Transguard Ins. Co. of America v. County of Los Angeles

Filed 4/3/07 Transguard Ins. Co. of America v. County of Los Angeles CA2/7

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.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

SECOND APPELLATE DISTRICT

DIVISION SEVEN

APPEAL from an order of the Superior Court of Los Angeles County. Elizabeth A. Grimes, Judge. Reversed and remanded.

Stone, Rosenblatt & Cha and Gregg S. Garfinkel for Plaintiffs and Appellants.

Raymond G. Fortner, Jr., County Counsel, Ralph L. Rosato, Assistant County Counsel, and Richard K. Kudo, Senior Associate County Counsel, for Defendant and Respondent.

___________________________________________

Transguard Insurance Company of America and Uribe Trucking, Inc., dba Alex Moving & Storage, Inc. (collectively, plaintiffs) appeal from an order sustaining the County of Los Angeless demurrer without leave to amend and dismissing plaintiffs first amended complaint. The trial court concluded plaintiffs could not state a cause of action against the County because they failed to comply with the claim presentation requirement of the California Tort Claims Act.[1] We find plaintiffs have shown there is a reasonable possibility they can amend their complaint to allege they notified the County of Los Angeles in writing about the existence of a monetary claim and the County failed to give plaintiffs notice of the insufficiency of the claim as presented. Such factual allegations, if true, could demonstrate the County waived its defense under the Tort Claims Act as to the sufficiency of the claim. Accordingly, we reverse the order of dismissal and remand the matter to give plaintiffs an opportunity to amend their complaint.

FACTS AND PROCEEDINGS BELOW

Plaintiffs filed a complaint against the County alleging causes of action for implied indemnity and declaratory relief. The County demurred to the complaint on the ground plaintiffs failed to comply with the claim presentation requirement of the Tort Claims Act, among other grounds. Instead of opposing the demurrer to the original complaint, plaintiffs filed a first amended complaint, which is the operative complaint on appeal. In substance, the first amended complaint alleges as follows:

At times relevant to plaintiffs causes of action, defendant County of Los Angeles, Department of the Sheriff (County),[2]acted as the agent of Sunset Post, Inc. and Sunset Digital Studios, Inc. (collectively, Sunset). Sunset claimed to be an unsecured creditor of a company known as Visual Matrix. Beginning on or about March 27, 2002, at the order of the County, plaintiff Uribe Trucking, Inc., dba Alex Moving and Storage, Inc. (Alex) provided transportation services, including storage of personal property. This property allegedly belonged to Visual Matrix. As part of its order to Alex, the County represented it had the rights of possession and control of the personal property and legal authority to order [Alexs] services. The County also agreed it would pay for all services rendered by Alex and would defend and indemnify Alex against all claims disputing the rights of possession and control over the personal property.

On or about March 27, 2002, Visual Matrix filed a Chapter 7 bankruptcy action triggering an automatic stay. Visual Matrix gave notice of the bankruptcy to Sunset and the County. Alex, on the other hand, did not have knowledge constituting actual notice of the bankruptcy and the stay. The County continued to order Alex to provide transportation services involving Visual Matrixs personal property.

In May 2002, Visual Matrix filed a complaint against Sunset, the County and Alex seeking return of its personal property and damages allegedly sustained as a result of the transportation of its property from its offices to a storage facility maintained by Alex. Two weeks after Visual Matrix filed its complaint, the bankruptcy court ordered the County and Alex to return the property to Visual Matrix. Alex delivered the property to Visual Matrixs offices at a cost to Alex of about $6,000.

On or about August 9, 2002, Alex answered Visual Matrixs complaint in the bankruptcy action and filed a cross-claim for defense and indemnification against the County and Sunset asserting virtually the identical allegations set forth in the first amended complaint in this action. Plaintiffs attached a copy of this cross-claim to the first amended complaint and allege the cross-claim Alex filed in bankruptcy court constitute[s] a timely and proper written claim to the County under the California Tort Claims Act and satisfies the claim presentation requirement as to the causes of action alleged in this action. The County answered Alexs cross-claim and did not assert any claims filing defense in the bankruptcy action.

