Opinion
Review Granted July 2, 1987.
Previously published at 203 Cal.App.3d 914 Lynberg & Nelsen, Norman J. Watkins and William W. Read, Los Angeles, for cross-complainant and appellant.
Corbett, Steelman & Balmages and Mark S. Rosen, Irvine, for cross-defendant and respondent Narmco Materials, Inc.
Crowe & Day, J. Michael Crowe, Douglas L. Day, and Gerald A. Klein, Los Angeles, for cross-defendant and respondent Ciba-Geigy Corp.
Wylie A. Aitken, Santa Ana, and James B. Abeltin, Los Angeles, for plaintiffs and respondents Helen Seaman, George E. Seaman IV, Mary C. Seaman, Cynthia Ellett, Larry Cercone, and Melissa Gallagher.
CROSBY, Associate Justice.
For the second time in a published opinion, and notwithstanding subsequent decisions of other appellate panels specifically disagreeing with our earlier holding, we adhere to the view that a cross-complaint for total equitable indemnity survives a cross-defendant's good faith settlement.
I
On August 22, 1979, Larry Cercone and George Seaman, employees of Narmco Materials, Inc., were severely burned when the first production batch of a new epoxy exploded. Seaman died from his injuries. Narmco's investigation determined the exothermic reaction was caused by defective Tullanox, one of the ingredients. Cercone and Seaman's heirs sued Narmco; Celanese Corporation, its parent; and Tulco, Inc., Weber Truck and Warehouse, and Cabot Corporation, the manufacturer, distributor, and licensor, respectively, of Tullanox, for negligence and strict products liability.
In January 1984 Tulco settled with the plaintiffs, and the following month the court determined Tulco's settlement was in good faith. (Code Civ.Proc., § 877.6.) The other defendants had not yet settled, however; and Tulco continued to prosecute its own cross-complaint for comparative partial and total equitable indemnity against them and Ciba-Geigy, the manufacturer of MY-720, another ingredient in the fatal epoxy compound. Tulco eventually dismissed its cross-complaint with prejudice against Cabot and Weber.
The remaining defendants (Weber, Cabot, and Narmco) and Ciba-Geigy, named as a defendant in a separate lawsuit filed by the Seaman heirs and Cercone in December 1984, settled with the tort plaintiffs in early 1985. The parties contributing to the settlement agreed not to pursue indemnification cross-complaints against one another.
The trial court found Ciba-Geigy's contribution to the settlement package to be in good faith and dismissed all cross-complaints against it, both for total and partial equitable indemnity. Tulco appeals only from that portion of the judgment dismissing its cross-complaint against Ciba-Geigy for total equitable indemnity. Ciba-Geigy and the plaintiffs in the underlying tort actions seek sanctions for a frivolous appeal.
II
Two years ago in Angelus Associates Corp. v. Neonex Leisure Products, Inc. (1985) 167 Cal.App.3d 532, 213 Cal.Rptr. 403, we reviewed the then published appellate wisdom on the subject and determined a cross-complaint for total equitable indemnity survives a cross-defendant's good faith settlement with the personal injury or wrongful death plaintiff. In so doing we concluded a party who is " 'factually innocent' of any wrongdoing" yet nevertheless liable to a personal injury plaintiff by statute, contract, or public policy considerations Notwithstanding contrary decisions in Lopez v. Blecher (1983) 143 Cal.App.3d 736, 192 Cal.Rptr. 190, Kohn v. Superior Court (1983) 142 Cal.App.3d 323, 191 Cal.Rptr. 78, and Turcon Construction, Inc. v. Norton-Villiers, Ltd. (1983) 139 Cal.App.3d 280, 188 Cal.Rptr. 580, we found the rationale of the dissent in City of Sacramento v. Gemsch Investment Co. (1981) 115 Cal.App.3d 869, 878-879, 171 Cal.Rptr. 764 and a unanimous court in Huizar v. Abex Corp. (1984) 156 Cal.App.3d 534, 203 Cal.Rptr. 47 more persuasive. (See also E.L. White, Inc. v. City of Huntington Beach (1982) 138 Cal.App.3d 366, 376, 187 Cal.Rptr. 879.) We also declined to embrace the notion expressed in Torres v. Union Pacific R.R. Co. (1984) 157 Cal.App.3d 499, 203 Cal.Rptr. 825 that a broad definition of "good faith," i.e., one that includes an assessment of the settling party's potential liability vis-a-vis that of the codefendants, eliminates the need to distinguish between partial and total indemnity. (Angelus Associates Corp. v. Neonex Leisure Products, Inc., supra, 167 Cal.App.3d at p. 541, 213 Cal.Rptr. 403.) Our decision was based in part on the statute governing good faith settlements, Code of Civil Procedure section 877.6, subdivision (c). It simply will not sustain a contrary view. That section bars only cross-complaints "against the settling tortfeasor for equitable comparative contribution, or partial or comparative indemnity, based on comparative negligence or comparative fault." (Emphasis added.)
