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S.B.C.C. v. Roof Structures

S.B.C.C. v. Roof Structures
03:24:2007



S.B.C.C. v. Roof Structures



Filed 3/8/07 S.B.C.C. v. Roof Structures CA1/5



NOT TO BE PUBLISHED IN OFFICIAL REPORTS



California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.



IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA



FIRST APPELLATE DISTRICT



DIVISION FIVE



S.B.C.C., INC., etc., et al.,



Plaintiffs and Respondents,



v.



ROOF STRUCTURES, INC.,



Defendant and Appellant.



A112825



(AlamedaCounty



Super. Ct. No. RG04144978)



Defendant and appellant Roof Structures, Inc. (appellant) appeals from the entry of summary judgment in favor of plaintiffs and respondents SBCC, doing business as South Bay Construction Company, Hunter/Storm/Durham, and 680 LLC (collectively, respondents) in respondents action for breach of an express indemnity agreement to pay attorney fees incurred in the defense of third party personal injury claims. Appellant contends summary judgment was improper because respondents did not tender the attorney fees before they filed the present action.



BACKGROUND



Underlying Action



Respondent Hunter hired respondent SBCC as general contractor to construct a warehouse on property owned by Hunter. SBCC subcontracted with appellant to build the roof of the warehouse. Pursuant to the subcontract, respondents were named as additional insureds in appellants $1,000,000 primary liability policy, issued by St. Paul Fire and Marine Insurance Company (St. Paul), and in its $10,000,000 excess liability policy, issued by Great American.[1]



On January 23, 1998, a portion of the roof collapsed during construction of the warehouse. Two of appellants employees, Current and Low, were seriously injured, and a third employee, Ramos, was killed. In July 1998 Current and Low brought personal injury actions (subsequently consolidated) against respondents. In August 1998 the Ramos family brought an action for wrongful death against respondents. (Collectively, the negligence actions.)



On September 24, 1998, SBCC, through its primary insurer, Commercial Underwriters, tendered defense and indemnification of the negligence actions to appellants primary insurer, St. Paul. The letter of tender added: Should it become necessary for us [Commercial Underwriters] to defend [SBCC] under our policy of insurance we will look to [St. Paul] to reimburse us all costs and fees related to the defense and investigation of this matter. St. Paul agreed to assume respondents defense of the negligence actions. It initially retained the law firm of Rankin, Sproat, Mires, Beaty & Reynolds, to represent respondents in the negligence actions.



After SBCC was named a defendant in the negligence actions, it personally hired and paid for the services of attorney Richard McDonald to represent it therein. Hunter also personally hired and paid the law firm of Miller, Starr & Regalia to provide legal services and represent its interests with respect to the claims raised against it in the negligence actions.



The Ramos negligence action settled in January 2003 for $1,900,000. One half the settlement was funded by appellants primary insurer, St. Paul, and the other half by respondent SBCCs primary insurer, Commercial Underwriters.



On or about January 22, 2003, respondent SBCC submitted to appellants personal counsel[2]SBCCs proposed cross-complaint against appellant for comparative negligence, equitable indemnity, and implied and express contractual indemnity. The proposed cross-complaint alleged that SBCC had performed all conditions required by the subcontract, and appellant was bound to indemnify and hold SBCC harmless from any losses, costs, and attorney fees SBCC incurred in defending the negligence actions. The cross-complaint was prepared by attorney Jeffrey Vucinich, whose firm, Clapp, Moroney, Bellagamba and Vucinich, had been retained by appellants primary insurer, St. Paul, to represent SBCC in its cross-complaint for indemnity, and which expected to be substituted in totally on behalf of SBCC in the negligence actions.



On March 26, 2003, SBCC informed appellant that it had obtained leave to file the cross-complaint.



On March 27, 2003, respondent Hunter filed a cross-complaint against appellant for implied and express indemnity, equitable apportionment, breach of third party beneficiary contract, and declaratory relief. The complaint alleged that if the plaintiffs in the underlying negligence action recovered against Hunter, Hunter would be entitled to recover the amount recovered by those plaintiffs from appellant, together with costs and attorney fees, as a third party beneficiary under the terms of the SBCC/appellant subcontract. The complaint was prepared by attorney Matthew Guichard of the firm Guichard, Tarkoff & Portello. Guichard was Hunters likely trial counsel. According to appellants opening brief, and not disputed by respondents, Guichards firm was retained by St. Paul.



