CajonValley Unified School Dist. v. Houghton

Filed 4/10/07 Cajon Valley Unified School Dist. v. Houghton CA4/1

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COURT OF APPEAL, FOURTH APPELLATE DISTRICT

DIVISION ONE

STATE OF CALIFORNIA

APPEAL from an order of the Superior Court of San Diego County, Joan Lewis, Judge. Reversed and remanded with directions.

In this construction defect case, defendant Edward Houghton appeals the denial of his motion for relief from judgment (Code Civ. Proc.,  473, subd. (b); statutory references are to the Code of Civil Procedure). That motion followed the granting of a motion for summary judgment ( 437c) brought by plaintiff Cajon Valley Union School District (Cajon Valley). Houghton and Cajon Valley have now filed a "joint motion and stipulation for vacatur of judgment and remand of action to the superior court." ( 128, subd. (a)(8).) The parties use the word "vacate" (and its variants) rather than the word "reverse." "[I]t makes no difference under [section 128, subdivision (a)(8)] whether the court is asked to reverse or vacate the judgment . . . ." We prefer the former term. (Hardisty v. Hinton & Alfert (2004) 124 Cal.App.4th 999, 1002, fn. 1.) We accept the stipulation and reverse the order.

FACTUAL AND PROCEDURAL BACKGROUND

In 2003, after a fire in a school building, Cajon Valley discovered, during the course of repairs, that certain structural elements called for in the original building specifications had not been included in certain buildings. The allegedly missing elements caused no actual damage to the buildings. Cajon Valley retrofitted all of the buildings at an alleged cost of nearly $700,000. Seeking to recoup that amount, in August 2004 Cajon Valley filed a lawsuit against Houghton and others. Houghton, a Department of State Architect certified school inspector, had inspected the school during its construction in 1993 and 1994.

The first amended complaint alleged that the school's roof framing was not constructed according to specifications. It alleged that Houghton failed to observe and report that the framing did not conform to the plans, specifications and building code, in that there was no blocking to attach the roofs to the buildings. The first amended complaint alleged causes against Houghton for negligence, breach of contract and breach of implied warranty.

Houghton contended that the original plans and specifications were modified during construction, he was not negligent, he did not breach any agreement with Cajon Valley, any claims for his alleged failure to inspect were barred by the four-year statute of limitations and the lawsuit was barred by Aas v. Superior Court (2000) 24 Cal.4th 627, superseded by statute on another ground as stated in Rosen v. State Farm General Ins. Co. (2003) 30 Cal.4th 1070, 1079-1080. In Aas v. Superior Court, supra, 24 Cal.4th 627, the California Supreme Court held that condominium homeowners and a homeowners' association could not recover damages in negligence from the developer, contractor, and subcontractors for construction defects that had not caused property damage. (Id. at p. 632.)

In August 2005, Houghton's original attorney withdrew from the case. Some time later, Cajon Valley served Houghton, in propria persona, with a motion for summary judgment. Houghton, who is hearing impaired, appeared in propria persona at the March 2006 summary judgment hearing. The court did not continue the hearing to give him the opportunity to obtain counsel and file opposition, and granted the motion because he had not filed a written opposition.

On April 4, 2006, the court entered a $693,904 judgment in favor of Cajon Valley and against Houghton. Houghton brought a motion for relief from judgment, which the court heard and denied on June 9. On July 13, the court filed a formal order denying the motion. On September 8, Houghton filed a notice of appeal from the order denying his motion.

Houghton is 70 years old, retired, and no longer works as a Department of State Architect school inspector. He no longer holds state certification as an inspector for public school projects and has no intention of doing so in the future. He has limited financial means. The judgment has ruined his credit and prevents him from borrowing money on his home to pay his living expenses.

The 10-year statute of limitations for construction defects ran in 2004, the business entities of the general contractor and subcontractor were dissolved many years ago, and no other parties to the underlying litigation remain. The general contractor's surety, Golden Eagle Insurance Co., is in receivership, with the California Insurance Commissioner (the Commissioner) as receiver. Cajon Valley filed a claim against Golden Eagle Insurance Co., whose rejection of the claim was upheld by the superior court. The parties state that Cajon Valley's appeal to this court is pending. They do not give a case number, however, and a search of this court's data base reveals no such pending appeal.

On December 5, 2006, Cajon Valley and Houghton filed the instant joint motion and stipulation. The joint motion states: "The parties . . . request that, upon vacating of the judgment, this Court remand said action to the Superior Court and that said order shall provide that (1) the remitt[itur] shall issue forthwith, (2) the judgment below shall be vacated and set aside, and (3) each party shall bear its own costs on appeal." The joint

motion also states: "The parties, through their respective counsel, hereby move for an order vacating the judgment from which this appeal was taken and dismissing this appeal, as a condition to a settlement of the action entered into by the parties." The parties clearly desire to have the judgment reversed and the matter remanded to the superior court so that they can seek an order deeming their settlement in good faith. We accordingly conclude that their allusion to dismissal of the appeal was inadvertent. Dismissing the appeal would be inconsistent with reversing the judgment.