Several courts have recognized that cross-complaints based on express or implied contractual indemnity do not fall within the ambit of Code of Civil Procedure section 877.6 and, consequently, survive a good faith settlement. (See, e.g., Bear Creek Planning Com. v. Title Ins. & Trust Co. (1985) 164 Cal.App.3d 1227, 211 Cal.Rptr. 172; C.L. Peck Contractors v. Superior Court (1984) 159 Cal.App.3d 828, 205 Cal.Rptr. 754; County of Los Angeles v. Superior Court (1984) 155 Cal.App.3d 798, 202 Cal.Rptr. 444; contra, Stratton v. Peat, Marwick, Mitchell & Co. (1987) 190 Cal.App.3d 286, 235 Cal.Rptr. 374.)
Our opinion was and is that the focus should be on the fault, if any, of the party seeking full indemnity. If it has none, then it cannot be considered a tortfeasor or subject to the provisions of Code of Civil Procedure section 877.6 at all. In short, we believe the cross-complainant must be afforded a trial on the question, unless there is no triable issue, in which case the matter may be resolved by summary judgment.
The response to Angelus has not been entirely enthusiastic. Division One of this court was the first to fault our position. There our colleagues observed, "Wrongdoing can be apportioned 100 percent to [one alleged tortfeasor] and zero percent to [another]. Comparative equitable indemnity includes the entire range of possible apportionments, from no right to any indemnity to a right of complete indemnity. Total equitable indemnification is just one end of the spectrum of comparative equitable indemnification." (Standard Pacific of San Diego v. A.A. Baxter Corp. (1986) 176 Cal.App.3d 577, 587-588, 222 Cal.Rptr. 106.) Our brethren suggested the Supreme Court's post-Angelus opinion in Tech-Bilt, Inc. v. Woodward-Clyde & Associates (1985) 38 Cal.3d 488, 213 Cal.Rptr. 256, 698 P.2d 159 had a bearing on the matter, although none of the conflicting cases or the issue itself was mentioned there: "Under Tech-Bilt the settlement will not be found in good faith unless the amount is reasonable in light of the settling tortfeasor's Standard was followed in quick succession by Hale v. Laden (1986) 178 Cal.App.3d 668, 224 Cal.Rptr. 182 and IRM Corp. v. Carlson (1986) 179 Cal.App.3d 94, 224 Cal.Rptr. 438. Hale is not inconsistent with Angelus. The court examined the facts in the case before it and, based on the pleadings and admissions in discovery, concluded the defendant who sought to pursue his indemnification cross-complaint against a settling codefendant "could not possibly assert a claim for total indemnification." (Ibid.) The court quite properly refused to apply Angelus on that basis. We agree. The admissions and the pleadings of the party seeking total equitable indemnity in Hale clearly destroyed any possible entitlement to such a finding, and the formality of returning the matter to the superior court for the entry of summary judgment on that question would have exalted form far beyond substance.
