Platt v. Coldwell Banker Residential Real Estate Services

• Citation: 266 Cal.Rptr. 601,217 Cal.App.3d 1439
• Decision Date: 15 February 1990
• Docket Number: No. D009465,D009465
• Court: California Court of Appeals
• Parties: Shearn H. PLATT, et al., Appellants, v. COLDWELL BANKER RESIDENTIAL REAL ESTATE SERVICES, Respondent.

Page 601

266 Cal.Rptr. 601

217 Cal.App.3d 1439

Shearn H. PLATT, et al., Appellants, v. COLDWELL BANKER RESIDENTIAL REAL ESTATE SERVICES, Respondent.

No. D009465.

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

Feb. 15, 1990.

Review Denied May 31, 1990.

Certified for Partial Publication ¹

Lewis, D'Amato, Brisbois, Bisgaard and Patricia Mundy, Janice G. Gibbons and Manuel R. Ramos, San Diego, for appellants.

Lindley, Lazar and Scales, San Diego, and Robert M. McLeod, San Francisco, and Ron A. Stormoen, San Diego, for respondent.

NARES, Associate Justice.

Shearn H. Platt, Martha Lessman Katz, Stephen L. Victor, a professional corporation; Rudick & Platt, a professional corporation; and Rudick, Platt & Victor (collectively, Attorneys) appeal from a judgment dismissing their first amended cross-complaint for equitable indemnity against Coldwell Banker Residential Real Estate Services (Coldwell Banker). Attorneys, who have been sued for legal malpractice in the underlying action, contend their cross-complaint should not have been dismissed because (1) equivalent relief is not available by an affirmative defense; and (2) there is no applicable public policy exception to the broad rule permitting one joint tortfeasor to cross-complain against another for equitable indemnity. We agree and reverse.

I FACTS AND PROCEDURE

In 1987 William R. Contreras (Contreras), Park Manor Hotel Investors (PMHI), a limited partnership, and six individual investors/limited partners (collectively, Plaintiffs) filed an amended complaint against Attorneys for legal malpractice. ² Coldwell Banker, the cross-defendant sued by Attorneys for indemnity, is not a plaintiff in the underlying case.

Plaintiffs allege they employed Attorneys to represent them in a real estate Attorneys filed a general denial and pleaded several affirmative defenses, including comparative negligence.

investment and to investigate, analyze, and evaluate the investment's soundness. Plaintiffs allege Attorneys simultaneously represented an adverse party to the investment without their consent, negligently advised them the investment was sound, failed to properly document the investment, and negligently failed to supervise and review "all aspects of the investment."

In July 1988 Attorneys filed a first amended cross-complaint for equitable indemnity against Coldwell Banker, PMHI, and Contreras. ³ As discussed in more detail below, the cross-complaint alleges Plaintiffs' investment loss, if any, was not caused by Attorneys, but if it was, it was also caused by negligent misrepresentations made by Contreras to the other plaintiffs.

More specifically, Attorneys allege Contreras misrepresented the soundness of the investment, his own expertise as an investment advisor, and the scope of Attorneys' services with regard to the investment. According to Attorneys, they did not represent the individual investors and neither investigated nor approved the soundness of the investment, as Contreras had told the other plaintiffs, but instead were solely employed to draft the partnership agreements. Attorneys allege they were never asked to and never did offer an opinion about the investment's soundness. Attorneys allege one investor, Liliana Binner, has filed an action against Contreras alleging he misrepresented such facts. The cross-complaint additionally alleges plaintiffs justifiably relied on Contreras's misrepresentations which he made in his capacity as plaintiffs' "attorney-in-fact," as PMHI's general partner, and as Coldwell Banker's agent. Coldwell Banker's liability rests solely on this alleged agency with Contreras.

In August 1988 Contreras and PMHI, joined by Coldwell Banker, filed a demurrer to Attorneys' first amended cross-complaint. ⁴ Stating Jaffe v. Huxley Architecture (1988) 200 Cal.App.3d 1188, 246 Cal.Rptr. 432 was "controlling," the court granted the demurrer without leave to amend and dismissed Attorneys' cross-complaint. ⁵ The court entered judgment for the cross-defendants in January 1989.

Attorneys petitioned this court for a writ of mandate as to Contreras and PMHI (not as to Coldwell Banker). In February 1989, this court denied the petition stating, "The petition is denied as there is no showing of an abuse of discretion." ⁶

In January 1989 Attorneys appealed from the dismissal of their cross-complaint against Coldwell Banker.

II DISCUSSION

A. Standard of Review

On appeal, in assessing the sufficiency of a pleading against a demurrer, all material facts properly pleaded and those which arise by reasonable implication therefrom are deemed true. The trial court commits reversible error when it sustains a demurrer without leave to amend where the cross-complainant has alleged facts showing entitlement to relief under any possible

legal theory. (Lewis v. Purvin (1989) 208 Cal.App.3d 1208, 1213, 256 Cal.Rptr. 827.)

