River Garden Farms, Inc. v. Superior Court

• Decision Date: 31 July 1972
• Citation: 26 Cal.App.3d 986,103 Cal.Rptr. 498
• Court: California Court of Appeals Court of Appeals
• Parties: RIVER GARDEN FARMS, INC., et al., Petitioners, v. The SUPERIOR COURT of the State of California FOR the COUNTY OF YOLO, Respondent, Sharon O. LAMBERT, a minor, etc., Real Party in Interest. Civ. 13297.

Page 498

103 Cal.Rptr. 498

26 Cal.App.3d 986

RIVER GARDEN FARMS, INC., et al., Petitioners, v. The SUPERIOR COURT of the State of California FOR the COUNTY OF YOLO, Respondent Sharon O. LAMBERT, a minor, etc., Real Party in Interest.

Civ. 13297.

Court of Appeal, Third District, California.

July 31, 1972.

Richard Mills, Sacramento, for petitioners.

Fitzwilliam, Memering, Stumbos & DeMers by Louis A. DeMers, Sacramento, for real parties in interest.

FRIEDMAN, Acting Presiding Justice.

Petitioners are the remaining defendants in a personal injury suit pending in the Yolo County Superior Court. Three other defendants settled with the plaintiff minor and received releases. Petitioners charge that these releases were not given in good faith as required by Code of Civil Procedure section 877, violating California statutes which authorize pre-verdict settlement wiht one of several joint tortfeasors and thus evoking the common law rule that the release of one joint tortfeasor releases all.

Pursuing this thesis, petitioners unsuccessfully sought dismissal in the superior court. They seek mandate here to compel dismissal or other appropriate relief. They name Sharon Lambert, the minor plaintiff, as real party in interest.

The question calls for interpretation of an untested statutory provision, the 'good faith' clause of Code of Civil Procedure section 877. ¹

California formerly adhered to the common law doctrines denying contribution among joint or concurrent tortfeasors and viewing the release of one as a release of all. (See Witt v. Jackson, 57 Cal.2d 57, 70, 70 Cal.Rptr. 369, 366 P.2d 641; Pellett v. Sonotone Corp., 26 Cal.2d 705, 710, 160 P.2d 783.) In 1957 sections 875 to 880 of the Code of Civil Procedure were adopted. Three of these provisions are important here. Section 875 establishes a right of post-judgment contribution among negligent tortfeasors held liable by a single judgment. Section 876 requires them to share in the judgment debt pro rata, that is, equally, a single share being allocated where one defendant is vicariously liable for the fault of another. Section 877 permits pre-verdict releases 'given in good faith' to one of several tortfeasors; such a release completely discharges the settlor, prevents contribution claims against him by the eventual judgment debtor and results in Pro tanto reduction in the amount the injured party can collect from the judgment debtor. (De Cruz v. Reid, 69 Cal.2d 217, 225--226, 70 Cal.Rptr. 550, 444 P.2d 342.)

In 1969 Sharon Lambert, age 10, and her brother Jessie, age 9, lived with their parents in a small ranch building or cottage owned by River Carden Farms, employer of Mr. Lambert. The cottage was furnished to Lambert as part of his compensation. While Lambert was painting the interior of the cottage, a fire broke out and destroyed the building. Both parents were killed and the two children severely burned. The burns apparently left both children with serious and permanent disfigurements and physical handicaps.

Four business firms or groups incurred potential liability for the children's injuries: Fuller-O'Brien Corporation, manufacturer of the paint used by Mr. Lambert; Pargas, Inc. and Van Gas, Inc., who supplied liquid propane to a water heater in the cottage; fourth, the petitioners, owners of the cottage and owners and operators of River Garden Farms. ² For convenience' sake, we shall refer to these parties as 'defendants.' The children also have claims under the wrongful death statute. One of the River Garden Farms entities was Mr. Lambert's employer; its workmen's compensation liability bars a wrongful death action against it. With that exception, all defendants incurred potential liability for the deaths.

Sharon and Jessie are represented by the same attorneys. After the appointment of a guardian ad litem, Sharon filed a personal injury action against the four defendants in Yolo County. No suit to recover for Jessie's injuries has yet been filed. No wrongful death action has yet been filed. Settlement discussions ensued among the parties. In the personal injury action brought by Sharon, River Garden Farms filed a cross-action seeking indemnity from the other defendants. Within the framework of that same lawsuit, a court-supervised settlement conference took place in March 1971. The court tentatively suggested a settlement figure for each child and an apportionment among the four defendants, but no settlement occurred.