We count Division Two in our camp, however, based on its pre-Angelus opinion in E.L. White, Inc. v. City of Huntington Beach, supra, 138 Cal.App.3d 366, 375-376, 187 Cal.Rptr. 879, affirming the recovery on a post-judgment cross-complaint by one tortfeasor against a second tortfeasor for total equity indemnity.
The majority in IRM surveyed the appellate decisions on total equitable indemnity, much as we did in Angelus, but determined "the concept of total implied equitable indemnity and its accompanying passive/active analysis [must be abandoned]." (IRM Corp. v. Carlson, supra, 179 Cal.App.3d at p. 109, 224 Cal.Rptr. 438.) The lead opinion does not base its conclusion on Tech-Bilt, however.
As an aside, we note the "passive/active" and "primary/secondary" terminologies are unnecessary baggage on the total indemnity cart. Worse, they are ambiguous and likely to lead to erroneous results. In our view, it makes more sense to determine whether a party's liability is derivative or vicarious, i.e., is it factually innocent of any wrongdoing but nevertheless liable based on a statute, public policy, or a particular legal relationship? A passive tortfeasor is nonetheless a tortfeasor and probably ought to be subject to section 877.6. Several of the majority rule cases are distinguishable on that basis, a point we should have made in Angelus. (See, e.g., City of Sacramento v. Gemsch Investment Co., supra, 115 Cal.App.3d 869, 171 Cal.Rptr. 764.)
The most recent adherent to Standard is Division Three of the Second District. In Far West Financial Corp. v. D & S. Co., Inc. (1987) 189 Cal.App.3d 1322, 234 Cal.Rptr. 771, the court held, "[I]ncluding vicariously liable defendants as joint tortfeasors within the meaning of section 877.6 reasonably accomplishes the twin goals of section 877.6 [to encourage settlement and equitably allocate costs of injury among joint tortfeasors]." (Id., at p. 1328, 234 Cal.Rptr. 771.) As Standard did earlier, the Far West court concluded, "After Tech-Bilt, the rationale for permitting claims for total equitable indemnity to survive a good faith settlement no longer applies." (Id., at p. 1330, 234 Cal.Rptr. 771.)
How is it "equitably" possible to assign any portion of a wrongdoer's liability to someone who is responsible only in law, not in fact?
Inconsistent with its claim that Tech-Bilt decided the matter, however, the Far West court also stated, "The law in this area is, to say the least, unsettled. IRM Corp. v. Carlson [supra] 179 Cal.App.3d 94, 108-109 [224 Cal.Rptr. 438], and Standard Pacific of San Diego v. A.A. Baxter Corp., supra, [176 Cal.App.3d] at pages 587-588 [222 Cal.Rptr. 106], held total equitable indemnity was subsumed within and replaced by comparative indemnity. Diametrically opposed are Huizar and Angelus Associates which allow claims for total indemnity in favor of a vicariously liable tortfeasor. All the foregoing cases remain published,
We disagree with the appellate and scholastic distortion of the Tech-Bilt holding. Tech-Bilt set forth the procedures to be used in determining whether a settlement is in good faith, nothing more. The Supreme Court had no occasion under the facts of that case to distinguish between claims for total equitable indemnity and those for partial equitable indemnity and appears to have considered only the latter. The Tech-Bilt opinion makes no effort to determine whether a claim for total indemnity could be extinguished by a good faith settlement, and it never describes the type of indemnity involved with an adjective other than "partial."
