Judge: Michael Shultz, Case: 18CMCV00035, Date: 2022-10-21 Tentative Ruling
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Case Number: 18CMCV00035 Hearing Date: October 21, 2022 Dept: A
18CMCV00035
Jose Ivan Rodriguez Jimenez v. Alicia Torres, et al.
[TENTATIVE] ORDER
I.
BACKGROUND
This action arose from Defendants’ failure to disclose known
material defects in a home purchased by Plaintiff. The matter was tried by a
jury, who rendered a verdict in favor of Plaintiff on July 21, 2022, and
against Defendants, Capero Investments, Inc. (“Capero”) and Louis Brian Teque
(“Teque”) (collectively Defendants) for past and future economic loss totaling
$106,852, and punitive damages of $250,000 against each Defendant.
Plaintiff submitted a proposed judgment on July 28, 2022, to which
Defendants objected on August 2, 2022.
II.
ARGUMENTS
A.
Motion filed August 15, 2022.
Defendants move to reduce the
judgment by the amount Plaintiff obtained in settlement with other Defendants
totaling $155,000. Where the acts of multiple defendants cause one injury, and
some defendants settle their claims, the remaining defendants are entitled to an
offset credit reducing the economic damages by the total amount of settlement.
While Plaintiff also filed a cost memorandum, Plaintiff’s entitlement to such
costs is determined after the net judgment is determined.
Defendants also
argue that the punitive damages award should be substantially reduced to an
amount that is reasonably related to actual damages, which in this case should
be reduced to $2,540.94. Therefore, punitive damages should be reduced to
$24,450.
B.
Opposition filed September 12,
2022.
Plaintiff argues that the judgment
should not be reduced because Defendants are not joint tortfeasors with the
settling Defendants. The jury intended to attribute all liability for
compensatory damages to Defendants. The jury did not attribute any liability to
Paula Peña (“Peña”), the realtor who represented the sellers. A settling
defendant is not entitled to an offset credit for any settlement attributable
to non-economic damages. Costs are not subject to offset of good faith
settlement amounts. Plaintiff’s claims against Peña and Golden State Real
Estate (“Golden State”) stems from the non-disclosure of the extensive fire
damage. The claims against Teque and Capero arise from their blatant fraud in failing
to obtain disclosures from the sellers and in creating their own fraudulent disclosures
and representing them to Plaintiff as if they came from the sellers.
The court’s file does not reflect
that Defendants filed a reply brief due on October 14, 2022.
III. DISCUSSION
A. Defendants are entitled to an offset in the amount of settlements
made by other Defendants.
An obligation imposed upon several
persons “is presumed to be joint, and not several, except as provided in
Section 1431.2, … .” Civ. Code, § 1431. Section
1431.2 states that each defendant’s liability for non-economic damages shall be
several only in “any action for personal injury, property damage, or wrongful
death, based upon principles of comparative fault.” Civ. Code, § 1431.2. The term “non-economic”
damages are defined as "pain, suffering, inconvenience, mental suffering,
emotional distress, loss of society and companionship, loss of consortium,
injury to reputation and humiliation.” Civ. Code, § 1431.2 subd. (b)(2)
(collectively “Proposition 51”). Therefore, "in an action subject to
Proposition 51, each tortfeasor remains jointly and severally liable to the
plaintiff for economic damages but is liable to the plaintiff for only its
proportionate share of noneconomic damages.” Bostick v. Flex Equipment Co., Inc. (2007) 147 Cal.App.4th
80, 90. This section does not apply here
since Defendants seek an offset for economic damages only, and the jury did not
award noneconomic damages as a component of compensatory damages.
Whether Defendants are entitled to
a reduction of the economic damages for prior settlements is governed by Code
of Civil Procedure section 877. Under that section, where a release “is given
in good faith before verdict or judgment to one or more of a number of
tortfeasors claimed to be liable for the same tort, … it shall have the following
effect: (a) It shall not discharge any other such party from liability unless
its terms so provide, but it shall reduce the claims against the others in the
amount stipulated by the release, the dismissal or the covenant, or in the
amount of the consideration paid for it whichever is the greater." Code Civ. Proc., § 877. In other words, “a good faith settlement cuts
off the right of other defendants to seek contribution or comparative indemnity
from the settling defendant [and] the nonsettling defendants obtain in return a
reduction in their ultimate liability to the plaintiff." Mayes v. Bryan (2006) 139 Cal.App.4th 1075, 1100.
The effect of Proposition 51 and its
interplay with Section 877 is that "each defendant is solely responsible
for its share of noneconomic damages under Civil Code section 1431.2.