Visual Matrixs complaint and Alexs cross-claim were pending in bankruptcy court for about three years. On the eve of trial, Alex and the bankruptcy trustee settled the matter, with Alex agreeing to pay $110,000 to resolve all of Visual Matrixs claims. Plaintiff Transguard Insurance Company of America (Transguard) funded the settlement on behalf of Alex and immediately prepared and served successive [sic] four (4) written demands to [the County] for reimbursement of the settlement funds expended which were presented in compliance with Government Code section 910, et seq. The County did not respond to any of Transguards demands.

Thereafter, the bankruptcy court questioned its jurisdiction over Alexs cross-claim against the County. The bankruptcy court did not issue an order resolving the cross-claim before June 27, 2005, the date the court clos[ed] the adversary case Visual Matrix brought against the County. Therefore, on September 29, 2005, plaintiffs filed this action against the County alleging the identical facts and theories Alex alleged in bankruptcy court.

In the first amended complaint, plaintiffs allege they have fully complied with the claim presentation requirement of the Tort Claims Act. In the alternative, they allege the County has waived or is estopped from asserting their failure to comply with the claim presentation requirement because the County did not raise this defense during the three-year litigation in bankruptcy court.

In their first cause of action for implied indemnity, plaintiffs assert the County agreed to indemnify Alex against any claim disputing Alexs authority to transport and store Visual Matrixs personal property, but has failed to do so. Plaintiffs seek, among other things, reimbursement of the $110,000 settlement plus the $6,000 Alex incurred in transportation costs after the bankruptcy court ordered Alex to return Visual Matrixs property. In their second cause of action for declaratory relief, plaintiffs seek a judicial determination of their rights and the Countys duties relating to their claim for equitable indemnity.

The County demurred to the first amended complaint on several grounds. First, the County asserted plaintiffs failed to comply with the claim presentation requirement of the Tort Claims Act in that the cross-claim Alex filed against the County in bankruptcy court was not a proper substitute for a valid statutory claim. Second, the County argued plaintiffs cause of action for implied indemnity fails because plaintiffs allege the existence of an express indemnity agreement. Third, the County contended plaintiffs cause of action for declaratory relief is improper because a declaration regarding future conduct is not necessary given plaintiffs have a mature claim for money.

In opposition to the demurrer, plaintiffs argued the cross-claim Alex filed in the bankruptcy case constitutes substantial compliance with the claim presentation requirement of the Tort Claims Act. Plaintiffs stated this indemnity action is a direct carry-over from the indemnity cross-claim asserted in the Visual Matrix bankruptcy case and the filing of a separate claim for damages under the claims statute would be superfluous. Plaintiffs also argued the County is estopped from asserting and has waived any defense under the Tort Claims Act because the County failed to raise the issue of Alexs noncompliance with the claim presentation requirement in the bankruptcy action. Plaintiffs requested the trial court grant them leave to amend their complaint in the event the trial court were inclined to sustain the Countys demurrer for noncompliance with the claim presentation requirement. Plaintiffs stated they could allege the existence of [a]dditional facts and documents, including correspondence between counsel for the parties sent between January and March 2005, which might provide a further basis for compliance with the statutory claims requirements. Plaintiffs also urged the trial court to reject the Countys arguments about the other purported defects in plaintiffs causes of action for implied indemnity and declaratory relief.

After hearing oral argument, the trial court concluded plaintiffs complaint must be dismissed for failure to comply with the claim presentation requirement of the Tort Claims Act because plaintiffs did not file a proper claim before they instituted this action. The trial court sustained the Countys demurrer without leave to amend and dismissed plaintiffs first amended complaint.

DISCUSSION

I. STANDARD OF REVIEW.

In reviewing an order sustaining a demurrer, we accept as true the properly pleaded factual allegations of the complaint and consider matters which may be judicially noticed.[3] The allegations of the complaint must be liberally construed with a view to attaining substantial justice among the parties.[4] We review the complaint de novo to determine whether the trial court erred in sustaining the demurrer.[5]