DISCUSSION

Section 128, subdivision (a)(8) provides: "An appellate court shall not reverse or vacate a duly entered judgment upon an agreement or stipulation of the parties unless the court finds both of the following: [] (A) There is no reasonable possibility that the interests of nonparties or the public will be adversely affected by the reversal. [] (B) The reasons of the parties for requesting reversal outweigh the erosion of public trust that may result from the nullification of a judgment and the risk that the availability of stipulated reversal will reduce the incentive for pretrial settlement." ( 128, subd. (a)(8).) "The parties must . . . submit memoranda of points and authorities and declarations and other documentary evidence persuasively demonstrating that reversal of the judgment in question will not adversely affect nonparties or the public, erode public trust, or reduce the incentive for pretrial settlement . . . ." (Hardisty v. Hinton & Alfert, supra, 124 Cal.App.4th at p. 1007.)

A

Here, the joint declaration sets forth the following facts to support a determination "that no reasonable possibility exists that the interests of nonparties or the public will be adversely affected by the vacating of the judgment."

The facts of the underlying case are unique. The outcome of the case, and the judgment against Houghton, who was but one of many people responsible for the construction of the school, have no direct or indirect impact on the public, other than the costs associated with making a motion for summary judgment that was not opposed in writing. Because Houghton filed no written opposition, the trial court made no factual determination based on conflicting evidence as to his responsibility for the defective conditions alleged by Cajon Valley.

There are no persons, other than the parties to the joint stipulation, with a direct or indirect interest in the circumstances of the case. The only possible exception to this statement is the Commissioner, who will have an opportunity to oppose a motion for good faith settlement in the trial court, so vacating the judgment would not prejudice him.

Considering the above facts, we conclude "[t]here is no reasonable possibility that the interests of nonparties or the public will be adversely affected by the reversal." ( 128, subd. (a)(8)(A).)

B

The declaration states the following reasons for requesting the judgment be vacated. Vacating the judgment will allow the parties to seek an order deeming the settlement in good faith, thereby preventing any possible claims for indemnity against Houghton by the Commissioner. Exposing Houghton to indemnity claims, particularly in view of his limited financial means, would defeat the purpose of the settlement. Houghton cannot afford the expense of a trial, and the settlement benefits Cajon Valley because it includes a cash payment by Houghton which will defray the costs of retrofitting the school if the appeal were pursued and Houghton were to prevail, Cajon Valley would waste scarce public funds and might "lose face" because of Houghton's defenses based on the statute of limitations and Aas v. Superior Court, supra, 24 Cal.4th 627.

Concerning the risk of reducing the incentive for pretrial settlement, the declaration states the following. Because Houghton did not have counsel, he did not understand that he could enter into settlement discussions before the hearing on the summary judgment motion. Once he retained counsel, the parties engaged in mediation. The instant settlement is similar to a pretrial settlement in that no evidence has been presented that might otherwise have affected the incentive for settlement. Because there was no normal opportunity for pretrial settlement discussions, vacating the judgment based on this stipulation will not reduce the incentive for pretrial settlement.

Concerning the possible erosion of public trust, the declaration states the following. Due to the fact that there was no trial, with its accompanying expenditure of trial court resources, there will be a reduced impact on public trust in the judicial system. Vacating the judgment will enable the parties to seek a finding from the trial court that the settlement is in good faith so that Houghton will not be exposed to a possible, but unlikely, indemnity claim by the general contractor's surety in receivership. There is no attempt to "immunize" any party; Houghton no longer works as a school inspector and has no plans to do so. The parties are not attempting to show that findings of fact are erroneous; there were none. Vacating the judgment will advance the public interest because it will eliminate the expenditure of public funds to respond to the appeal, for the costs of a successful appeal and an ensuing trial, and for attempts to execute on a judgment. It will also result in the payment of settlement sums to Cajon Valley.

Considering the above facts, we conclude "[t]he reasons of the parties for requesting reversal outweigh the erosion of public trust that may result from the nullification of a judgment and the risk that the availability of stipulated reversal will reduce the incentive for pretrial settlement." ( 128, subd. (a)(8)(B).) "When lawyers responsibly settle litigation, public trust in the courts is advanced. Hence, in exercising discretion on a case-by-case basis in evaluating whether the three factors in section 128, subdivision (a)(8) are present, it is relevant that reversible error occurred but it is not a prerequisite to the judicial acceptance of a stipulated reversal in a case such as this . . . ." (Union Bank of California v. Braille Inst. of Am. (2001) 92 Cal.App.4th 1324, 1331.)

DISPOSITION

Based on the stipulation of the parties under section 128, subdivision (a)(8), the judgment is reversed and the case is remanded to the trial court with directions to vacate

the judgment. The remittitur shall issue immediately. Each party shall bear its own costs.

McINTYRE, J.

WE CONCUR:

BENKE, Acting P. J.

NARES, J.

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