In this regard Tech-Bilt is to be contrasted with Safeway Stores, Inc. v. Nest-Kart (1978) 21 Cal.3d 322, 146 Cal.Rptr. 550, 579 P.2d 441, where the court expressly reserved the question of whether comparative indemnity principles should be applied when a defendant is liable to the plaintiff but factually innocent of any wrongdoing: "[W]e have no occasion to determine in this case whether the comparative indemnity doctrine should be applied in a situation in which a party's liability is entirely derivative or vicarious in nature. [Citations.]" (Id., at p. 332, fn. 5, 146 Cal.Rptr. 550, 579 P.2d 441.) Nest-Kart is not mentioned in Tech-Bilt and surely would have been had the Supreme Court intended to answer the question left open in that case. Based on the restraint evidenced in Nest-Kart, it would be unwise, in our view, to infer a Moreover, the overriding theme in Tech-Bilt is implementation of the "['not always necessarily harmonious'] 'goals of [ ] tort contribution legislation [, which] are, first, equitable sharing of costs among the parties at fault, and second, encouragement of settlements.' [Citation.]" (Tech-Bilt, Inc. v. Woodward-Clyde & Associates, supra, 38 Cal.3d at p. 494, 213 Cal.Rptr. 256, 698 P.2d 159, emphasis added.) The theme which the majority rule decisions emphasize, on the other hand, is that once the tort plaintiff has been compensated, the policy to encourage settlements overrides any unfairness in the allocation of the loss. We find no support for this notion in any of the Supreme Court's holdings to date. Fair compensation to injured parties is obviously of paramount concern; but an only slightly less important tenet of our present tort system is that losses are to be allocated equitably among the responsible parties. Where there is no fault to compare, the administration of justice is not, as our critics appear to suggest, more important than justice itself.
The recent passage of the Fair Responsibility Act of 1986 (familiar as "Proposition 51"), abolishing joint and several liability for noneconomic damages in tort actions, is a clear recognition of this principle by the electorate and accomplishes its purpose of fair allocation of the responsibility even at the cost of denying the plaintiff full compensation. Also, Sindell v. Abbott Laboratories (1980) 26 Cal.3d 588, 163 Cal.Rptr. 132, 607 P.2d 924 provides an interesting variation on the themes of comparative fault and joint and several liability. In establishing the market share theory of tort liability, the Supreme Court observed, "It is probably impossible, with the passage of time, to determine market share with mathematical exactitude. But just as a jury cannot be expected to determine the precise relationship between fault and liability in applying the doctrine of comparative fault [citation] or partial indemnity [citation], the difficulty of apportioning damages among the defendant producers in exact relation to their market share does not seriously militate against the rule we adopt." (Id., at p. 613, emphasis added, 163 Cal.Rptr. 132, 607 P.2d 924.)
Mesler v. Bragg Management Co. (1985) 39 Cal.3d 290, 216 Cal.Rptr. 443, 702 P.2d 601, a post-Tech-Bilt decision, is instructive on this point. The issue before the Supreme Court in Mesler was whether a tort plaintiff's settlement with a corporate subsidiary barred its pursuit of the parent corporation on the theory the proposed defendant was the alter ego of the settling party. The court recited the three policies underlying the contribution legislation, which includes section 877.6 (id., at p. 299, 216 Cal.Rptr. 443, 702 P.2d 601): " 'First ... is maximization of recovery to the injured party for the amount of his injury to the extent fault of others has contributed to it.... Second is encouragement of settlement of the injured party's claim.... Third is the equitable apportionment of liability among the tortfeasors.' " (Id., at p. 304, 216 Cal.Rptr. 443, 702 P.2d 601.)
The court emphasized the importance of the third policy consideration: "Section 877, subdivision (a), provides that the plaintiff's recovery will be reduced by the amount [ ] paid by the settling defendant, not by the proportion of that defendant's liability. If the subsidiary is allowed to settle for a modest share of the plaintiff's liability and this settlement covers the parent as well, the remaining defendants will have a proportionately greater sum to pay. The low settlement, not made in bad faith because, for example, the subsidiary is undercapitalized, may indeed be unfair if the more affluent parent corporation is included in its terms. Since the remaining defendants cannot attack a settlement unless it was made in bad faith, the rule would be inequitable to the nonsettlors." (Id., at p. 305, 216 Cal.Rptr. 443, 702 P.2d 601.) The same analysis is unassailable when applied to cross-complaints for total equitable indemnity. The determination that a settlement is in good faith is inextricably bound with the paramount, and sometimes competing, policy to maximize recovery to the injured party. Once that goal has been achieved, however, it is inequitable to deny the factually innocent but legally liable party the opportunity to recoup its entire settlement
To apply Tech-Bilt and section 877.6 to claims for total indemnity is to adopt the dubious notion that a party who is legally responsible, but factually innocent, is somehow at fault for that reason alone. (See, e.g., Standard Pacific of San Diego v. A.A. Baxter Corp., supra, 176 Cal.App.3d 577, 587-588, 222 Cal.Rptr. 106.) But chicken hawks are not chicken soup. We see no fairness in an "equitable sharing" of responsibility in the case of a claim for total indemnity which, by its very nature, denies all actual responsibility for plaintiff's injuries.
