Prince v. Pacific Gas & Electric Company
Filed 3/19/09
IN THE SUPREME COURT OF CALIFORNIA
)
Cross-complainant and Appellant, )
v. )
Pacific Gas & Electric Company, )
Cross-defendant and Respondent. ) Super. Ct. No. 1-02-CV-810390
__________________________________ )
STORY CONTINUES FROM PART I.
After American Motorcycle, this court emphasized that, although the change from a shifting of loss to an apportionment of damages was a significant development, it did not affect the essential restitutionary character of equitable indemnity. (Western Steamship, supra, 8 Cal.4th at p. 109.) As we shall demonstrate below, the analyses in our post-American Motorcycle decisions, consistent with the earlier cases validating and applying the doctrine, support the conclusion that a party may defeat a claim for implied contractual indemnity by relying on an immunity otherwise available against the injured party.
In E. L. White, supra, 21 Cal.3d 497, we recognized that, notwithstanding the three separately identified forms of indemnity, the obligation of indemnity arises only from either of two general sources. (Id. at p. 506.) First, it may arise by virtue of express contractual language establishing a duty in one party to save another harmless upon the occurrence of specified circumstances. (Ibid.) Second, it may find its source in equitable considerations brought into play either by contractual language not specifically dealing with indemnification or by the equities of the particular case. (Id. at p. 507, italics added.) Although a claim of implied contractual indemnity was not at issue in E. L. White, we relied on the distinction between express contractual indemnity and equitable indemnity to hold that the latter might still apply to apportion responsibility for a loss where an express indemnity agreement between the joint tortfeasors is found inapplicable to the injury. (Id. at pp. 507-510.)
Relying on the analysis in E. L. White, supra, 21 Cal.3d 497, our decision in Bay Development, supra, 50 Cal.3d 1012, also distinguished between express contractual indemnity, on the one hand, and the two forms of equitably based indemnity, on the other, and rejected the contention that a claim for implied contractual indemnity should be equated with a claim for express contractual indemnity. (Id. at pp. 1029-1032.) In particular, we observed that equating implied contractual indemnity with express indemnity could, anomalously, accord an indemnitee greater rights than it would have under an express indemnification contract, because in an implied indemnity situation a court could not apply the rules requiring specificity in express indemnification clauses. (Id. at p. 1033; see generally Crawford v. Weather Shield Mfg. Inc., supra, 44 Cal.4th at p. 552 [contract language must be particularly clear and explicit to afford protection beyond that available under doctrines of implied or equitable indemnity, e.g., indemnification regardless of the indemnitors fault]; E. L. White, supra, 21 Cal.3d at p. 507.)
That consideration, as well as our observation that equitable considerations have always played an integral role in defining the scope of the implied contractual indemnity doctrine (Bay Development, supra, at pp. 1029-1030, fn. 10), supported our conclusion that a claim for implied contractual indemnity is a form of equitable indemnity subject to the rules governing equitable indemnity claims (id. at p. 1033, fn. omitted). In particular, we recognized that an implied contractual indemnity claim, like a traditional equitable indemnity claim, is subject to the American Motorcycle rule that a partys liability for equitable indemnity is based on its proportional share of responsibility for the damages to the injured party. (Bay Development, supra, 50 Cal.3d at p. 1031.)
Based on the foregoing, we ultimately held in Bay Development that, notwithstanding a different rule for express indemnity claims, an implied contractual indemnity claim may not be pursued against a party who has entered into a good faith settlement pursuant to Code of Civil Procedure section 877.6, subdivision (c).[1] (Bay Development, supra, 50 Cal.3d at p. 1020; cf. C. L. Peck Contractors v. Superior Court (1984) 159 Cal.App.3d 828, 834.) Thus, in evaluating a settling defendants potential proportionate liability to the injured party for purposes of the good faith settlement determination, the trial court must take into account any contractual relationship between the settling and nonsettling defendants, and must consider how each partys performance of its contractual obligations relates to its share of liability. (Bay Development, supra, 50 Cal.3d at p. 1034, italics added.)