On April 25, 2003, the Current/Low negligence action settled for $4,000,000. Participants in the judicially supervised settlement included two attorneys representing appellant, an attorney representing appellants primary insurer, St. Paul (who also represented Hunters insurer, Fidelity), and an attorney representing appellants excess carrier, Great American. Robert McDonald, personal counsel retained by SBCC, and the Miller, Starr & Regalia firm, personal counsel retained by Hunter, did not participate. Appellants primary insurer, St. Paul, paid $45,000 of the settlement, its excess carrier, Great American, paid $1,952,500, and SBCCs primary and excess carriers, respectively Commercial Underwriters and Firemans Fund, paid the remainder. The settlement was without prejudice as to any future litigation among the insurance carriers as to their respective liability and responsibility under the policies at issue. With the courts permission to refile them, respondents agreed to dismiss their cross-complaints against appellant without prejudice. Respondents also agreed not to execute against appellant except as to its insurance assets.



Present Action



1. Original and Amended Complaints



On March 9, 2004, respondents filed their original complaint for express indemnity against appellant.[3] It alleged that they were entitled under the subcontract to recover from appellant the amount of the settlements in the underlying negligence actions, together with expenses, costs and attorneys fees incurred in defense of the negligence actions. The complaint did not identify the attorney fees incurred.



The first amended complaint, filed July 9, 2004, added the allegation that although respondents were defended in the negligence actions under the applicable primary insurance, they incurred separate and independent legal fees, costs and/or expenses related to the defense of the negligence actions and were entitled to reimbursement of these monies under the indemnity provisions of the subcontract, whether the sums were paid by respondents directly or paid on respondents behalf by their insurers.



The second amended and operative complaint, filed August 31, 2004, alleged: Respondents tendered defense of the negligence actions to appellant, which, through its primary insurer, i.e., St. Paul, agreed to assume the defense. The subcontract between appellant and SBCC provides that appellant is obligated to pay respondents any and all . . . cost and expenses of whatsoever kind or nature (including attorneys fees) in any manner caused or occasioned, or claimed to be caused or occasioned through any occurrence, omission, fault or negligence of Subcontractor . . . Appellant advised respondents it would not pay the fees and costs of the personal counsel whom respondents had hired to monitor the defense of the negligence actions due to their concern about the potential for exposure in excess of appellants primary policy limit. By refusing to pay the fees and costs of personal counsel, appellant breached the subcontract and excused respondents from any obligation to make further demand for payment of these fees and costs. Respondents prayed for the fees and costs they incurred in engaging personal counsel in the negligence actions.



2. Answer



Appellant asserted as an affirmative defense that respondents claims for recovery of fees paid to their personal counsel were barred to the extent they incurred expenses or costs before tendering to [appellant] or to the extent [respondents] seek recovery for any alleged costs and expenses incurred without the consent of [appellant].



3. Motion for Summary Judgment



Respondents moved for summary judgment on the grounds they were entitled under the terms of the subcontract to be fully indemnified by appellant for all fees they paid directly to the attorneys they engaged to advise them on their defenses and legal rights. They supported their motion with the declarations of Deborah Stakich, SBCCs chief financial officer, and Robert McMaster, Hunters chief financial officer.



Stakich declared: After SBCC was named as a defendant in the negligence actions, it hired attorney Richard McDonald to provide legal services. It has incurred $12,597.76 in fees and costs in connection with his representation.



McMaster declared: After Hunter was named a defendant in the negligence actions, it hired the law firm of Miller, Starr & Regalia to provide legal services and to represent Hunters interests with respect to the claims raised against it. Hunter incurred $59,639.87 in fees from Miller, Starr, & Regalias representation. It paid $35,449.07 of these fees and St. Paul, appellants primary insurer, paid the balance of $24,120.42.



4. Opposition to Motion



As is relevant here, appellant opposed the motion on the grounds the undisputed evidence showed respondents had no claim because they never tendered their fees to appellant.[4] It supported its opposition with the declaration of its president, Brad Holmgren; deposition testimony of Richard McDonald, SBCCs personal attorney; deposition testimony of Steven Hoedt, director of administration of Hunters personal law firm, Miller, Starr & Regalia; and a July 30, 2004 letter from appellants attorney to counsel for respondents.



