Judge: Michael E. Whitaker, Case: 19STCV29485, Date: 2023-03-09 Tentative Ruling

Case Number: 19STCV29485    Hearing Date: March 9, 2023    Dept: 32

PLEASE NOTE:   Parties are encouraged to meet and confer concerning this tentative ruling to determine if a resolution may be reached.  If the parties are unable to reach a resolution and a party intends to submit on this tentative ruling, the party must send an email to the Court at sscdept32@lacourt.org indicating that party’s intention to submit.  The email shall include the case number, date and time of the hearing, counsel’s contact information (if applicable), and the identity of the party submitting on this tentative ruling.  If the Court does not receive an email indicating the parties are submitting on this tentative ruling and there are no appearances at the hearing, the Court may place the motion off calendar or adopt the tentative ruling as the order of the Court.  If all parties do not submit on this tentative ruling, they should arrange to appear in-person or remotely (which is highly encouraged).  Further, after the Court has posted/issued a tentative ruling, the Court has the inherent authority to prohibit the withdrawal of the subject motion and adopt the tentative ruling as the order of the Court. 

TENTATIVE RULING

MOTION

Plaintiffs Winnie Cheung and Michael Cheung (collectively, Plaintiffs) sued Defendants Vanna Phung and Van Ngan Phung (collectively, Defendants) based on a motor vehicle collision resulting in death of Decedent Chan Shu Cheung (Decedent). 

On February 8, 2021, Plaintiffs added Cross-Complainant Navigators Real Estate Inc. (Navigators) as a Defendant through a “Doe” Amendment.  On July 16, 2021, Navigators filed a Cross-Complaint against Defendant Vanna Phung (Defendant).  On December 28, 2021, Navigators filed the operative Second Amended Cross-Complaint (SAXC) which alleges causes of action for Breach of Contract, Express Indemnity, and Requested Declaratory Relief against Defendant. 

A Notice of Settlement between Defendant and Plaintiffs was filed with the Court on September 3, 2021.  On September 20, 2022, the Court granted Navigator’s Motion for Summary Judgment against Plaintiffs.  Navigators seeks through the SAXC reimbursement for its legal fees and costs, relying on the indemnity and hold harmless clause in an agreement between Navigators and Defendant. 

Defendant moves for a judgment on the pleadings.  Navigators opposes the motion.  Defendant replies.

JUDICIAL NOTICE

Under Evidence Code section 451, “[j]udicial notice shall be taken of the following: (a) The decisional, constitutional, and public statutory law of this state and of the United States and the provisions of any charter described in Section 3, 4, or 5 of Article XI of the California Constitution…(f) Facts and propositions of generalized knowledge that are so universally known that they cannot reasonably be the subject of dispute. ” (Evid. Code, § 451, subds. (a), (f).) Under Evidence Code section 452, “[j]udicial notice may be taken of the following matters to the extent that they are not embraced within Section 451: (a) The decisional, constitutional, and statutory law of any state of the United States and the resolutions and private acts of the Congress of the United States and of the Legislature of this state. (b) Regulations and legislative enactments issued by or under the authority of the United States or any public entity in the United States. (c) Official acts of the legislative, executive, and judicial departments of the United States and of any state of the United States (d) Record of (1) any court of this state or (2) any court of record of the United States or of any state of the United States…(g) Facts and propositions that are of such common knowledge within the territorial jurisdictions of the court that they cannot reasonably be the subject of dispute. (h) Facts and propositions that are not reasonably subject to dispute and are capably of immediate and accurate determination by resort to sources of reasonably indisputable accuracy.” (Evid. Code, § 452, subds. (a)-(d), (g), (h).)

Here, the Court grants Defendant’s unopposed request for judicial notice of the following: (1) Tentative Ruling of February 28, 2022 on Defendant’s demurrer to Navigators’ SAXC; (2) Court’s Ruling issued on September 20, 2022 on Navigators’ Motion for Summary Judgment against Plaintiffs’ complaint for vicarious liability; (3) Navigators’ Memorandum of Points and Authorities in support of their Motion for Summary Judgment; and (4) Navigators’ SAXC, per Evidence Code section 452, subdivision (d)(1).

ANALYSIS

A motion for judgment on the pleadings has the same function as a general demurrer, but may be made after the time to demur has expired. (Code Civ. Proc., § 438, subd. (f).)  “Like a demurrer, the grounds for the motion [for judgment on the pleadings] must appear on the face of the challenged pleading or from any matter of which the court is required to take judicial notice.” (Civic Partners Stockton, LLC v. Youssefi (2013) 218 Cal.App.4th 1005, 1013.)  In ruling on a motion for judgment on the pleadings, “[a]ll allegations in the complaint and matters upon which judicial notice may be taken are assumed to be true.” (Rippon v. Bowen (2008) 160 Cal.App.4th 1308, 1313.)