Guided by the rationale driving the doctrine and the logical force and consistency of the analyses in S.F. Unified, supra, 162 Cal.App.2d 434, E. L. White, supra, 21 Cal.3d 497, and Bay Development, supra, 50 Cal.3d 1012, we conclude that implied contractual indemnity has always been subject to the rule that there can be no indemnity without liability. (Childrens Hospital, supra, 45 Cal.App.4th at p. 1787.) Application of this rule here compels the conclusion that PG&Es immunity from liability to Jackson under section 846 bars Prince from recovering on an implied contractual indemnity theory.
The Court of Appeal below relied on Bear Creek Planning Com. v. Title Ins. & Trust Co. (1985) 164 Cal.App.3d 1227 to find that joint liability is not required because the implied contractual indemnity doctrine is grounded upon the indemnitors failure to properly perform contractual duties owed to the indemnitee. As the Court of Appeal acknowledged, however, Bay Development disapproved Bear Creek to the extent it erroneously assumed that a claim for implied contractual indemnity is not a form of equitable indemnity and is not subject to comparative indemnity principles. (See Bay Development, supra, 50 Cal.3d at pp. 1031-1032 & fn. 12.) Furthermore, while Bear Creek correctly observed that the implied contractual indemnity doctrine is grounded upon the indemnitors failure to properly perform contractual duties owed to the indemnitee, the decision was flawed to the extent it viewed the doctrine as akin or analogous to express contractual indemnity. Express indemnity has never required joint liability, and as indicated, equating the two doctrines would lead to anomalous results. (Bay Development, supra, 50 Cal.3d at p. 1033.)
More importantly, Bear Creek failed to appreciate that implied contractual indemnity is and always has been restitutionary in nature, meaning it is intended to address the situation where one person is unjustly enriched at the expense of another when the other discharges liability that it should be his responsibility to pay. (Western Steamship, supra, 8 Cal.4th at p. 108.) Indeed, our recognition that a claim for implied contractual indemnity is a form of equitable indemnity subject to the rules governing equitable indemnity claims (Bay Development, supra, 50 Cal.3d at p. 1033, fn. omitted) corrects any misimpression that joint liability is not a component of such claims.[2]
Prince relies on S.F. Unified, supra, 162 Cal.App.2d 434, Ryan Co. v. Pan-Atlantic Corp., supra, 350 U.S. 124, and Weyerhaeuser S.S. Co. v. Nacirema Co., supra, 355 U.S. 563, to argue that implied contractual indemnity is properly available even when the alleged indemnitor is immune from direct liability to the injured party. In those cases, the courts either held or recognized that a workers compensation law did not preclude an entity from seeking implied contractual indemnity from a contractor for damages paid to an injured party, where the contractor was also the employer of the injured party. (S.F. Unified, supra, 162 Cal.App.2d at pp. 440-442 [Workmens Compensation Act]; Ryan Co. v. Pan-Atlantic Corp., supra, 350 U.S. at pp. 128-132 [Longshoremens and Harbor Workers Compensation Act]; see Weyerhaeuser S.S. Co. v. Nacirema Co., supra, 355 U.S. 563 [following Ryan Co. v. Pan-Atlantic Corp.].)[3] We are not convinced.
As PG&E points out, the compensation laws in those cases were not comparable to section 846 and the recreational use immunity it affords. Under section 846, an easement holder owes no duty of care to keep the premises safe for entry or use by others for any recreational purpose. Because PG&E owed no such duty to Jackson, there is no question that PG&E is immune from liability to Jackson. By contrast, the compensation laws did not operate to shield the employers from liability to their injured employees or otherwise negate any duty of care owing from employers to employees. To the contrary, those laws reflected compensation bargains, pursuant to which employers were held to assume liability for all industrial injuries, regardless of fault, in exchange for a limitation on the amount of that liability.[4] In light of the obvious differences between section 846 and the compensation laws, as well as the balance of the legal analysis appearing in S.F. Unified, supra, 162 Cal.App.2d at pages 444-449, these cases are not persuasive authority for disregarding the no-indemnity-without-liability rule.