Acting under the statutes for approval of minors' compromise (Code Civ.Proc., § 372; Prob.Code, § 1431), the children's attorneys filed a petition in April, 1971, requesting court approval of a proposed compromise of the two minors' claims against Pargas, Inc. The compromise covered both the personal injury and wrongful death claims. The court approved a settlement by which Pargas was released upon payment of $250,000. Under the court's order $75,000 was allocated to the settlement of each child's personal injury claim and $50,000 to each wrongful death claim.

Two months later, in June, the claimants concluded settlements with two other defendants, Van Gas, Inc., and Fuller-O'Brien Corporation. In response to the minors' petition the court approved settlement by which Van Gas paid $625,000 and Fuller-O'Brien $415,000. The children's attorney requested that the aggregate settlement of $1,040,000 be allocated as follows: $350,000 to the wrongful death claim of each child and $170,000 to each personal injury claim. An attorney representing Van Gas objected to the allocation of $700,000 to the wrongful death claims as excessive. The court found the allocation reasonable and approved it.

River Garden Farms describes its predicament in somewhat the following terms: Counsel for the children have arrived at successive settlements with the other three defendants, leaving River Garden Farms as the sole target of liability. In view of the children's severe and permanent physical handicaps, the personal injury claims have a potential for much larger verdicts than the wrongful death claims. The latter, moreover, lose value for settlement purposes because one or both the senior Lamberts might have been guilty of contributory negligence. Notwithstanding these comparative appraisals, the attorneys for the children (with court approval) have chosen to allocate the major share of the settlements to the less valuable wrongful death claims and a minor share to the potentially large personal injury liability. As a result of the three settlements, $800,000 has been applied to the wrongful death claims and $490,000 to the personal injury claims. ³ The attorneys for the children did not notify River Garden Farms of the proposed settlements with the other defendants or of its applications for court approval. The attorneys for the children had originally offered to settle all claims for $2,000,000, then withdrew the offer. At the abortive settlement conference, the court had tentatively suggested a total settlement figure of $1,600,000. Subsequently River Garden Farms offered $700,000, the sum recommended by the court, as its share of a complete settlement. The attorneys for the children have most recently offered to settle with River Garden Farms for $3,850,000 less the $1,290,000 received from the other defendants. Such a settlement would require River Garden Farms to bear about two-thirds of the liability it once shared with three other defendants.

Petitioners contend that the allocation of a disproportionately large share of the settlements to the wrongful death claims has isolated petitioner as the sole target for potentially large personal injury judgments which it will bear alone, without contribution and with credit only for the relatively minor share of the settlements allocated to the personal injury claims. Under the circumstances, petitioners contend, the settlements were not given in good faith as required by section 877. Petitioners do not charge inadequacy of the amounts paid in settlement or collusion or other inequitable conduct by the settling defendants. The charge of bad faith is aimed at the claimants alone and is based upon the claimants' ex parte, although court-approved, allocation of the settlement proceeds.

I

The injured claimants contend that the duty of good faith is limited to the parties to the settlement. They point out that an injured person may choose among those with whom he will negotiate and settle. He may sue one defendant and ignore others. ⁴ The contribution statutes establish no right of contribution before judgment, but only a right of contribution among joint judgment debtors. (Code Civ.Proc., § 875, subd. (a); Augustus v. Bean, 56 Cal.2d 270, 272, 14 Cal.Rptr. 641, 363 P.2d 873.) The contribution rights of the judgment debtors do not impair the plaintiff's right to collect the entire judgment from any one of them. (Code Civ.Proc., § 875, subd. (g).) Thus a plaintiff may turn his back on collective negotiations.

It does not follow that the good faith burdens only the Vis-a-vis relationship of the negotiating parties. Nor does it follow that they may negotiate and settle in disregard of a tortfeasor whom the claimant reserves for latter negotiation or suit. In every contract there is an implied obligation of good faith and fair dealing. (Comunale v. Traders & General Ins. Co., 50 Cal.2d 654, 658--659, 328 P.2d 198.) Were the obligation of good faith limited to the settling parties, no statutory demand for release 'given in good faith' would have been necessary. In the absence of direct decisional guidance, we seek the meaning and effect of that statutory demand as revealed by the objectives of the legislation in which it is found.

The major goals of the 1957 tort contribution legislation are, first, equitable sharing of costs among the parties at fault, and second, encouragement of settlements. ⁵ Auxiliary to the latter is some assurance of settlement finality. Because the statute limits...