of Civil Procedure section 877.5 ³ requires that a court in which litigation is pending be promptly notified by the parties of the existence and terms of any sliding scale settlement agreement. As required by section 877.5, Merritt Construction and Western Shower Door notified the trial court of the sliding scale settlement agreement through a motion in which they sought an order "approving sliding scale recovery agreement." In the notice of motion and supporting memorandum of points and authorities, the parties requested that the court find the settlement was entered into "in good faith" but nowhere referenced the provisions of section 877 ⁴ or section 877.6 ⁵ which deal with the subject of "good faith" settlements, unlike section 877.5 which does not address "good faith." In this instance, the notice of motion and supporting papers referenced only section 877.5. However, Paragraph 12 of the settlement agreement, attached to the moving papers, did reference both section 877.5 and section 877.6. Neither the notice of motion nor the supporting memorandum of points and authorities and declaration requested dismissal of IRM's cross-complaint.

A hearing on the motion was held on shortened notice of two days. No opposition to the motion was filed; all parties except Pioneer Shower Door were represented at the hearing. IRM's counsel informed the court that IRM had not filed papers concerning the motion because the motion papers had been received less than two days before. However, IRM's counsel expressed no significant opposition to the good faith nature of the settlement. During the hearing the subject of dismissing IRM's complaint was not discussed.

The court found the settlement was made in good faith and ordered IRM's cross-complaint dismissed with prejudice. IRM objected to the form of the order dismissing its cross-complaint. Conceding that its claim for equitable contribution based on comparative negligence was barred by the settlement, IRM asserted that its remaining three claims were not barred by section 877.6 because they were claims (1) for total equitable indemnity based on the distinction between the alleged active wrongdoing of cross-defendants and its own alleged passive liability, (2) for contractual indemnity and (3) for indemnity "by operation of law." IRM informed the court that it was willing to appear for a hearing regarding the disputed form of order if the court "deem[ed] it necessary," but did not specifically demand a hearing. Without any further hearing, the trial court entered an order dismissing IRM's cross-complaint. IRM appealed. ⁶

II. THE ISSUES FRAMED BY IRM

Having determined that the settlement before it was entered into in good faith, the trial court apparently accepted the arguments of the settling cross-defendants and reasoned that dismissal of IRM's cross-complaint was mandated by both section 877.6 and the analysis of the Supreme Court in American Motorcycle Assn. v. Superior Court (1978) 20 Cal.3d 578, 146 Cal.Rptr. 182, 578 P.2d 899. On appeal, IRM contends that neither the Supreme Court's AMA decision nor section 877.6 bars its three remaining claims for total indemnity against Merritt Construction and Western Shower Door because its theories of recovery on those claims are founded (1) on the active/passive negligence distinction (tort) and (2) the asserted breach by cross- defendants of express and implied warranties (contractual indemnity).

As a second argument, IRM contends that it was denied due process because it was never given notice that its cross-complaint might be dismissed and never received the hearing referenced in section 877.6 on the question of whether or not the Mary Carter settlement agreement was entered into in good faith.

III. ANALYSIS

A. The Good Faith Settlement Statute

Section 877.6 was enacted by the Legislature in 1980 to establish a statutory procedure for determining if a settlement by an alleged joint tortfeasor has been entered into in good faith and to provide a bar to claims of other alleged joint tortfeasors for equitable contribution or partial or comparative indemnity when good faith is shown. According to our Supreme Court, section 877.6 is a codification of one of the principles adopted by it in American Motorcycle Assn. v. Superior Court, supra, 20 Cal.3d 578, 604, 146 Cal.Rptr. 182, 578 P.2d 899 where the court concluded that "from a realistic perspective the legislative policy underlying ... [section 877] dictates that a tortfeasor who has entered into a 'good faith' settlement [citation] with the plaintiff must also be discharged from any claim for partial or comparative indemnity that may be pressed by a concurrent tortfeasor." (Tech-Bilt, Inc. v. Woodward-Clyde & Associates (1985) 38 Cal.3d 488, 496, fn. 5, 213 Cal.Rptr. 256, 698 P.2d 159; see also Turcon Construction, Inc. v. Norton-Villiers, Ltd. (1983) 139 Cal.App.3d 280, 283, 188 Cal.Rptr. 580.)

B. Previous Court of Appeal Decisions

In its 1978 AMA decision, our Supreme Court determined that the principles of comparative negligence adopted in Li v. Yellow Cab Co. (1975) 13 Cal.3d 804, 119 Cal.Rptr. 858, 532 P.2d 1226 should be used to apportion liability among multiple negligent tortfeasors under a comparative indemnity doctrine. Prior to the AMA decision, the doctrine of equitable indemnification had permitted passively negligent joint tortfeasors to obtain indemnity from joint tortfeasors whose active negligence was the primary cause of a plaintiff's injury. (See, e.g., Alisal Sanitary Dist. v. Kennedy (1960) 180 Cal.App.2d 69, 74, 4 Cal.Rptr. 379; Gardner v. Murphy (1975) 54 Cal.App.3d 164, 126 Cal.Rptr. 302.) As we noted at the outset, the implications of the principles set forth in the AMA decision as applied in the context of good faith settlements have already been considered by several of the Courts of Appeal with differing results. We, therefore, survey those decisions to assist us in reaching our own conclusion on the question.

1. The First Post-AMA Consideration of the Issue

The continuing...