Prince asserts that another decision, Great Western, supra, 238 Cal.App.2d 502, directly supports her position that the indemnitor could be liable as a matter of contract even if it had been exonerated in a tort action by the injured person. Great Western involved an assault on a victim (Nizuk) by an employee (Gorges) of a Thrift Club that was managed and supervised by the indemnitor (Porter) but located within a furniture store owned by the indemnitee (Great Western). In a previous action, Nizuk had sued Porter and Great Western, but Porter obtained a summary judgment and a dismissal while Great Western eventually settled the action during the trial. Great Western then successfully sued Porter for implied contractual indemnity after demonstrating that, pursuant to a contract between the two of them, Porter, not Great Western, had complete charge of the entire Thrift Club operation, including the employment, management, and supervision of all its personnel, including Gorges. (Great Western, supra, 238 Cal.App.2d at p. 516.)
Princes reliance on Great Western is misplaced. First, the decision made clear that Porters successful defense of Nizuks action was not res judicata on the issue of liability in the Great Western indemnity action. (Great Western, supra, 238 Cal.App.2d at pp. 508-514.) Second, it observed that Nizuk had failed to even assert the basis of liability against Porter that Great Western relied on in the indemnity action, and arguably suggested that, had Nizuk done so, he might have prevailed. (Id. at pp. 510-511.) Thus, the issue of the indemnitors liability was litigated and resolved against the indemnitor in the Great Western indemnity action, while here it is conceded that the alleged indemnitor (PG&E) had no duty or liability to the injured party (Jackson). Great Western presents no parallel to this case.
Finally, Prince contends equitable considerations support her claim for implied contractual indemnity because (1) the extraordinary hazard of high-voltage electricity emphasizes the need to give utilities strong incentive to maintain easements in safe condition, (2) the typical liability limits of homeowners insurance of typical servient tenement owners are unlikely to compensate the injured person, and (3) the public benefits of electric power counsel that the rate paying public should pay for both public safety and injured persons compensation through power rates. Although equitable considerations are properly considered when assessing the awarding of indemnity in individual cases, at least two of the identified concerns essentially amount to policy arguments for excluding utilities from the protective scope of section 846, and are more appropriately directed to the Legislature.[5] In any event, Princes indemnity claim fails because she cannot make the required showing that PG&E bears some legal responsibility for Jacksons injuries.
In sum, we conclude, as a matter of law, that PG&Es immunity under section 846 bars Princes claim for implied contractual indemnity. Contrary to Princes assertions, there is nothing inequitable about this outcome. It is undisputed that Prince, like PG&E, may defend against Jacksons suit by claiming the benefit of the recreational use immunity provided in section 846. In fact, Prince herself relies on section 846 as an affirmative defense, and the only reason Jacksons case against her remains pending is that a disputed issue of material fact exists as to whether Prince expressly invited Jackson onto her property, so as to trigger a statutorily listed exception to immunity. (See 846, 4th par., subd. (c).) If that issue is ultimately resolved in Jacksons favor, then there is no question that Princes ability to claim the statutory immunity, and to avoid the damages for which she seeks indemnity (i.e., her costs in defending the action and her potential liability for Jacksons damages), will have been defeated by her own conduct. Under these circumstances, considerations of equity and fairness fail to support Princes unilateral efforts to partially or completely shift responsibility for her loss to PG&E, which did nothing to except either Prince or itself from the statutory immunity.
That Prince has no recourse for indemnification against PG&E does not contravene the equitable premise of the indemnity doctrine. As we have recognized, [i]nevitably, whenever one concurrent tortfeasor is insolvent or immunized, either partially or completely, from liability, the remaining tortfeasors must pay more than an amount measured by their proportional responsibility for the injury. [Citations.] [Citation.] Such are the realities, if not the vagaries, of multi-party litigation. (Western Steamship, supra, 8 Cal.4th at p. 117.)
Disposition
We reverse the judgment of the Court of Appeal, and direct that court to enter judgment in favor of PG&E.
BAXTER, J.
WE CONCUR:
GEORGE, C.J.
KENNARD, J.
MORENO, J.
McINTYRE, J.*
McGUINESS, J.**
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* Associate Justice of the Court of Appeal, Fourth Appellate District, Division One, assigned by the Chief Justice pursuant to article VI, section 6 of the California Constitution.