Holmgren declared that since the inception of the negligence actions to the present time respondents never tendered a demand to appellant to pay the fees respondents owed their personal counsel. To his knowledge, SBCCs insurer, Commercial Underwriters, had never tendered SBCCs defense to appellant. He was unaware of the September 24, 1998 letter that Commercial Underwriters sent to St. Paul, appellants insurer, tendering SBCCs defense of the negligence actions.



McDonald testified that he did not remember whether he ever tendered a demand for his fees to appellant. During the deposition, respondents attorney[5]stated that he reviewed McDonalds correspondence file regarding the negligence actions and found no letter from McDonald to appellant. Had there been such a letter he (respondents attorney) would have produced it for the instant proceeding.



Hoedt testified that appellants primary insurer, St. Paul, paid some of Miller, Starr & Regalias bills in the early stages of the negligence actions. The last payment Miller, Starr & Regalia received from St. Paul was August 21, 2000. Hoedt did not know why St. Paul ceased making any payments thereafter.[6]



The July 30, 2004 letter from appellants attorney to counsel for respondents was sent after respondents filed their first amended complaint on July 9, 2004.[7] It states: Appellant first learned of respondents claim to be entitled to reimbursement for separate and independent defense costs in respondents first amended complaint. Appellant is entitled to know why respondents incurred these separate and independent costs, to whom they were paid, and if and when respondent ever made a demand on appellant or its insurers that these costs be paid or such defense undertaken.



5. Order



The court concluded that appellants assertion that respondents motion for summary judgment should be denied because respondents did not allege or prove they tendered the subject defense costs to appellant . . . is not well taken. Nor has [appellant] successfully created a triable issue as to the amount of fees requested.[8] It sustained respondents objection to portions of Holmgrens declaration for lack of relevance. It ordered respondents to have judgment against appellant in the amount of $48,046.83.



Judgment in this amount, plus interest at the legal rate commencing from the date of judgment, was entered accordingly.




DISCUSSION



Appellant contends that respondents were not entitled to indemnification for the fees they paid their personal counsel because they did not tender these fees to appellant before filing the instant action.



Standard of Review



Summary judgment is properly granted if all the papers submitted show there is no triable issue as to any material fact and the moving party is entitled to judgment as a matter of law. (Code Civ. Proc.,  437c, subd. (c).) The appellate court reviews the trial courts grant of summary judgment de novo. (Merrill v. Navegar, Inc. (2001) 26 Cal.4th 465, 476.) In doing so, it first identifies the issues framed by the pleadings. (Aguilera v.Henry Soss & Co. (1996) 42 Cal.App.4th 1724, 1729.) It then determines whether the moving party has established facts that negate the opponents claim and justify judgment in the movants favor. (Ibid.) A plaintiff moving for summary judgment meets its burden by establishing all of the elements necessary to its causes of action and negating every defense raised by the defendant. (Schrader v. Scott (1992) 8 Cal.App.4th 1679, 1683.) If it does so, the court determines whether the opposition demonstrates the existence of a triable, material factual issue. (Id., at pp. 1683, 1684.)



Contractual Indemnity



Generally speaking, indemnity is an obligation that rests on one party to make good a loss or damage another party has incurred. (Civ. Code,  2772; Rossmoor Sanitation, Inc. v. Pylon, Inc. (1975) 13 Cal.3d 622, 628 (Rossmoor Sanitation).) When parties have expressly contracted to assume a duty to indemnify, the extent of the duty is determined by the contract, not by reliance on the independent doctrine of equitable indemnity. (Ibid.) Like any contract, an indemnity agreement must be construed so as to give effect to the mutual intent of the parties at the time of contracting. (Morton Thiokol, Inc. v. Metal Building Alteration Co. (1987) 193 Cal.App.3d 1025, 1030, fn. 2; see also Gribaldo, Jacobs, Jones & Associates v. Agrippina Versicherunges A.G. (1970) 3 Cal.3d 434, 442 (Gribaldo).)




Subcontract



Respondents based their action for express indemnity on the indemnity provision in the subcontract between respondent SBCC and appellant. It states:



the subcontractor [i.e., appellant] agrees: . . .



