Judge: Teresa A. Beaudet, Case: 21STCV27807, Date: 2022-10-05 Tentative Ruling

Case Number: 21STCV27807    Hearing Date: October 5, 2022    Dept: 50

Superior Court of California

County of Los Angeles

Department 50

            Background

On July 28, 2021, Plaintiffs Xian Chen Ge, Dong Ge, Yu Qi Ge, and Su Me Zheng (collectively, “Plaintiffs”) initiated the instant action against Defendants Joe Chikin, Angela Szeto, Parkland Townhomes Homeowners Association, Inc.[1], and Inveserve Corporation (“Inveserve”). Chikin Joe (“Joe”) indicates in the instant motion that he was erroneously sued as Joe Chikin, and Nicole Szeto (“Szeto”) indicates that she was erroneously sued as Angela Szeto. 

On July 19, 2022, Plaintiffs filed a Second Amended Complaint (“SAC”), asserting causes of action for (1) violation of Civil Code § 1941, et. seq. and Civil Code § 1942, et. seq., (2) breach of warranty of habitability, (3) breach of covenant of quiet enjoyment, (4) nuisance, (5) negligent failure to provide and/or maintain habitable premises, (6) intentional infliction of emotional distress, (7) negligent infliction of emotional distress, (8) violation of Business & Professions Code § 17200 et seq., and (9) injunctive relief.   

On July 14, 2022, Plaintiffs reached a settlement with Joe and Szeto. (Lezon Decl., ¶ 9.) The settlement includes, inter alia, a release of claims in exchange for payment by Joe

and Szeto in the total amount of $145,000.00. (Lezon Decl., ¶¶ 10-11, Ex. 1.)

Joe and Szeto (the “Settling Defendants”) filed a motion for an order determining that the settlement was entered into in good faith pursuant to Code of Civil Procedure section 877.6. Parkland and Inveserve (the “Non-Settling Defendants”) oppose.

The instant motion originally came on for hearing on September 6, 2022. The Court’s September 6, 2022 minute order provides, inter alia, that “Settling Defendants will meet & confer with Plaintiff to determine if they can agree upon an amount for the value of the assignment in the settlement agreement. If so, they will file and serve a supplemental Declaration in support of the motion on or before 09/21/22 with a courtesy copy lodged directly in Department 50 and the non-settling defendants will file and serve a response thereto on or before 09/28/22, also with courtesy copy to Department 50.” The hearing on the motion was continued to October 5, 2022.

On September 20, 2022, the Settling Defendants filed a supplemental declaration in support of the motion, and on September 28, 2022, Non-Settling Defendants filed an opposition to the supplemental declaration.

Discussion

“[Code of Civil Procedure] Section 877.6 was enacted by the Legislature in 1980 to establish a statutory procedure for determining if a settlement by an alleged joint tortfeasor has been entered into in good faith and to provide a bar to claims of other alleged joint tortfeasors for equitable contribution or partial or comparative indemnity when good faith is shown.” ((Irm Corp. v. Carlson (1986) 179 Cal.App.3d 94, 104.)

Section 877.6, subdivision (a)(1) provides, in relevant part, that, on noticed motion, “[a]ny party to an action in which it is alleged that two or more parties are joint tortfeasors or co-obligors on a contract debt shall be entitled to a hearing on the issue of the good faith of a settlement entered into by the plaintiff or other claimant and one or more alleged tortfeasors or co-obligors.” (Code Civ. Proc., § 877.6, subd. (a)(1).) “The party asserting the lack of good faith shall have the burden of proof on that issue.” (Code Civ. Proc., § 877.6, subd. (d).)

“A determination by the court that the settlement was made in good faith shall bar any other joint tortfeasor or co-obligor from any further claims against the settling tortfeasor or co-obligor for equitable comparative contribution, or partial or comparative indemnity, based on comparative negligence or comparative fault.” (Code Civ. Proc., § 877.6, subd. (c).) 