            Defendant argues that the SAXC fails to state facts sufficient to constitute viable causes of action for breach of contract, express indemnity, and declaratory relief based on the Court’s determination in its September 20, 2022 ruling which found that Defendant was not operating her vehicle within the course and scope of her employment when the accident occurred.

            To prevail on a cause of action for breach of contract, “the plaintiff must prove (1) the contract, (2) plaintiff’s performance of the contract or excuse for nonperformance, (3) defendant’s breach, and (4) resulting damage to the plaintiff.” (Richman v. Hartley (2014) 224 Cal.App.4th 1182, 1186.) “If the action is based on alleged breach of a written contract, the terms must be set out verbatim in the body of the complaint or a copy of the written agreement must be attached and incorporated by reference.” (Harris v. Rudin, Richman & Appel (1999) 74 Cal.App.4th 299, 307.) “As a general rule in testing a pleading against a demurrer the facts alleged in the pleading are deemed to be true, however improbable they may be.” (Del E. Webb Corp. v. Structural Materials Co. (1981) 123 Cal.App.3d 593, 604.)

Express indemnity refers to an obligation that arises “by virtue of express contractual language establishing a duty in one party to save another harmless upon the occurrence of specified circumstances.” (Prince v. Pacific Gas & Electric Co. (2009) 45 Cal.4th 1151, 1120.) Express indemnity is generally “enforced in accordance with the terms of the contracting parties’ agreement. In the context of noninsurance indemnity agreements, if a party seeks to be indemnified for its own active negligence, or regardless of the indemnitor’s fault, the contractual language on the point must be particularly clear and explicit, and will be construed strictly against the indemnitee.” (Ibid., emphasis in original, [cleaned up].)

            Under Code of Civil Procedure section 1060,

[a]ny person interested under a written instrument, excluding a will or a trust, or under a contract, or who desires a declaration of his or her rights or duties with respect to another, or in respect to, in, over or upon property, or with respect to the location of the natural channel of a watercourse, may, in cases of actual controversy relating to the legal rights and duties of the respective parties, bring an original action or cross-complaint in the superior court for a declaration of his or her rights and duties in the premises, including a determination of any question of construction or validity arising under the instrument or contract. He or she may ask for a declaration of rights or duties, either alone or with other relief; and the court may make a binding declaration of these rights or duties, whether or not further relief is or could be claimed at the time. The declaration may be either affirmative or negative in form and effect, and the declaration shall have the force of a final judgment. The declaration may be had before there has been any breach of the obligation in respect to which said declaration is sought.

(Code Civ. Proc., § 1060.) 

            “A complaint for declaratory relief is legally sufficient if it sets forth facts showing the existence of an actual controversy relating to the legal rights and duties of the parties under a written instrument or with respect to property and requests that the rights and duties of the parties be adjudged by the court.”  (Wellenkamp v. Bank of America (1978) 21 Cal.3d 943, 947.)  “Declaratory relief must be granted when the facts justifying that course are sufficiently alleged.  Any doubt should be resolved in favor of granting declaratory relief.”  (Californians for Native Salmon etc. Assn. v. Department of Forestry (1990) 221 Cal.App.3d 1419, 1426-1427.) 

Defendant argues that Navigators’ entire SAXC is premised upon the following allegations:

·       . . . on the morning of the Incident, immediately before the Incident, Phung was working in the course and scope of her employment because she drove to the Plaza to attend a realtors’ meeting held by the West San Gabriel Valley Association of Realtors.”

·       Phung’s alleged presence at the West San Gabriel Valley Association of Realtors would constitute ‘services rendered’ under the Agreement and indemnity clause set forth.

(SAXC, ¶¶ 17, 19.)  Defendant also argues that Navigators disproved the above allegations in its Motion for Summary Judgment which the Court granted on September 20, 2022, specifically finding “evidence is sufficient to [meet] Navigators’ burden to show Plaintiffs cannot establish Phung was acting within the course and scope of her employment with Navigators at the time of the collision.”  (Minute Order, September 20, 2022.)  Defendant concludes that without these allegations, there are no facts sufficient to establish the underlying cause of action in the original complaint would be covered under the indemnity provisions in question.  Thus, there are no facts sufficient to constitute the causes of action alleged against Defendant in the SAXC.