(I) LIABILITY FOR INJURY & DAMAGE. To indemnify, save harmless and defend Owner [Hunter] and Contractor [SBCC] and each of them from and against any and all suits, actions, legal proceedings, claims, demands, damages, liabilities, cost[s] and expenses of whatsoever kind or nature (including attorneys fees) in any manner caused or occasioned, or claimed to be caused or occasioned through any occurrence, omission, fault or negligence of Subcontractor, or anyone acting under its direction and control or on its behalf, in connection with or incident to the performance of the work and, without limiting the generality of the foregoing, the same shall include injury or death . . . to any person or persons and damage to any property including that of Owner and Contractor. In the event Contractor shall employ an attorney to enforce the terms of this subcontract[], subcontractor shall pay reasonable attorneys fees and costs for the services of such attorney.



In this appeal, appellant does not dispute that the broad language of this indemnity clause obligates appellant to make good (Rossmoor Sanitation, supra, 13 Cal.3d at p. 628) on any attorney fees respondents claimed they incurred as a result of an occurrence, omission, fault or negligence of Subcontractor, or anyone acting under its direction and control . . . in connection with the performance of work for construction of the roof. Specifically, respondents have shown, and appellant has not disputed, that the collapse of the roof that injured and killed appellants employees constituted such an occurrence, and that respondents incurred certain attorney fees as a result of the collapse and ensuing injuries.



Relying primarily on the phrase in Civil Code section 2778,[9]subdivision (4), on request of the person indemnified, italicized below, appellant contends that respondents are not entitled to judgment on their action for contractual indemnity because they did not request indemnification of their personal counsel fees before bringing the instant action. Consequently, appellant argues, it cannot be in breach of the indemnity agreement because a demand for performance is a prerequisite to respondents breach of contract claim.



Section 2778 states, in pertinent part:



In the interpretation of a contract of indemnity, the following rules are to be applied, unless a contrary intention appears:



1. Upon an indemnity against liability, expressly, or in other equivalent terms . . . the person indemnified is entitled to recover upon becoming liable;



2. Upon an indemnity against claims, or demands, or damages, or costs . . . the person indemnified is not entitled to recover without payment thereof;



3. An indemnity against claims, or demands, or liability, expressly, or in other equivalent terms, embraces the costs of defense against such claims, demands, or liability incurred in good faith, and in the exercise of a reasonable discretion;



4. The person indemnifying is bound, on request of the person indemnified, to defend actions or proceedings brought against the latter in respect to the matters embraced by the indemnity, but the person indemnified has the right to conduct such defenses . . . (Italics added.)



Section 2778, subdivision (4) does not assist appellant. First, as the introduction to section 2778 states, the statutory rules of interpretation are inapplicable when the indemnity agreement manifests a contrary intention. The parties indemnity agreement imposes no conditions precedent to respondents obtaining indemnification. Rather, it broadly states that appellant agrees--present tense--to indemnify respondents for expenses caused or occasioned--past tense--through appellants occurrence, omission, fault or negligence in connection with the roofing work. The language of the agreement anticipates that respondents will already have incurred their expenses when they seek indemnification. Appellant did not qualify its agreement to make good on these expenses with the caveat that respondents must first ask appellant to defend any actions brought against respondents. Nor did appellant limit its agreement to indemnify only the fees of attorneys it chooses for respondent. Appellant is a roofing contractor of large commercial buildings. There are inherent dangers in the work it performs. In accordance with its undertaking to provide a safe workplace on the subject jobsite, it hired its own safety consultant. Had it wanted to reserve the right to pre-approve respondents expenses related to a personal injury claim arising from the roofing work, and specifically attorney fees, it could have done so. That such a reservation of right is absent from the indemnity agreement reflects the parties intention that respondents had no obligation to seek permission to incur expenses before actually incurring them.



Secondly, section 2778, subdivision (4) pertains specifically to the indemnitors obligation on request of the indemnitee to defend actions brought against the indemnitee. It does not speak of the indemnitors obligation on request of the indemnitee to indemnify, an obligation different from the obligation to defend. Under the plain terms of the parties indemnity agreement, appellant agreed to do more than defend respondents against legal proceedings. It agreed to indemnify, i.e., make good, attorney fees incurred by respondents. Even if section 2778, subdivision (4) may not obligate an indemnitor to defend its indemnitee until requested to do so, it does not relieve appellant, the indemnitor, of its obligation to indemnify, until requested to do so.[10]



Gribaldo, supra, 3 Cal.3d 434, on which appellant relies, is distinguishable. The indemnity agreement at issue in Gribaldo specified that the indemnitee was not to admit liability, settle any claims, or incur any costs or expenses in connection therewith without the indemnitors written consent. (Id. at p. 441.) Gribaldo concluded that plaintiff indemnitees could not recover defense costs because they had assumed them voluntarily without first requesting the indemnitor to undertake the defense of the claim against them, contrary to the specific requirement of the agreement to obtain written consent. (Id. at p. 450.) There was no comparable advance-request requirement in the indemnity agreement at issue in this case.