**Presiding Justice of the Court of Appeal, First Appellate District, Division Three, assigned by the Chief Justice pursuant to article VI, section 6 of the California Constitution.
CONCURRING OPINION BY WERDEGAR, J.
I concur in the majority opinion. I write separately to address what I perceive to be a general misperception about the nature of implied contractual indemnity and to express my belief that irrespective of its nature, the doctrine no longer exists in California.
As the majority observes, implied contractual indemnity and equitable indemnity developed as related exceptions to the rule of noncontribution existing in this state before American Motorcycle Assn. v. Superior Court (1978) 20 Cal.3d 578. (Maj. opn., ante, at pp. 13-14.) Equitable indemnity rests on the concept that one person is unjustly enriched at the expense of another when the other discharges liability that it should be his responsibility to pay. (Western Steamship Lines, Inc. v. San Pedro Peninsula Hospital (1994)8 Cal.4th 100, 108.) For that reason, as the majority rightly states, as to equitable indemnity there can be no indemnity without liability. (Maj. opn., ante, at p. 7.) Implied contractual indemnity, on the other hand, historically arose from the concept that a party who breaches a contract is responsible for the resulting damages to its contractual partner. For example, in the seminal case of S.F. Unified Sch. Dist. v. Cal. Bldg. etc. Co. (1958) 162 Cal.App.2d 434, which the majority discusses (maj. opn., ante, at pp. 10-12), the appellate court reasoned the defendant maintenance company could be required to indemnify the school district even if the parties contract contained no express provision for indemnity, holding, such a warranty or agreement to indemnify would necessarily be implied (S.F. Unified,at p. 449). In my view, Bear Creek Planning Com. v. Title Ins. & Trust Co. (1985) 164 Cal.App.3d 1227 correctly summarized the law defining implied contractual indemnity when it explained: [W]here the right of implied indemnity arises from a contractual relationship between the indemnitor and the indemnitee, it is predicated upon the indemnitors breach of such contract, the rationale of the cases being that a contract under which the indemnitor undertook to do work or perform services necessarily implied an obligation to do the work involved in a proper manner and to discharge foreseeable damages resulting from improper performance absent any participation by the indemnitee in the wrongful act precluding recovery. [Citation.] (Id.at p. 1237.) Thus, implied contractual indemnity is based upon the premise that a contractual obligation to perform carries with it an implied agreement to indemnify and to discharge foreseeable . . . damages resulting to a contractual partner from the negligent performance of that obligation. (Ibid.)
Because implied contractual indemnity as originally conceived was based on a duty one party to the contract owed to the other, contrary to the majoritys assertion (maj. opn., ante, at p. 17) it has not always been a restitutionary doctrine that depended on the payment by the indemnitee of a legal obligation the indemnitor owed to an injured plaintiff. Rather, the indemnitor could be required to pay its contractual partner even if the indemnitor was immune from direct liability to the injured party. It is for that reason the defendant maintenance company in S.F. Unified Sch. Dist. v. Cal. Bldg. etc. Co., supra, 162 Cal.App.2d 434, was required to pay the school district even though by reason of the workers compensation laws in existence at the time, the maintenance company could not be required to pay the injured worker. (Id. at pp. 440-442.) And it is for that reason, contrary to the majority (maj. opn., ante, at p. 21), that I believe Pacific Gas & Electric Companys (PG&E) immunity from direct liability to Jackson would not of itself bar Prince from pursuing an action against PG&E for implied contractual indemnity as that doctrine was originally conceived.
Nonetheless, the doctrine of implied contractual indemnity has always presented significant conceptual and practical problems, some of which were alluded to in Bay Development, Ltd. v. Superior Court (1990) 50 Cal.3d 1012, 1029-1033, where a majority of this court recognized that ordinary rules of express contractual indemnity could not reasonably be applied to a claim of implied contractual indemnity and disposed of the problem by characterizing implied contractual indemnity as simply a form of equitable indemnity. As I believe equitable indemnity provides a far better tool than traditional implied contractual indemnity for distributing liability between those directly or legally responsible for an injury or loss, I without reservation join in the majoritys holding that a remedy under the doctrine of implied contractual indemnity may not be had when, as here, none would be available under the doctrine of equitable indemnity because the contracting party is immune from liability. But in my opinion, which admittedly is inconsistent with that expressed by the majority in Bay Development,relief in that event should be denied not because the doctrine of implied contractual indemnity is a form of equitable indemnity, but because the development of equitable indemnity has obviated any need for the unwieldy doctrine of implied contractual indemnity, and it should be abandoned.