B. Law of the Case ^*

C. The Cross-Complaint

Code of Civil Procedure section 428.10, subdivision (b), permits "[a] party against whom a cause of action has been asserted in a complaint" to file a cross-complaint stating "[a]ny cause of action he has against a person alleged to be liable thereon, whether or not such person is already a party...." Accordingly, a defendant may generally file a cross-complaint against any person from whom he seeks equitable indemnity. (Daon Corp. v. Place Homeowners' Assn. (1989) 207 Cal.App.3d 1449, 1454-1455, 255 Cal.Rptr. 448.)

"The purpose of equitable indemnification is to avoid the unfairness, under joint and several liability theory, of holding one defendant liable for the plaintiff's entire loss while allowing another responsible defendant to escape ' "scot free" ' [citation omitted]." (GEM Developers v. Hallcraft Homes of San Diego, Inc. (1989) 213 Cal.App.3d 419, 426, 261 Cal.Rptr. 626.) A defendant "has a right to bring in other tortfeasors who are allegedly responsible for plaintiff's action through a cross-complaint ... for equitable indemnification." (Id. at p. 428, 261 Cal.Rptr. 626.)

Because indemnification between joint tortfeasors is an equitable rule created to correct potential injustice, the doctrine is not available where it would operate against public policy. (See Woodward-Gizienski & Associates v. Geotechnical Exploration, Inc. (1989) 208 Cal.App.3d 64, 67, 255 Cal.Rptr. 800.) For example, in Munoz v. Davis (1983) 141 Cal.App.3d 420, 190 Cal.Rptr. 400, the court refused to permit an attorney (sued for malpractice for allowing the statute of limitations to expire) to cross-complain against a driver whose negligence caused the plaintiff's injuries, in part because there was "no equitable basis for shifting malpractice liability from the negligent lawyer to the tortfeasor whose actions caused the client's original injuries." (Id. at p. 427, 190 Cal.Rptr. 400.) ⁷ Similarly, in Lewis v. Purvin, supra, 208 Cal.App.3d 1208, 256 Cal.Rptr. 827 this court recognized "an exception to the broad application of indemnity principles" where an attorney sued for malpractice cross-complains for indemnity against a successor attorney who was retained to extricate the client from the problems created by the first attorney. (Id. at pp. 1213, 1216, 256 Cal.Rptr. 827.) Of course, although many of the cases denying relief by way of cross-complaint involve attempts to cross-complain against the plaintiff's lawyer, the policy considerations limiting the availability of a cross-complaint for equitable indemnity are not restricted to such claims.

In Jaffe v. Huxley Architecture, supra, 200 Cal.App.3d 1188, 246 Cal.Rptr. 432, this court considered whether a developer sued by a homeowners association (association) for construction defects could cross-complain for equitable indemnity against the association's board of directors for their conduct which contributed to the damages arising from the original defects. (Id. at p. 1191, 246 Cal.Rptr. 432.) Jaffe holds such a cross-complaint fails to state a cause of action because (1) equivalent relief would be available to the developer by way of an affirmative defense; and (2) pitting individual board members against the association in such a cross-complaint would "jeopardize or entangle a special relationship which strong policies dictate be preserved." (Id. at p. 1193, 246 Cal.Rptr. 432.)

Citing Jaffe, Coldwell Banker contends the court properly dismissed Attorneys' cross-complaint because equivalent relief is available to Attorneys by virtue of their Neither Jaffe nor the other cases Coldwell Banker cites support an assertion that, as a matter of law, a cross-complaint for equitable indemnity fails to state a cause of action whenever resolution of the main action will apportion liability. Such a rule would be contrary to the Supreme Court's statements in American Motorcycle Assn. v. Superior Court (1978) 20 Cal.3d 578, 146 Cal.Rptr. 182, 578 P.2d 899. There, holding a defendant could cross-complain for equitable indemnity against a concurrent tortfeasor, the court also said the totality of 100 percent fault is to be apportioned among the plaintiff, defendant, and non-party tortfeasors. (Id. at p. 589, fn. 2., 146 Cal.Rptr. 182, 578 P.2d 899; see also Seamen's Bank v. Superior Court (1987) 190 Cal.App.3d 1485, 1492-1493, 236 Cal.Rptr. 31 ["It is not necessary a person be a party to the action in order for the court to assess that person's proportion of fault."].) Thus, because the court in American Motorcycle not only created the cause of action Attorneys plead here, but in the same opinion stated fault should be apportioned among all legally responsible persons in the main action, American Motorcycle implicitly rejects the assertion a cross-complaint is improper whenever liability can be apportioned in the main action.

                comparative negligence affirmative defense.  Coldwell Banker notes its alleged liability solely derives from Contreras's liability, and Attorneys have pleaded comparative negligence as an affirmative defense.  Moreover,

...