Also, the current majority view, wedded as it is to the encouragement of settlements, the second goal of Tech-Bilt, may be grounded on a fallacious premise. An alleged tortfeasor who is factually innocent of any wrongdoing but legally responsible without fault should be encouraged to promptly settle with the injured party. Settlement will not be fostered, however, where a claim for total equitable indemnity against other tortfeasors, even those who have settled, is barred. But assuming our view will chill some settlements, "[w]e perceive the rule ... as deterring only those settlements by defendants who are clearly at fault and attempt to buy peace too cheaply at the expense of codefendants who are merely vicariously liable. Although our holding may discourage such settlements, we believe promotion of this state's policy to assign fiscal responsibility in proportion to fault outweighs the policy of encouraging settlement in this limited instance." (Angelus Associates Corp. v. Neonex Leisure Products, Inc., supra, 167 Cal.App.3d at p. 542, 213 Cal.Rptr. 403.)
We can only reiterate that the policy we defend originated in the Legislature which specifically limited the provisions of Code of Civil Procedure section 877.6 to "further claims ... for equitable comparative contribution, or partial or comparative indemnity, based on comparative ... fault." The Legislature has spoken. If claims for total equitable indemnity are to be barred as well, as clearly they are not under the current statute, the change should come from the Legislature, not the courts.
Tulco has pleaded a cause of action for total equitable indemnity: "[A]ny liability it would have had to plaintiffs would have been solely derivative liability, not resulting from any active conduct of the cross-complainant, but only of an obligation imposed upon the cross-complainant by law and that cross-complainant is therefore entitled to total and complete indemnity from the cross-defendants [including Ciba-Geigy] and each of them." This language is sufficient to entitle Tulco to proceed with a cause of action for total equitable indemnity, notwithstanding Ciba-Geigy's good faith settlement with the tort plaintiffs.
We are not insensitive to arguments by Ciba-Geigy, Narmco, and the plaintiffs that our holding could be subject to abuse by alleged tortfeasors who will unnecessarily and in bad faith prolong litigation by simply reciting the requisite allegations of a cause of action for total equitable indemnity when there is no reasonable probability of prevailing based on the facts of the particular case; and this lawsuit may be one of them. Tulco is the manufacturer of an allegedly defective ingredient in an allegedly defective product, yet it seeks to shift the total factual responsibility for the accident to the manufacturer of another ingredient and to the injured parties' employer. Tulco may have great difficulty in a bifurcated trial where the only issue is whether it was at fault in any degree. But that question was not properly before the superior court in determining whether Ciba-Geigy's settlement was in good faith. Section 877.6 does not confer the right to determine on that motion whether a defendant has a reasonable probability of prevailing as a wholly innocent party. (Cf. Hale v. Laden, supra, 178 Cal.App.3d 668, 224 Cal.Rptr. 182.) To the extent the matter is not subject to a motion for summary Ciba-Geigy and the other cross-defendant are not without recourse against a bad-faith prosecution of Tulco's cross-complaint. The Legislature has already created a remedy, which in itself is additional confirmation of our understanding of the scope of section 877.6. The nonsettling defendants (although not our plaintiffs whose settlement is apparently contingent on dismissal of the cross-complaints) will be entitled to reimbursement of their expenses should the trial court determine that Tulco's cross-complaint was not brought "with reasonable cause and in the good faith belief that there was a justiciable controversy under the facts and law...." (Code Civ.Proc., § 1038, subd. (a).)