In Tech-Bilt, Inc. v. Woodward-Clyde & Associates (1985) 38 Cal.3d 488, 499, the California Supreme Court identified the following nonexclusive factors courts are to consider in determining if a settlement is in good faith under section 877.6: “a rough approximation of plaintiffs’ total recovery and the settlor’s proportionate liability, the amount paid in settlement, the allocation of settlement proceeds among plaintiffs, and a recognition that a settlor should pay less in settlement than he would if he were found liable after a trial. Other relevant considerations include the financial conditions and insurance policy limits of settling defendants, as well as the existence of collusion, fraud, or tortious conduct aimed to injure the interests of nonsettling defendants.” The evaluation of whether a settlement was made in good faith is required to “be made on the basis of information available at the time of settlement.” (Ibid. )

In light of the Court’s September 6, 2022 minute order, the instant order solely concerns the parties’ arguments concerning the assignment of rights in the settlement agreement.

The Non-Settling Defendants noted in their opposition to the motion that the Settling Defendants did not set a specific amount for the assignment of rights to Plaintiffs in the settlement. The Settling Defendants agree under the settlement to “assign and transfer to PLAINTIFFS any and all sums of money now due or owing to [the Settling Defendants], and all claims, demands, and cause or causes of action of whatever kind and nature that [the Settling Defendants] now have or may later have against INVESERVE CORPORATON and PARKLAND TOWNHOMES HOME OWNERS ASSOCIATION, INC., or any other person or persons, whether jointly or severally, arising out of, or for, any loss, injury, or damage sustained by [the Settling Defendants] in connection with PLAINTIFFS’ claims in the ACTION.” (Lezon Decl., ¶ 10, Ex. 1, ¶ C(3).) The Non-Settling Defendants assert that the value of the assigned rights must be established by declarations or other evidence to fix the amount of credit to which the Non-Settling Defendants are entitled. In support of this assertion, they cite to Erreca’s v. Superior Court (1993) 19 Cal.App.4th 1475, 1496-1497, where the Court of Appeal noted the following:

“It is clear that assignment of indemnity rights may constitute a valuable noncash consideration for settlement. In Southern Cal. Gas Co. v. Superior Court (1986) 187 Cal.App.3d 1030, 1034-1037 [232 Cal.Rptr. 320], the court granted a writ of mandate to require the trial court to vacate a good faith settlement approval because the parties had not placed a value upon certain defendants’ assignment to plaintiffs of their rights under the defendants’ insurance policy, under which the insurer had denied coverage and refused to defend. The Court of Appeal noted that the assignment of tort and contract rights with respect to the insurance policy was a part of the consideration paid by the settling defendants, that such rights were valuable, and that under section 877, subdivision (a) the nonsettling defendants were entitled to credit against any eventual judgment for the value of the assigned rights. The court explained that the value of the assigned rights could have been determined by declaration or by expert testimony, and the value then allocated between the several plaintiffs by agreement among the settling parties. Alternatively, the trial court could have provided for credit in favor of the nonsettling defendants for any amounts recovered by the plaintiffs through the assigned rights, as long as the assigned rights were pursued with due diligence. (Southern Cal. Gas Co., supra, 187 Cal.App.3d at p. 1036.) 

In Alcal, supra, 8 Cal.App.4th 1121, the court noted that the settlement included an assignment of the developers’ indemnity rights against the roofer to the plaintiff homeowners’ association, but that the settling parties had failed to place a value upon that assignment of rights. The court stated: ‘Without more information about the assignment, we cannot determine whether valuable consideration was transferred here or whether the assigned rights merely duplicated Association’s existing rights against roofer. If the assigned rights were valuable, the settlement agreement should have set their value and the court should have considered the added value when determining whether the settlement was in good faith. [Citation.] The added value would then be included in any offset to any judgment against roofer.’ (Alcal, supra, 8 Cal.App.4th at p. 1128.)”

