Watts Industries v. Zurich American Ins. Co.

Filed 3/5/07 Watts Industries v. Zurich American Ins. Co. CA2/4

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.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

APPEAL from an order of the Superior Court of Los Angeles County,

Peter D. Lichtman, Judge. Affirmed.

Selman Breitman, Neil S. Selman, Sheryl W. Leichenger, and Mark F. Didak; Lascher & Lascher and Wendy Lascher for Defendant and Appellant.

Weston, Benshoof, Rochefort, Rubalcava & MacCuish, David S. MacCuish, Andrew M. Gilford, and Richard C. Giller for Plaintiff and Respondent Watts Industries, Inc.

Stanzler Funderburk & Castellon, Ruben A. Castellon, and Ross H. Hirsch for Plaintiff and Respondent James Jones Company.

Appellant Zurich American Insurance Company (Zurich) argues the trial court erred in denying its motion to set aside payment orders as void. The payment orders were issued in conjunction with the courts ruling that Zurich had a duty to indemnify its policyholders, Watts Industries, Inc. (Watts) and James Jones Company (Jones). We affirm.

FACTUAL AND PROCEDURAL SUMMARY

In 1986, Watts acquired Jones, a manufacturer of parts for municipal water systems. In 1997, Nora Armenta, a former Jones employee, brought a qui tam action against Jones, Watts and others on behalf of various Southern California municipalities (Armenta action). She alleged that these companies sold substandard parts, knowingly defrauded the municipalities, and violated the False Claims Act. The Los Angeles Department of Water & Power (DWP) and several municipalities joined the action.

In 2001, Watts and Jones sued Zurich for breach of contract and bad faith denial of insurance benefits in relation to the Armenta action. Watts requested a declaration that Zurich had duties to defend and indemnify. The court granted summary adjudication on the duty to defend and ordered Zurich to pay past defense costs and interest. These orders were affirmed by this court. (See Watts Industries, Inc. v. Zurich American Ins. Co. (2004) 121 Cal.App.4th 1029, 1049.)

Watts and Jones entered into settlement agreements with DWP and certain municipalities (first phase cities). At oral argument in this court, Watts and Jones stated that the settlement amounts were liquidated, which Zurich did not dispute. Zurich contends that 151 other claims are still outstanding.

In 2002, the court granted summary adjudication of Zurichs duty to indemnify Watts and Jones for the DWP settlement. Among other things, the court found that the claims settled with DWP were covered under Zurichs policies (the claims constituted an occurrence and property damage as defined by Zurichs policies). The court also concluded that Zurich had not even come close to meeting its burden of proving that the settlement was not covered under its policies or that the settlement was the product of fraud or collusion. On November 22, 2002, the court ordered Zurich to reimburse Watts and Jones for amounts paid and future payments to DWP in accordance with the settlement. Zurich filed a writ petition with this court; it was summarily denied.

In 2004, the court also granted summary adjudication of Zurichs duty to indemnify Watts and Jones for the first phase cities settlement. The court found that the claims settled with the first phase cities were covered under Zurichs policies (the claims constituted an occurrence and property damage as defined by Zurichs policies). It also found that Zurichs coverage defenses failed and did not bar summary adjudication. On August 6, 2004, the court ordered Zurich to reimburse Watts and Jones for amounts paid and future payments to the first phase cities in accordance with the settlement. Zurich again filed a writ petition; it was denied as untimely.

On March 6, 2006, Zurich moved to set aside the November 22, 2002 and August 6, 2004 payment orders as void, pursuant to Code of Civil Procedure section 473, subdivision (d). Zurich argued the orders were void because they were issued before a final judgment, because they were not authorized by statute, and because they resulted in a denial of Zurichs right to due process of law.

The court denied the motion. In doing so, it stated: It is undisputed that the court has the power to determine coverage issues of duty and indemnity. Zurich argues that the court is impotent to enforce those orders. This [c]ourt respectfully disagrees. A court has the inherent power to administer complete relief, particularly with respect to finding the means of enforcing its decrees against a delinquent defendant . . . [] . . . [] . . . this court has the inherent authority to order Zurich to reimburse Watts for amounts paid as part of Zurichs judicially established indemnity obligations. Zurich has failed to cite a single case to the contrary. [] The challenged orders are not void. A judgment is never absolutely void if the court had jurisdiction of the matter and the person of the defendant no matter how erroneous it may be. [Citation.] When a court has fundamental jurisdiction but acts in excess of its jurisdiction, its act or judgment is merely voidable. . . .  [] The cases Zurich cites as examples of void orders involve situations . . . where the court ignored specific statutory or due process constraints. . . .  [] Here, the court had the power to enforce its indemnity orders by requiring Zurich to reimburse Watts for settlement amounts paid.