            In opposition, Navigators argues that Defendant has failed to address Navigators allegations in each of its three causes of action that Defendant owes Navigators’ a duty to defend which is separate and apart from any ultimate factual determinations or resolution of liability. 

“Parties to a contract, . . . , may define therein their duties toward one another in the event of a third party claim against one or both arising out of their relationship.  Terms of this kind may require one party to indemnify the other, under specified circumstances, for moneys paid or expenses incurred by the latter as a result of such claims. They may also assign one party, pursuant to the contract's language, responsibility for the other's legal defense when a third party claim is made against the latter.”  (Crawford v. Weather Shield Mfg., Inc. (2008) 44 Cal.4th 541, 551 [cleaned up] (hereafter Crawford).) 

“[T]he [indemnitor’s] duty to defend is broader than its duty to indemnify.  The latter duty runs only to claims that are actually covered by the [agreement], while the duty to defend extends to claims that are merely potentially covered.  The [indemnitor’s] defense duty is a continuing one, arising on tender of defense and lasting until the underlying lawsuit is concluded, or until it has been shown that there is no potential for coverage.”  (Crawford, supra, 44 Cal.4th at p. 547 [cleaned up].)  Further, “a contractual promise to “defend” another against specified claims clearly connotes an obligation of active responsibility, from the outset, for the promisee’s defense against such claims.  The duty promised is to render, or fund, the service of providing a defense on the promisee’s behalf — a duty that necessarily arises as soon as such claims are made against the promisee, and may continue until they have been resolved.”  (Id. at pp. 553–554 [cleaned up].) 

Equally important, “If not forbidden by other, more specific, statutes, the obligations set forth in [Civil Code] section 2778 thus are deemed included in every indemnity agreement unless the parties indicate otherwise.”  (Crawford, supra, 44 Cal.4th at p. 553.)  Civil Code section 2778 provides, in pertinent part:

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, if he chooses to do so;

5. If, after request, the person indemnifying neglects to defend the person indemnified, a recovery against the latter suffered by him in good faith, is conclusive in his favor against the former

(Civ. Code, § 2778, subds. (4)-(5).)  “By virtue of these statutory provisions, the case law has long confirmed that, unless the parties' agreement expressly provides otherwise, a contractual indemnitor has the obligation, upon proper tender by the indemnitee, to accept and assume the indemnitee's active defense against claims encompassed by the indemnity provision. Where the indemnitor has breached this obligation, an indemnitee who was thereby forced, against its wishes, to defend itself is entitled to reimbursement of the costs of doing so.” (Crawford, supra,  44 Cal.4th at p. 555.)  Moreover, “implicit in this understanding of the duty to defend an indemnitee against all claims “embraced by the indemnity,” as specified in subdivision 4 of section 2778, is that the duty arises immediately upon a proper tender of defense by the indemnitee, and thus before the litigation to be defended has determined whether indemnity is actually owed.  This duty, as described in the statute, therefore cannot depend on the outcome of that litigation.  It follows that, under subdivision 4 of section 2778, claims “embraced by the indemnity,” as to which the duty to defend is owed, include those which, at the time of tender, allege facts that would give rise to a duty of indemnity.  Unless the indemnity agreement states otherwise, the statutorily described duty “to defend” the indemnitee upon tender of the defense thus extends to all such claims.”  (Id. at p. 558.)

And whether a duty to defend arises from an indemnity agreement is question of law for a court.  (See Centex Homes v. R-Help Construction Co., Inc. (2019) 32 Cal.App.5th 1230 (“the duty to defend was not a question of fact for the jury; the trial court was compelled to determine [that issue of duty] as a matter of law”].) 

            Navigators contends it has sufficiently alleged in the SAXC that Defendant had a duty to defend Navigators which is separate and apart from the determination that Plaintiffs’ claims were unfounded or would ultimately be disproved.  Navigators points to the follow relevant portions of the SAXC in support of its contention:

·       Under the Agreement, Phung agreed to defend and indemnify Cross-Complainants. Paragraph 14 of the Agreement, states in relevant part:

Regarding any action taken or omitted by Associate-Licensee, or others working through, or on behalf of Associate-Licensee in connection with services rendered or to be rendered pursuant to this Agreement or real estate licensed activity prohibited by this agreement: (i) Associate-Licensee agrees to indemnify, defend and hold Broker harmless from all claims, disputes, litigation, judgments, awards, costs and attorney fees, arising therefrom and (ii) Associate-Licensee shall immediately notify Broker if Associate-Licensee is served with or becomes: aware of a lawsuit or claim regarding any such action.