Moreover, Gribaldo underscores the principle that the rules of interpretation in section 2778 will not be applied where a contrary intention is apparent from the plain language of the parties contract. The Gribaldo court concluded the provisions of subdivision 4 of section 2778 were inapplicable because it is apparent that with respect to the duty to defend the parties have indicated by the terms of [their] policy an intent contrary to that expressed in subdivision 4 insofar as defendants duty to defend is concerned. (3 Cal.3d at p. 448.)



Because we conclude that respondents were not obligated by the indemnity agreement to tender a demand for payment of attorney fees for their personal counsel before incurring them, we need not address appellants contention that the trial court abused its discretion in sustaining respondents relevance objections to the declaration of its president, Holmgren, that appellant never received a tender letter from respondents for these fees and was unaware of them until the filing of the first amended complaint.



DISPOSITION



The judgment is affirmed.



_________________________



Jones, P.J.



We concur:



________________________



Gemello, J.



________________________



Needham, J.



Publication courtesy of San Diego free legal advice.



Analysis and review provided by Santee Property line attorney.







[1]SBCC carried its own $1,000,000 primary general liability policy with Commercial Underwriters Insurance Company and a $25,000,000 excess general liability policy with Firemans Fund. Hunter carried a $1,000,000 primary general liability policy and a $10,000,000 excess general liability policy, both issued by Fidelity & Guaranty Insurance Company.



[2]Appellants personal counsel is different from the attorneys representing it in the present action.



[3]The complaint also contained a cause of action for equitable subrogation which alleged respondents were entitled to be indemnified for all contributions they made to the settlement of the underlying negligence actions. That cause of action was abated and stayed and is not at issue in this appeal.



[4]Appellant also opposed the motion on the ground that the indemnity provision of the parties subcontract was not intended to embrace [the negligence of cross-complainants SBCC and Hunter], which is what the underlying plaintiffs claims concerned [, and] thus, the indemnity agreement does not apply. Appellant asserts no argument on this ground on appeal.



[5]Respondents attorney at the deposition was Damon Thurston of Rankin, Sproat, Mires, Beaty, & Reynolds, the original law firm retained by appellants primary insurer, St. Paul, to represent SBCC in the negligence actions.



[6]As noted earlier, the negligence actions were filed in July and August 1998 and settled in January and April 2003.



[7]The author of the letter is an attorney at the firm Hancock Rothert & Bunshoft, which was retained on appellants behalf by its excess carrier, Great American. The recipient of the letter is an attorney at the firm Lombardi, Loper & Conant, which represented SBCCs excess carrier, Firemans Fund.



[8]The trial court also ruled against appellant on the issue of the applicability of the contractual indemnity provision to SBCCs and Hunters negligence and by extension their claim for attorney fees in defense of the underlying negligence claim. The trial court stated, to the extent that evidence in the record demonstrates negligence on the part of Hunter or SBC [sic], such evidence does not overcome the contractual duties of RSI to indemnity SBC [sic] and Hunter.



[9]All further section references are to the Civil Code.



[10]When applied to the terms of the instant indemnity agreement, the rule of interpretation set forth in section 2778, subdivision (2), supports the trial courts ruling. Subdivison (2) provides that, upon an indemnity against, inter alia, costs, the indemnittee is not entitled to recover without payment thereof. Appellant agreed to indemnify respondents against, inter alia, cost and expenses of whatsoever kind or nature (including attorneys fees) . . . It is undisputed that respondents have paid the fees of their personal counsel.





Description Defendant (appellant) appeals from the entry of summary judgment in favor of plaintiffs and respondents SBCC, doing business as South Bay Construction Company, Hunter/Storm/Durham, and 680 LLC (collectively, respondents) in respondents action for breach of an express indemnity agreement to pay attorney fees incurred in the defense of third party personal injury claims. Appellant contends summary judgment was improper because respondents did not tender the attorney fees before they filed the present action.

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