Zurich petitioned for writ relief and also filed a timely notice of appeal. The writ petition and a motion to dismiss the appeal were denied.

DISCUSSION

I

We first address whether denial of the motion to set aside the payment orders as void is appealable. A denial of a motion to set aside or vacate an order generally is not appealable; otherwise, a party would be able to (1) effectively appeal a nonappealable order or judgment, (2) obtain two appeals from the same decision, or (3) if no timely appeal had been made, receive an unwarranted extension of time to bring the appeal. (See Annette F. v. Sharon S. (2005) 130 Cal.App.4th 1448, 1458-1459.) However, [a]n exception to this general rule applies when the underlying judgment is void. In such case, the order denying the motion to vacate is itself void and appealable because it gives effect to a void judgment. (Carlson v. Eassa (1997) 54 Cal.App.4th 684, 691.) [W]hen an appellant attacks an order on the ground that it gives effect to a judgment that is void . . . the general rule prohibiting appeal does not apply. It is a special order, and it may be appealed if the underlying judgment was appealable. (In re Marriage of Goodarzirad (1986) 185 Cal.App.3d 1020, 1030-1031; see also County of Ventura v. Tillett (1982) 133 Cal.App.3d 105, 110, disapproved of on another ground in County of Los Angeles v. Soto (1984) 35 Cal.3d 483, 492, fn. 4; Adoption of Matthew B. (1991) 232 Cal.App.3d 1239, 1267; Code Civ. Proc., 904.1, subd. (a)(1) & (2) [stating that an order made after an interlocutory judgment is generally not appealable].)

We conclude that the underlying payment orders are final collateral judgments and therefore appealable. Accordingly, the order denying the motion to set aside the payment orders as void is appealable. A necessary exception to the one final judgment rule is recognized where there is a final determination of some collateral matter distinct and severable from the general subject of the litigation. If, e.g., this determination requires the aggrieved party immediately to pay money or perform some other act, he is entitled to appeal even though litigation of the main issues continues. The determination is substantially the same as a final judgment in an independent proceeding. [Citations.] (Yeboah v. Progeny Ventures, Inc. (2005) 128 Cal.App.4th 443, 449, fn. 2.) Thus, an interim order is considered a final collateral judgment if: (1) it is collateral to the subject matter of the litigation, (2) it is final as to the collateral matter, and (3) it directs the payment of money by the appellant or the performance of an act by or against appellant. (Marsh v. Mountain Zephyr, Inc. (1996) 43 Cal.App.4th 289, 297-298.)

In Watts Industries, Inc. v. Zurich American Ins. Co., supra, 121 Cal.App.4th at p. 1038, we found that although the summary adjudication order on duty to defend normally would not be appealable by itself, the payment order is appealable. . . .  As such, the summary adjudication and payment order together constitute a collateral final judgment that is appealable. The summary adjudication orders on the duty to indemnify and the payment orders together also constitute final collateral judgments. These orders are collateral because they are distinct and severable from the rest of the case. (See Steen v. Fremont Cemetery Corp. (1992) 9 Cal.App.4th 1221, 1227.) As the trial court correctly stated, [t]he duty to indemnify for the specific settlements involving specific parties raises different legal issues than those remaining in the rest of the case. The remaining cities and water districts claims involve different facts and allegations.

Zurich argues that although the payment orders are like collateral final judgments, they are not because there has been no adjudication of its coverage defenses, including whether or not Watts and Jones engaged in willful conduct. Zurich is mistaken. In granting summary adjudication on the duty to indemnify for the DWP settlement, the court stated that Watts and Jones had the benefit of an evidentiary presumption, and the burden is on Zurich to show that the settlement could not possibly be for a covered claim or that the settlement was the product of fraud or collusion. The court found that Zurich did not meet this burden. In granting summary adjudication of the duty to indemnify for the first phase cities settlement, the court stated that Zurichs various coverage defenses failed and that because there was an occurrence under Zurichs policy, one or more willful acts by Watts and/or Jones, even if proved, would not preclude coverage under Insurance Code section 533.

The orders are final as to the duty to indemnify Watts and Jones for the DWP and the first phase cities settlements because no further judicial action was required. (See Steen v. Fremont Cemetery Corp., supra, 9 Cal.App.4th at p. 1228.) Finally, the orders directed Zurich to pay Watts and Jones. Because the underlying payment orders are collateral final judgments and appealable, denial of the motion to set aside the payment orders as void also is appealable.

II

Zurich argues the court erred in denying its motion to set aside the November 22, 2002 and August 6, 2004 payment orders as void. Zurich asserts that a court may not order a defendant to pay damages before trial is over and judgment is entered. Thus, it argues, the orders are void because they violate its state and federal constitutional right to jury trial, its right to due process, the summary judgment statute, the one final judgment rule, the statutes allowing stays of execution pending appeal, and the Enforcement of Judgments Law.