            The Settling Defendants assert in the motion that at the time of settlement, they did not know the value of the assignment in the settlement agreement, since the Settling Defendants had not considered bringing a cross-action against the Non-Settling Defendants. (Lezon Decl., ¶ 13.) “The trial court’s evaluation of the good faith of a settlement must be made on the basis of¿information available at the time of settlement.” (Cahill v. San Diego Gas & Elec. Co. (2011) 194 Cal.App. 4th 939, 960 [internal quotations omitted, emphasis in original].) 

In the supplemental declaration in support of the motion, counsel for the Settling Defendants indicates that he spoke with Plaintiffs’ counsel so that they could formulate an estimate of the approximate value of the assignment. (Suppl. Lezon Decl., ¶ 5.) The Settling Defendants’ counsel indicates that “to the extent that the Non-Settling Defendants failed to remediate any issues with the roof and the sprinkler system at the subject property, and to the extent that that failure resulted in the conditions of the subject property, as alleged in Plaintiffs’ operative complaint, Plaintiffs’ counsel and I have a good-faith estimate that the Non-Settling Defendants would be responsible for one-third of the $145,000 paid by Defendants to Plaintiffs in the settlement, or $48,333.00. In addition, Defendants paid $6,295 to effect repairs to the common areas that were the responsibility of the Non-Settling Defendants, such as the roof and sprinkler, which are estimated to total $6,295.” (Suppl. Lezon Decl., ¶ 7.)

In their opposition to the Settling Defendants’ supplemental declaration, the Non-Settling Defendants assert that “the settlement proceeds are being paid by Settling Defendants’ insurer Mercury and therefore, the rights are subrogated…Settling Defendants’ are without authority to assign the rights of the insurer.” (Opp’n to Supplemental Declaration at p. 2:11-14.) They note the settlement agreement provides, “[o]n behalf of DEFENDANTS, the total sum of One Hundred and Twenty Five Thousand Dollars ($125,000) will be paid by DEFENDANTS’ carrier, Mercury Insurance Company, to PLAINTIFFS.” (Lezon Decl., ¶ 10, Ex. 1, ¶ B (2.1).) The Court notes that the Non-Settling Defendants did not raise this argument in their original opposition to the instant motion. Thus, the Settling-Defendants have not had the opportunity to respond to it. 

The Non-Settling Defendants also note that the settlement agreement provides, “DEFENDANTS waive any and all rights to demand, receive, or collect PLAINTIFFS’ total rent that was past due on July 11, 2022,” and that “DEFENDANTS waive any and all rights to demand, receive, or collect rent from PLAINTIFFS that is due between July 12, 2022 and the date PLAINTIFFS vacate the SUBJECT PROPERTY.” (Original Lezon Decl., ¶ 10, Ex. 1, ¶¶ B (2.8, 2.9).) The Non-Settling Defendants assert they are entitled to credit for amounts of past due rent prior to July 11, 2022 as well as “after July 12, 2022 and the date of vacation of plaintiffs.” (Opp’n to Supplemental Declaration at p. 2:19-20.)

Lastly, the Non-Settling Defendants assert that “Settling Defendants did not set an amount of the settlement relating to the rent to determine if the amount contributes or detracts from the good faith determination.” (Opp’n to Supplemental Declaration at p. 3:4-5.) The Non-Settling Defendants did not raise this argument in their original opposition to the instant motion.

In light of the assertions raised by the Non-Settling Defendants for the first time in their opposition to the Settling Defendants’ supplemental declaration, the Court will permit the Settling Defendants to file and serve a surreply to this opposition on or before ____________, 2022. The hearing on this motion will be continued to ___________, 2022 at 2:00 p.m. in Dept. 50.

            The Settling Defendants are ordered to give notice of this order.

DATED:  October 5, 2022                             ________________________________

Hon. Teresa A. Beaudet

Judge, Los Angeles Superior Court