The judgment dismissing the first cause of action by Tulco for total equitable indemnity against Ciba-Geigy is reversed. Appellant is entitled to costs on appeal from respondent Ciba-Geigy.
Since we have reversed the judgment of dismissal on the first cause of action for total equitable indemnity, the request by Ciba-Geigy and the tort plaintiffs for sanctions on appeal is, of course, of no moment.
TROTTER, P.J., concurs.
SONENSHINE, Associate Justice.
I respectfully dissent. I realize "[t]he law in this area is to say the least, unsettled." (Far West Financial Corp. v. D. & S. Co., Inc. (1987) 189 Cal.App.3d 1322, fn. 6, 234 Cal.Rptr. 771.) But I find the reasoning of Far West and the authority upon which it relies convincing.
"Total indemnification is nothing more than equitable allocation of all of the loss to another party." (Standard Pacific of San Diego R.R. v. Baxter Corp. (1986) 176 Cal.App.3d 577, 587, 222 Cal.Rptr. 106.) "After Tech-Bilt, the rationale for permitting claims for total equitable indemnity to survive a good faith settlement no longer applies." (Far West Financial Corp. v. D. & S. Co., Inc., supra, 189 Cal.App.3d at p. 1330, 234 Cal.Rptr. 771.)
I would affirm the judgment.
In a decision which predated the enactment of section 877.6, Division Two of this court did hold that "[i]mplied contractual indemnity is [but] a form of equitable indemnity." (Kramer v. Cedu Foundation, Inc. (1979) 93 Cal.App.3d 1, 12, 155 Cal.Rptr. 552.) Nevertheless, in affirming a judgment for the cross-defendant on a cross-complaint for indemnity, the court noted the jury's finding that the cross-complainant was 38 percent negligent negated "[t]he contention that [its] liability was wholly derivative or vicarious, as a matter of law." (Ibid.)
The comment explained that in order to determine whether a settlement is in good faith, the trial court must examine the settling party's liability to all parties and not just the plaintiff. (Id., at p. 1099.) Accordingly, an alleged tortfeasor like Woodward-Clyde in Tech-Bilt, against whom the statute of limitations for an action by the plaintiff had run, could not settle for a nominal sum if its estimated liability to a cross-complaining defendant in the main action was significant. We agree with the comment's reasoning to this point. The author added, however, that in order to encourage settlements, a settlement which takes into consideration liability to other defendants should insulate the settling party from any more exposure, even by way of a cross-complaint for total equitable indemnity.
Our viewpoint was championed in the Loyola of Los Angeles Law Review. The author there correctly observed the Supreme Court in American Motorcycle v. Superior Court (1978) 20 Cal.3d 578, 146 Cal.Rptr. 182, 578 P.2d 899 "never specifically addressed the issue of total indemnity.... Instead, the court recognized [ ] there remained situations where a total shifting of liability would be appropriate. However, it did not specifically explain when full indemnification would apply, probably because the dispute in the case involved the right of a culpable party to seek indemnity from another potentially culpable party. The dispute did not involve a vicariously or derivatively liable tortfeasor." (Comment, Total Equitable Indemnity: Can It Pierce a Pretrial Settlement? (1986) 20 Loyola L.A.L.Rev. 99, 128, fns. omitted.)
In criticizing the Standard approach, the author reasoned, "There is nothing equitable about compelling a faultless party to bear any portion of the damages when indemnity can be obtained from the party directly responsible. [Citing Angelus.] Where there is no fault to apportion, the principles of comparative negligence should be inapplicable." (Id., at pp. 143-144, fn. omitted.) The comment concluded, "Some courts have indicated that the primary legislative intent behind [Code of Civil Procedure section 877.6] was to promote settlements by guaranteeing their finality. However, in light of the 'reasonable range' test espoused in Tech-Bilt [ ], the policy considerations of fair and equitable apportionment of loss and encouragement of settlements must be given equal importance." (Id., at p. 140, fns. omitted.)