Therefore, a nonsettling defendant may not receive any setoff under section 877
for the portion of a settlement by another defendant that is attributable to
noneconomic damages. (See Espinoza, supra, 9 Cal.App.4th at
pp. 274–275, 11 Cal.Rptr.2d 498; Hoch, supra, 24 Cal.App.4th
at p. 63, 29 Cal.Rptr.2d 615.) Second, where a plaintiff has received a
pretrial settlement from a different defendant, the portion of the settlement
which may be set off from a subsequent jury award of economic damages to the
plaintiff must be determined by application of the percentage of the jury award
of economic damages in relationship to the total award of damages." Poire v. C.L. Peck/Jones Brothers Construction Corp. (1995)
39 Cal.App.4th 1832, 1838–1839.
Section 877
applies to settlements made with “one or more of a number of tortfeasors
claimed to be liable for the same tort.” Code Civ. Proc., § 877. Plaintiff
argues that each Defendant engaged in discrete acts of fraud, concealment, and negligence
in failing to make required material disclosures, and therefore, Defendants
were not joint tortfeasors. However, in determining whether Defendants and Settling
Parties were joint tortfeasors, “[t]he only relevant question in applying
section 877 is whether there was one indivisible injury caused by two or more
parties.” May v. Miller (1991) 228 Cal.App.3d 404, 409. Here, while multiple defendants allegedly failed to disclose
material defects to Plaintiff or fabricated another disclosure statement,
Plaintiff suffered a single, indivisible injury, namely that he was compelled
to rebuild the entire home in order to make it habitable. FAC, 2:12-16.
The court determines whether a
settlement was made in good faith pursuant to a motion by the party asserting
lack of good faith. Code Civ. Proc., § 877.6.
Alternatively, a settling party may give notice of settlement to all parties
and to the court, together with an application for determination of good faith
settlement. Code Civ. Proc., § 877.6 subd.
(a)(2). The court may approve the application if no other parties file a motion
to contest the settlement. Id.
The court’s file does not reflect an
order determining that the settlements were made in good faith. Where the
settlement agreement has not been judicially approved, "the court's task [is]
to determine whether there [is] a reasonable basis on which to justify those
allocations. (Ibid.) To enable the court to perform that responsibility,
plaintiffs [have] the burden to present evidence from which the trial
court could determine the reasonableness of the proposed allocation." Jones v. John Crane, Inc. (2005) 132 Cal.App.4th 990, 1009.
Section 877 provides that the effect
of the settlement “shall reduce the claims against the others in the amount
stipulated by the release, the dismissal or the covenant, or in the amount of
the consideration paid for it whichever is the greater." Code Civ. Proc., § 877. Where
settlement funds are “’undifferentiated’ that is, the settlements do not
apportion the funds between the claims resolved at trial,” the court calculates
the ratio of economic damages to the total compensatory damages, as awarded at
trial. Pfeifer v. John Crane, Inc. (2013) 220 Cal.App.4th 1270, 1319. The offset credit is determined by multiplying this ratio to the
amount of the settlement funds. Id.
The jury’s compensatory damage
award consisted solely of economic damages; Plaintiff did not ask for any other
compensatory damages in addition to economic damages. Therefore, the entire
amount of settlements obtained are applied against the economic damages awarded
by the jury. As the total amount of settlements ($155,000) exceed the amount of
the jury verdict ($106,852), compensatory damages are reduced to zero. McComber v. Wells (1999) 72 Cal.App.4th 512, 518 [judgment modified to zero since the amount of offset was greater
than the jury’s economic damage award.]. Defendants’ calculation of the total
damage award includes $50,598.94 in costs, which is improper since the offset
is applied to the economic damages award alone.
Plaintiff argues that the jury did
not assign any percentage of liability against Peña or Moreno. Id., Ex.
1, 14:2-4. However, the jury was instructed to skip question 36 (percentage of
liability) if they determined that Plaintiff’s negligence was not a substantial
factor in causing harm. Id., 13:23-26. The Special Verdict form does not
support the inference that the jury determined that Peña’s and Moreno’s portion
of liability was 0 percent.
B. Defendants
have not established that the court should reduce the punitive damage award based
on the compensatory award after offset.
The jury determined that each
Defendant acted with malice, fraud, or oppression and awarded Plaintiff
$250,000 against each Defendant. Sandoval declaration ISO Opp., Ex. 1, 15:8-10
and 16:17-19. One of Defendants’ cited case authority supports the proposition
that where a jury award is reduced because of prior settlements, the court may
consider a reduction in the punitive damages award. Krusi v. Bear, Stearns & Co. (1983) 144 Cal.App.3d 664, 680. In Krusi, the court determined that the Plaintiffs’
award for compensatory damages was required to be reduced on remand because
Plaintiff had received a settlement and other payments by unrelated parties prior
to trial. Id. at 674.