·       Notwithstanding Cross-Complainant’s denial of liability for the Incident and Plaintiffs’ contention that Phung was working in the course and scope of her employment, Cross-Complainant alleges Phung has an express duty and is obligated to defend Cross-Complainant in this action for the claims, damages, and causes of action alleged by Plaintiffs. Phung has a duty to defend Cross-Complaint immediately upon proper tender of Cross-Complainant’s defense, independent of any determination or adjudication of liability (See e.g., Crawford v. Weather Shield (2008) 44 Cal.4th 541.)

·       Cross-Complainant has tendered, and continues to tender, its defense to Phung. Phung has refused, and continues to refuse, to defend and/or indemnify Cross-Complainant. As such, Phung has breached the Agreement by refusing to defend and hold Cross-Complainant harmless.

·       As a direct and proximate result Phung’s breaches, Cross-Complainant has been compelled to incur attorneys’ fees, court costs, and the expenses this action and other claims and actions, and may be in the future compelled to incur additional liability, expenses, and fees, by way of settlement, judgment or otherwise, arising from the claims by Plaintiffs in this action. Cross-Complainant is entitled to be defended, held harmless, indemnified, and reimbursed by Phung, for Cross-Complainant’s costs, fees, and expenses including recovery of their reasonable attorneys’ fees, according to proof. Cross-Complainant has been compelled to bring this action in light of Phung’s breach, set forth above, and if successful, is entitled to its costs and attorneys’ fees.

·       Phung has refused, and continues to refuse, to defend and/or indemnify Cross Complainant despite the fact that Plaintiffs allege Phung was rendering services under the Agreement for the benefit of Cross-Complainant at the time of the Incident, thereby breaching the indemnity provision.

·       Cross-Complainant has been damaged, and continues to be damaged, by Phung’s refusal to defend and/or indemnify Cross-Complainant pursuant to the indemnity clause of the Agreement.

·       Third Cause of Action Declaratory Relief for Duty to Defend and Indemnify

·       An actual controversy has arisen and now exists between Cross-Complainant and Phung, and ROES 1 through 20 as to whether said cross-defendants have a duty to defend and indemnify Cross-Complainant, as a result of the allegations in Plaintiffs’ Complaint, and to contribute to the payment or repayment of any settlement amounts paid or damages adjudged due and owing from Cross-Complainant to Plaintiff or any other party.

·       For indemnity arising out of any award or judgment entered in favor of Plaintiffs, including costs and expenses incurred by Cross-Complainant in defending themselves in this action

·       For a judicial determination and declaratory judgment that Phung is contractually obligated to defend and indemnify Cross-Complainants for the claims, causes of action, and allegations alleged by Plaintiffs

(SAXC, ¶¶ 14, 20, 21, 22, 26, 32, 33, 35; pp. 7:7-19, 8:10-12, 8:16-18.)

            Based on the foregoing allegations, the Court finds Navigators has sufficiently pled that Defendant owes a contractual duty to defend Navigators against Plaintiffs’ claims, as well Defendant’s failure to honor said duty.  Thus, there are sufficient allegations within the SAXC to support Navigators’ causes of action for breach of contract, express indemnity, and declaratory relief.

            In reply, Defendant contests Navigators interpretation of the subject agreement and the scope of her duty to defend under said agreement.  Defendant argues that the terms of the agreement, including the duty to defend, are only applicable when the underlying events are related to work being performed on behalf of the employer.  Because Defendant did not, in any way, perform any work at the time of the underlying accident, Defendant concludes that the underlying cause of action does not qualify for a duty to defend under the subject agreement.

            The Court notes “a general demurrer to the complaint admits not only the contents of the instrument but also any pleaded meaning to which the instrument is reasonably susceptible.” (Aragon-Haas v. Family Security Insurance Services, Inc. (1991) 231 Cal.App.3d 232, 239, emphasis added.) The subject language in this instance provides “Associate-Licensee agrees to indemnify, defend and hold Broker harmless from all claims, disputes, litigation, judgments, awards, costs and attorney fees, arising therefrom.”  (SAXC, Exhibit A.)  For pleading purposes, the Court finds Navigators’ interpretation of this language as establishing Defendant’s duty to defend Navigators from Plaintiffs’ underlying claims to be reasonable such that Navigators alleges facts sufficient to constitute causes of action for breach of contract, express indemnity, and declaratory relief.  

CONCLUSION AND ORDER 

Therefore, the Court denies Defendant’s motion for judgment on the pleadings.  Defendant shall provide notice of the Court’s ruling and file proof of service of such.