When a trial court sustains a demurrer without leave to amend, we decide whether there is a reasonable possibility that the defect can be cured by amendment: if it can be, the trial court has abused its discretion and we reverse; if not, there has been no abuse of discretion and we affirm. [Citations.] The burden of proving such reasonable possibility is squarely on the plaintiff.[6] So long as the plaintiff shows the reviewing court it can amend its complaint to state a cause of action, it is immaterial to the appellate courts review whether the plaintiff made such a showing in the trial court.[7] The plaintiff may advance on appeal a new legal theory why the allegations of the [complaint] state a cause of action.[8]

II. PLAINTIFFS HAVE SHOWN A REASONABLE POSSIBILITY THEY CAN AMEND THEIR COMPLAINT TO ALLEGE THE COUNTY WAIVED ITS DEFENSE UNDER THE TORT CLAIMS ACT BY FAILING TO NOTIFY PLAINTIFFS OF THE INSUFFICIENCY OF THEIR CLAIM AS PRESENTED AFTER PLAINTIFFS GAVE THE COUNTY WRITTEN NOTICE OF THEIR MONETARY CLAIM.

With certain exceptions not relevant here, the Government Code requires a claimant to file a claim against a local public entity before the claimant may file an action for money or damages against the entity.[9] A claim relating to a cause of action for equitable indemnity must be presented to the public entity within one year after accrual of the cause of action.[10] The filing of a claim is a condition precedent to the maintenance of any cause of action against the public entity and is therefore an element that a plaintiff is required to prove in order to prevail.[11] [F]ailure to allege facts demonstrating or excusing compliance with the claim presentation requirement subjects a claim against a public entity to a demurrer for failure to state a cause of action.[12]

A claim must be presented to the public entity by the claimant or by someone acting on the claimants behalf and must include the following information: (a) The name and post office address of the claimant. [] (b) The post office address to which the person presenting the claim desires notices to be sent. [] (c) The date, place and other circumstances of the occurrence or transaction which gave rise to the claim asserted. [] (d) A general description of the indebtedness, obligation, injury, damage or loss incurred so far as it may be known at the time of presentation of the claim. [] (e) The name or names of the public employee or employees causing the injury, damage, or loss, if known. [] (f) The amount claimed if it totals less than ten thousand dollars ($10,000) as of the date of presentation of the claim, including the estimated amount of any prospective injury, damage, or loss, insofar as it may be known at the time of the presentation of the claim, together with the basis of computation of the amount claimed. If the amount claimed exceeds ten thousand dollars ($10,000), no dollar amount shall be included in the claim. However, it shall indicate whether the claim would be a limited civil case.[13]

The claim presentation requirement . . . serves several purposes: (1) it gives the public entity prompt notice of a claim so it can investigate the strengths and weaknesses of the claim while the evidence is still fresh and the witnesses are available; (2) it affords opportunity for amicable adjustment, thereby avoiding expenditure of public funds in needless litigation; and (3) it informs the public entity of potential liability so it can better prepare for the upcoming fiscal year. [Citation.][14] As the purpose of the claim is to give the government entity notice sufficient for it to investigate and evaluate the claim, not to eliminate meritorious actions [citation], the claims statute should not be applied to snare the unwary where its purpose has been satisfied [citation].[15] The claims statute should be given a liberal construction to permit full adjudication on the merits so long as its purpose has been satisfied.[16] We should note, however, [t]he fact that a public entity has full knowledge of the claim and related circumstances is not sufficient to excuse noncompliance.[17]

[C]ourts employ the test of substantial compliance rather than strict compliance in deciding whether a plaintiff has met the requirements of the Tort Claims Act.[18] Where there has been an attempt to comply but the compliance is defective, the court must ask whether sufficient information is disclosed on the face of the filed claim to reasonably enable the public entity to make an adequate investigation of the merits of the claim to settle it without expensive litigation.[19]

As set forth above, in the first amended complaint, plaintiffs allege Transguard served four written demands on the County seeking reimbursement of the settlement amount it paid on behalf of Alex. Presumably none of the four demands was identified as a claim within the meaning of the Tort Claims Act. Moreover, based on the allegations and plaintiffs briefing, it is doubtful plaintiffs intended their demand letters to be an attempt at compliance with the Tort Claims Act (although this might not be discernible at the pleading stage). These factors likely would make a theory of substantial compliance unavailing.[20] Regardless, we find there is a reasonable possibility plaintiffs can amend their complaint to allege one (or more) of these letters constitutes a claim as presented as defined below. By alleging such facts, plaintiffs could demonstrate the County waived its right to assert noncompliance with the claim presentation requirement as a defense to this action. Plaintiffs and the County have briefed this new theory on appeal.