WERDEGAR, J.
See next page for addresses and telephone numbers for counsel who argued in Supreme Court.
Name of Opinion Prince v. Pacific Gas & Electric Company
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Unpublished Opinion
Original Appeal
Original Proceeding
Review Granted XXX 145 Cal.App.4th 289
Rehearing Granted
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Opinion No. S149344
Date Filed: March 19, 2009
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Court: Superior
County: Santa Clara
Judge: John F. Herlihy
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Attorneys for Appellant:
Luce, Forward, Hamilton & Scripps, Charles A. Bird, Peter H. Klee; Rankin, Landsness, Lahde, Serverian & Stock, Jon A. Heaberlin and Bernard P. Lahde for Cross-complainant and Appellant.
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Attorneys for Respondent:
Sedgwick, Detert, Moran & Arnold, Frederick D. Baker and Steven P. Burke for Cross-defendant and Respondent.
Fred J. Hiestand for The Civil Justice Association of California as Amicus Curiae on behalf of Cross-defendant and Respondent.
Counsel who argued in Supreme Court (not intended for publication with opinion):
Charles A. Bird
Luce, Forward, Hamilton & Scripps
600 West Broadway, Suite 2600
San Diego, CA 92101-3372
(619) 236-1414
Frederick D. Baker
Sedgwick, Detert, Moran & Arnold
One Market Plaza, Steuart Tower, 8th Floor
San Francisco, CA 94105
(415) 781-7900
Publication courtesy of California pro bono lawyer directory.
Analysis and review provided by Chula Vista Property line Lawyers.
San Diego Case Information provided by www.fearnotlaw.com
[1] Code of Civil Procedure section 877.6, subdivision (c) provides: A determination by the court that the settlement was made in good faith shall bar any other joint tortfeasor or co-obligor from any further claims against the settling tortfeasor or co-obligor for equitable comparative contribution, or partial or comparative indemnity, based on comparative negligence or comparative fault.
[2] Allowing a claim for implied contractual indemnity to proceed in the absence of any independent liability on the part of the indemnitor to the injured party would essentially subject the indemnitor to liability for the injured partys damages in connection with an alleged breach of contract. Our reiteration that indemnity is restitutionary in nature and our recognition of a shared liability requirement will avoid transforming a breach of contract claim into a vehicle for the recovery of tort damages.
[3] Subsequent to the decisions in S.F. Unified, supra, 162 Cal.App.2d 434, Ryan Co. v. Pan-Atlantic Corp., supra, 350 U.S. 124, and Weyerhaeuser S.S. Co. v. Nacirema Co., supra, 355 U.S. 563, state and federal lawmakers enacted legislation barring recovery of implied or equitable indemnity against employers for injuries to their employees. (See Lab. Code, 3864, added by Stats. 1959, ch. 955, 1, p. 2986; Cooper Stevedoring Co. v. Kopke, Inc. (1974) 417 U.S. 106, 113, fn. 6 [noting congressional intent to overrule Ryan insofar as it made an employer circuitously liable for injuries to its employee, by allowing the employee to maintain an action for unseaworthiness against the vessel and allowing the vessel to maintain an action for indemnity against the employer].)
[4] As already indicated, the Court of Appeal in S.F. Unified viewed the employer as a joint tortfeasor. (S.F. Unified, supra, 162 Cal.App.2d at p. 444.)
[5] To the extent Prince complains that a requirement of joint liability would expose property owners to extensive liability that rightfully should be borne by PG&E, we note that PG&Es immunity under section 846 would not be triggered unless a person were to engage in a recreational activity with respect to PG&Es easement. We perceive no unfairness in the Legislatures policy decision to provide for immunity when, for instance, kiteflyers poke metal poles into power lines, or people race up and down power poles.