The court
acknowledged that the general rule barring double recovery "would be
unreasonably violated if an offset were not given” for the prior settlements
and other payments Krusi at 675. Therefore, the
Court of Appeal remanded to the trial court to determine if the source of those
payments were from a co-tortfeasor or from a source independent of a co-tortfeasor,
and whether applying a setoff was proper. Id. The Court of Appeal
declined to overturn the punitive damages award since that was the result of
the jury’s determination, and there was evidence to support it. Krusi at 681. However,
since the compensatory award would be reduced on remand, the Court of Appeal
agreed that the trial court should have at least considered reducing the
punitive damages award. Id.
However, Krusi
does not stand for the proposition that an award of punitive damages must be
reversed and retried whenever the Court of Appeal reduces an award of
compensatory damages. Krusi merely holds that when the trial
court is directed to reconsider the award of compensatory damages, it “may wish
to” reduce the award of punitive damages as a condition of granting a new
trial." Behr v. Redmond (2011) 193 Cal.App.4th 517, 536–537.
A more recent
case held that even where an offset “wipes out” a defendant’s liability for
compensatory damages, a Plaintiff can still receive punitive damages. Colaco v. Cavotec SA (2018) 25 Cal.App.5th 1172, 1205. The Colaco court determined that "satisfaction of a
compensatory damage award by offset does not mean those damages were
never awarded. As we have explained, it merely means the award was effectively paid. Hence,
where a claimant's award of compensatory damages was completely offset, he
could still receive punitive damages." Colaco at 1205.
Punitive damages
cannot be awarded unless actual damages are suffered. Esparza v. Specht (1976) 55 Cal.App.3d 1. The requirement of “actual damages” is “simply the requirement
that plaintiff has indeed been damaged even though monetary damages are not
awarded. Esparza at v.
Specht (1976) 55 Cal.App.3d 1, 7.The
relevant question to determine whether a plaintiff may recover punitive damages
is whether he or she suffered a tort for which the law permits the recovery of
damages—not whether those damages have (or have not) already been
paid. Fullington v. Equilon Enterprises, LLC (2012) 210 Cal.App.4th
667, 690.
Thus, while the
economic damage award is “wiped out” by the settlement with other
co-defendants, this does not negate the jury’s finding that Defendants acted
with malice, fraud, or oppression sufficient to warrant an award of punitive damages.
Here the ratio of punitive damages to compensatory damages is roughly 2.3 to 1.
Single-digit multipliers are "more likely to comport with due process,
while still achieving the State's goals of deterrence and retribution, than
awards with ratios in the range of 500 to 1.” Bullock v. Philip Morris USA, Inc. (2011) 198 Cal.App.4th
543, 563.
The jury found
Defendants’ conduct warranted imposition of punitive damages. Settling Parties
settled for an amount that exceeded what the jury determined the Plaintiff
sustained in compensatory damages. It does not follow that Defendants’ conduct did
not cause actual damages to Plaintiff or that Defendants’ conduct did not
amount to malice, fraud, or oppression, which is contrary to what the jury
found.
Defendants’ other case authority
does not support their contention that the punitive damages award should be
reduced to an amount that is reasonably related to a compensatory damages award
offset by prior settlements. In Frommoethelydo v. Fire Ins. Exchange (1986) 42 Cal.3d 208, the court determined that the judgment for damages attributable
to a privileged report that was improperly admitted into evidence could not
stand. Frommoethelydo at 220 [“The award
of punitive damages may not be upheld since most of the compensatory damages
must be set aside.”]. In other words, the punitive damages could not be upheld
because it was based on improperly admitted evidence. Here, the jury’s award of
damages is reduced by statute given the pre-trial settlements. Defendants do not contend that the award was
improperly based on inadmissible evidence.
Similarly, Las Palmas Associates v. Las Palmas Center Associates (1991)
235 Cal.App.3d 1220 is factually distinguishable.
There, the court determined that fraud award was excessive as a matter of law
and was not supported by substantial evidence. Las Palmas at 1252. Therefore,
the court determined that the $10 million in punitive damages awarded should
also be reduced as it would have been grossly disproportionate to the
compensatory losses supported by the evidence. Las Palmas at 1255. Defendants
do not contend that the compensatory damage award was unsupported by
substantial evidence.
C. Defendant’s contention that the court cannot award costs and fees
until it determines the net settlement award is not supported by any authority.
Whether
Plaintiff is entitled to costs and fees as the prevailing party is determined by
a motion to tax or strike the Cost Memorandum. Here, Plaintiff served the Cost
Memorandum on August 2, 2022, by mail. Any notice of motion to strike or tax
costs must be served and filed 15 days after service extended by five calendar
days for service by mail. CA ST CIVIL RULES Rule 3.1700. Accordingly, Defendants were required to file
their motion to tax by August 22, 2022. The court’s file does not reflect that Defendants
filed such a motion.
IV.
CONCLUSION
Based
on the foregoing, the court GRANTS Defendants’ motion to reduce the
compensatory damage award which is offset by the amount Plaintiff obtained in
prior settlements, thus reducing the award to $0. The court DENIES Defendants’
motion to reduce the punitive damages award.