A claim as presented is a claim that is defective in that it fails to comply substantially with Government Code sections 910 and 910.2,^[[21]^] but nonetheless puts the public entity on notice that the claimant is attempting to file a valid claim and that litigation will result if it is not paid or otherwise resolved. A claim as presented triggers a duty on the part of the governmental entity to notify the claimant of the defects or omissions in the claim. A failure to notify the claimant of the deficiencies in a claim as presented waives any defense as to its sufficiency. [Citations.] A document will be deemed a claim as presented if it discloses the existence of a claim which, if not satisfactorily resolved, will result in a lawsuit against the entity. [Citation.] A public entitys receipt of written notice that a claim for monetary damages exists and that litigation may ensue places upon the public entity the responsibility, and gives it the opportunity, to notify the potential plaintiff pursuant to sections 910.8^[[22]^] and 911^[[23]^] of the defects that render the document insufficient under sections 910 and 910.2 and thus might hamper investigation and possible settlement of the claim. Such a written notice claiming monetary damages thereby satisfies the purposes of the claims act to facilitate investigation of disputes and their settlement without trial if appropriate. [Citation.] [Citation.][24]

In Green v. State Center Community College District,[25]the Court of Appeal succinctly outlined the legal standard to apply in determining whether correspondence is a claim that triggers the notice-waiver provisions of the [Tort Claims] Act: [T]o be sufficient to constitute a trigger-claim under section 910.8, the content of the correspondence to the recipient entity must at least be of such nature as to make it readily discernible by the entity that the intended purpose thereof is to convey the assertion of a compensable claim against the entity which, if not otherwise satisfied, will result in litigation.[26] In Green, the appellate court found the letter in question did not constitute a claim as presented, explaining: Other than the ambiguous fact that this letter was from an attorney, we find nothing in the letter from which we can even infer that a claim was being made on respondent [public entity] or that litigation would follow if the matter was not resolved.[27]

The notice-waiver provisions of the Tort Claims Act, including sections 910.8 and 911, come into play only when the claim as presented does not substantially comply with sections 910 and 910.2.[28] In determining whether a written notice constitutes a claim as presented, courts have concluded it is irrelevant whether a plaintiff actually intended to present a claim within the meaning of the Tort Claims Act.[29] What is relevant is that the letter or notice put the public entity on notice of the assertion of a compensable claim and that the claimant intends to pursue the matter by means of litigation if necessary.[30]

Plaintiffs first amended complaint alleges, after Transguard paid $110,000 to settle Visual Matrixs claims against Alex in the bankruptcy action, Transguard sent the County four written demands seeking reimbursement. Plaintiffs assert they can amend their complaint to allege facts demonstrating at least one of these letters constitutes a claim as presented as defined above. Plaintiffs state one (or all) of the letters advis[ed] [the County] of the existence of the ongoing claim and address[ed] the fact that further litigation would ensue if no response was received.[31] Such a letter could have put the County on notice that Transguard and Alex would file a new action to the extent the bankruptcy court refused to resolve Alexs cross-claim against the County.

Obviously, the County was well aware of the facts surrounding plaintiffs claim, and had had ample opportunity to investigate the claim, given its participation in the litigation in bankruptcy court. But a written demand to the County -- one which qualifies as a claim as presented -- would have given the County an opportunity to decide whether to settle the claim (after Transguard paid $110,000 on behalf of Alex) or face new litigation filed by Transguard and Alex. And such a claim as presented would have triggered the Countys duty to notify Transguard it needed to file a proper claim within the meaning of section 910.

Based on the foregoing, we find plaintiffs have shown there is a reasonable possibility they can amend their complaint to allege they submitted to the County a claim as presented, and the County failed to notify them they had presented an insufficient claim.[32] Such facts would demonstrate the County waived its defense of noncompliance with the claim presentation requirement of the Tort Claims Act. Plaintiffs are entitled to amend their complaint to state these facts.[33]

DISPOSITION

The order sustaining the demurrer without leave to amend and dismissing the first amended complaint is reversed and the cause is remanded for further proceedings consistent with this opinion. Appellants are entitled to recover their costs on appeal.