Our Supreme Court has explained the distinction between a void and voidable order as follows: Essentially, jurisdictional errors are of two types. Lack of jurisdiction in its most fundamental or strict sense means an entire absence of power to hear or determine the case, an absence of authority over the subject matter or the parties. (Albelleira v. District Court of Appeal (1941) 17 Cal.2d 280, 288 (Abelleira).) When a court lacks jurisdiction in a fundamental sense, an ensuing judgment is void, and thus vulnerable to direct or collateral attack at any time. (Barquis v. Merchants Collection Assn. (1972) 7 Cal.3d 94, 119.) [] However, in its ordinary usage the phrase lack of jurisdiction is not limited to these fundamental situations. (Abelleira, supra, 17 Cal.2d at p. 288.) It may also be applied to a case where, though the court has jurisdiction over the subject matter and the parties in the fundamental sense, it has no jurisdiction (or power) to act except in a particular manner, or to give certain kinds of relief, or to act without the occurrence of certain procedural prerequisites. (Ibid.) [W]hen a statute authorizes [a] prescribed procedure, and the court acts contrary to the authority thus conferred, it has exceeded its jurisdiction. (Id. at p. 290.) When a court has fundamental jurisdiction, but acts in excess of its jurisdiction, its act or judgment is merely voidable. (In re Marriage of Goddard (2004) 33 Cal.4th 49, 56; Conservatorship of OConnor (1996) 48 Cal.App.4th 1076, 1088.) That is, its act or judgment is valid until it is set aside, and a party may be precluded from setting it aside by principles of estoppel, disfavor of collateral attack or res judicata. (Conservatorship of OConnor, at p. 1088.) Errors which are merely in excess of jurisdiction should be challenged directly, for example by motion to vacate the judgment, or on appeal, and are generally not subject to collateral attack once the judgment is final unless unusual circumstances were present which prevented an earlier and more appropriate attack. (Pacific Mut. Life Ins. Co. v. McConnell (1955) 44 Cal.2d 715, 727; 2 Witkin, Cal. Procedure (4th ed. 1996) Jurisdiction, 323, p. 899.) (People v. American Contractors IndemnityCo. (2004) 33 Cal.4th 653, 660-661.)

Zurich does not attempt to distinguish People v. American Contractors Indemnity Co., which was decided after the cases it cites to support its contention that the payment orders are not merely voidable. There is no claim that the court lacked subject matter or personal jurisdiction. Instead, Zurich argues the court lacked the fundamental power to issue the payment orders until after the trial was over. The court ruled that Zurich had a duty to indemnify Watts and Jones for payments made to DWP and the first phase cities in accordance with the settlements. Thus, the court had the power to enforce its summary adjudication order, which was exercised by issuing payment orders. (See American Motorists Ins. Co. v. Superior Court (1998) 68 Cal.App.4th 864, 869.) If the court acted in excess of its jurisdiction by exercising its power prematurely or erroneously, the orders are voidable, not void. (See People v. American Contractors Indemnity Co., supra, 33 Cal.4th at p. 663; Conservatorship of OConnor, supra, 48 Cal.App.4th 1076, 1088; County of Los Angeles v. Harco National Ins. Co. (2006) 144 Cal.App.4th 656, 662; People v. Aegis Security Ins. Co. (2005) 130 Cal.App.4th 1071, 1076.)

At oral argument, Zurich cited this courts opinion in Rochin v. Pat Johnson Manufacturing Co. (1998) 67 Cal.App.4th 1228, for the proposition that when a court exceeds its jurisdiction in granting relief it had no power to grant, the resulting order is void. In Rochin, the trial court entered judgment in a negligence action and subsequently amended the judgment to reflect different fault allocations than previously had been entered. (Id. at pp. 1232-1233.) We held that once the time for direct attack on the fault allocations had lapsed, the court no longer had subject matter jurisdiction to make nonclerical substantive changes. (Id. at p. 1238.) Thus, the amended judgment was void. (Ibid.) Here, unlike Rochin, the court had fundamental jurisdiction to make the payment orders.

Because the orders are not void, the court properly denied Zurichs motion to set aside the payment orders. Zurich does not argue that the payment orders are voidable and should be voided by this court. Thus, we do not address that issue. Moreover, Zurich has not demonstrated that exceptional circumstances precluded a direct attack on the voidable payment orders, compelling us to hear a collateral attack years later. (See People v. American Contractors IndemnityCo.,supra, 33 Cal.4th at p. 663.)

DISPOSITION

The denial of Zurichs set aside motion is affirmed. Respondents are to recover their costs on appeal.

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS.

EPSTEIN, P. J.

We concur:

MANELLA, J.

SUZUKAWA, J.

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