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

JOHNSON, J.

We concur:

PERLUSS, P. J.

WOODS, J.

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Analysis and review provided by Oceanside Property line Lawyers.

[1] Government Code section 810 et seq. All further statutory references are to the Government Code.

[2] Plaintiffs named the County of Los Angeles, Department of the Sheriff as the defendant in this action. The party who appeared and is defending this action is the County of Los Angeles.

[3]Thompson v. County of Alameda (1980) 27 Cal.3d 741, 746; Blank v. Kirwan (1985) 39 Cal.3d 311, 318.

[4] Code of Civil Procedure section 452; King v. Central Bank (1977) 18 Cal.3d 840, 843.

[5]Cantu v. Resolution Trust Corp. (1992) 4 Cal.App.4th 857, 879.

[6]Blank v. Kirwan, supra, 39 Cal.3d at page 318.

[7]Careau & Co. v. Security Pacific Business Credit, Inc. (1990) 222 Cal.App.3d 1371, 1386; Dudley v. Department of Transportation (2001) 90 Cal.App.4th 255, 260; Code of Civil Procedure section 472c.

[8]Dudley v. Department of Transportation, supra, 90 Cal.App.4th at page 259.

[9] Sections 905 and 945.4.

[10] Section 911.2, subdivision (a).

[11]Del Real v. City of Riverside (2002) 95 Cal.App.4th 761, 767.

[12]State v. Superior Court (Bodde) (2004) 32 Cal.4th 1234, 1239.

[13] Section 910.

[14]Renteria v. Juvenile Justice, Department of Corrections and Rehabilitation (2006) 135 Cal.App.4th 903, 909.

[15]Stockett v. Association of California Water Agencies Joint Powers Insurance Authority (2004) 34 Cal.4th 441, 446.

[16]Stockett v. Association of California Water Agencies Joint Powers Insurance Authority, supra, 34 Cal.4th at page 449.

[17]Dilts v. CantuaElementary School (1987) 189 Cal.App.3d 27, 32.

[18]Dilts v. Cantua Elementary School, supra, 189 Cal.App.3d at page 33; Johnson v. San Diego Unified School District (1990) 217 Cal.App.3d 692, 697.

[19]Dilts v. Cantua Elementary School, supra, 189 Cal.App.3d at page 33; Johnson v. San Diego Unified School District, supra, 217 Cal.App.3d at page 697.

[20] See Jamison v. State of California (1973) 31 Cal.App.3d 513, 516 (in determining whether there has been [substantial] compliance, the courts must determine if the purpose of the statute has been satisfied, if there has been a bona fide attempt to comply, and whether any prejudice to the governmental entity appears), italics added.
We reject plaintiffs contention the cross-claim Alex filed in the bankruptcy action, by itself and standing alone, constitutes substantial compliance with the claim presentation requirement of the Tort Claims Act. The purpose of the claim presentation requirement was not satisfied as to this action by the filing of a cross-claim in a prior action.

[21] Section 910.2 provides, in pertinent part, The claim shall be signed by the claimant or by some person on his behalf.

[22] Section 910.8 provides: If, in the opinion of the board or the person designated by it, a claim as presented fails to comply substantially with the requirements of Sections 910 and 910.2, or with the requirements of a form provided under Section 910.4 if a claim is presented pursuant thereto, the board or the person may, at any time within 20 days after the claim is presented, give written notice of its insufficiency, stating with particularity the defects or omissions therein. The notice shall be given in the manner prescribed by Section 915.4. The board may not take action on the claim for a period of 15 days after the notice is given.

[23] Section 911 provides: Any defense as to the sufficiency of the claim based upon a defect or omission in the claim as presented is waived by failure to give notice of insufficiency with respect to the defect or omission as provided in Section 910.8, except that no notice need be given and no waiver shall result when the claim as presented fails to state either an address to which the person presenting the claim desires notices to be sent or an address of the claimant.

[24]Alliance Financial v. City and County of San Francisco (1998) 64 Cal.App.4th 635, 643-644, quoting Phillips v. Desert Hospital District (1989) 49 Cal.3d 699, 709.

[25]Green v. State Center Community College District (1995) 34 Cal.App.4th 1348.

[26]Green v. State Center Community College District, supra, 34 Cal.App.4th at page 1358.

[27]Green v. State Center Community College District, supra, 34 Cal.App.4th at page 1356.

[28]Phillips v. Desert Hospital District, supra, 49 Cal.3d at page 709.

[29]Phillips v. Desert Hospital District, supra, 49 Cal.3d at pages 709-710.

[30]Alliance Financial v. City and County of San Francisco, supra, 64 Cal.App.4th at page 650.

[31] In Alliance Financial v. City and County of San Francisco, supra, 64 Cal.App.4th at page 650, the Court of Appeal discussed whether one letter in a series of letters to a public entity can be deemed a claim as presented. Responding to the argument it would be unfair to expect a public entity to determine which letter in a series of letters the entity should treat as a claim, the appellate court in Alliance Financial stated: It is true that on occasion it may be difficult for the public entity to determine the point at which correspondence ceases being an expression of unhappiness or the mere conveyance of information, and becomes the assertion of a compensable claim. It does not, however, follow that a clear assertion of a compensable claim and the intent to pursue it through litigation should not be deemed a claim as presented. If any letter sent by the claimant or its attorney gives the public entity notice of a compensable claim and an intent to litigate, the entity has received the necessary information. (Ibid.) The Countys reliance on Dilts v. Cantua Elementary School District, supra, 189 Cal.App.3d 27 in support of a contrary position is misplaced. In that case, the appellate court concluded a series of letters to the public entity did not constitute substantial compliance with the Tort Claims Act. (Id. at pages 33-36.) Dilts did not address the theory of a claim as presented.

[32] Moreover, we have not ruled out the possibility plaintiffs new factual allegations might establish substantial compliance with the Tort Claims Act.

[33] The County has not asked this court to affirm the order sustaining the demurrer and dismissing the first amended complaint on the other grounds the County raised in its demurrer to the first amended complaint (the purported defects in the causes of action for implied indemnity and declaratory relief). Neither of the parties briefed or raised these other issues on appeal.
At oral argument, however, the County asked this court to affirm the order on a ground not raised in the Countys demurrer to the first amended complaint or in the Countys appellate brief. Citing cases and statutes not mentioned in its briefing to this court, and without even providing those citations to either plaintiffs counsel or this court, the Countys lawyer spent the bulk of his oral argument urging this court to decide plaintiffs time to file a tort claim against the County expired before the bankruptcy action even concluded.
For purposes of the claim presentation requirement, a cause of action for equitable indemnity accrues on the date the defendant is served with the complaint giving rise to the defendants claim for equitable indemnity or partial equitable indemnity against the public entity. (Gov. Code, 901.) A tort claim alleging equitable indemnity must be presented to the public entity within one year after accrual of the cause of action for equitable indemnity. (Gov. Code, 911.2, subd. (a).) The County argues plaintiffs were required to present their claim to the County within one year of the date Visual Matrix served its complaint in the bankruptcy action. Plaintiffs have alleged Visual Matrix filed the complaint on May 7, 2002 and the bankruptcy action concluded in June 2005. Plaintiffs have not alleged they filed a tort claim or a claim as presented during the time the bankruptcy action was pending.
We decline to vacate the submission of this matter and allow the parties to brief this issue belatedly raised by the County at oral argument. Issues raised on appeal for the first time at oral argument need not be considered by an appellate court. (Sunset Drive Corporation v. City of Redlands (1999) 73 Cal.App.4th 215, 226 [Absent a sufficient showing of justification for the failure to raise an issue in a timely fashion, we need not consider any issue which, although raised at oral argument, was not adequately raised in the briefs].) Our refusal to reach this issue does not preclude the County from raising it in response to a second amended complaint filed by plaintiffs. Similarly, among other responses to this argument, plaintiffs will be permitted to allege the County is estopped from asserting, or has waived, the claim presentation defense in this action because the County did not assert it in the prior bankruptcy action, as plaintiffs have argued on appeal.