Judge: William D. Claster, Case: 30-2017-00931609-CU-OR-CJC, Date: 2022-08-05 Tentative Ruling
Defendant/Cross-Complainant Adam E Wolfenden dba Wolf Construction's Notice of Motion and Motion to Contest Good the Faith of Alejandro Rubalcava dba Aruba Construction, Dan Marrufo dba Dyna-Lux Electric, Alltops, Inc. dba All-Tops Roofing, and Qwest Drywall's Joint Settlement ROA 923
Adam E. Wolfenden dba Wolf Construction moves to contest the application for good faith determination of good faith settlement filed by Alejandro Rubalcava dba Aruba Construction; Dan Marrufo dba Dyna-Lux Electric; Alltops, Inc. dba All-Tops Roofing; and Qwest Drywall (collectively, the “Settling Parties”). For the reasons set forth below, Wolfenden’s motion is DENIED.
I. Factual and Procedural Background
The underlying complaint in this action sounds in negligence, contract, and misrepresentation. Defendant Boss Ventures owned a property in Laguna Beach consisting of two separate cottages on one parcel. It hired Wolfenden, a licensed general contractor, to remodel the property. The Settling Parties here were subcontractors hired by Wolfenden.
When the remodel was complete, Boss Ventures listed the property for sale, with defendant Villa Real Estate as the listing agent. The property was eventually sold to plaintiffs Richard and Amy Fulford. After closing, the Fulfords allegedly found (1) that the remodeling work was defective, and (2) that the property was smaller than the 1,550 square feet represented in the listing. In the operative 4AC, the Fulfords bring five causes of action:
As usual in construction defect actions, a number of cross-complaints and Doe amendments followed.
The Fulfords and the Settling Parties reached a settlement. In exchange for a release of the Fulfords’ claims, the Settling Parties will pay the Fulfords a total of $35,000: $12,500 from Aruba, $12,500 from Qwest, $5,000 from Dyna-Lux, and $5,000 from All-Tops. The Settling Parties applied for a determination of good faith (ROA 869), and Wolfenden moved to contest the application (ROA 923).
II. Standard of Review
The factors to be considered in determining whether a settlement was reached in good faith are set forth in Tech-Bilt, Inc. v. Woodward-Clyde & Associates (1985) 38 Cal. 3d 488, 499. They include:
Where, as here, the good faith of a settlement is contested, the opposing party bears the initial burden of putting on evidence the settlement was not reached in good faith, at which point the moving party must come forward with evidence of good faith. (City of Grand Terrace v. Superior Court (1987) 192 Cal.App.3d 1251, 1261-1262.) The question of whether a settlement was reached in good faith must be decided on the basis of information available at the time of settlement. (Tech-Bilt, supra, 38 Cal.3d at p. 499.) “The ultimate determinant of good faith is whether the settlement is grossly disproportionate to what a reasonable person at the time of settlement would estimate the settlor’s liability to be.” (City of Grand Terrace, supra, 192 Cal.App.3d at p. 1262.)
In his reply, Wolfenden contends the settlement must be allocated on a defect-by-defect basis, or between alleged repair costs and alleged financial losses. He further argues that until the Settling Parties make such an allocation and support it with evidence, he bears no burden at all on this motion. The Court rejects this argument for the reasons set forth in its ruling on the good faith motion filed by Boss Ventures and Villa (ROA 876): allocation is not required at the good faith determination stage. Accordingly, Wolfenden bears the usual initial burden of demonstrating the settlement was not reached in good faith.
III. Discussion
Wolfenden fails to meet his initial burden to show the settlement was not reached in good faith, i.e., that it is grossly disproportionate to what a reasonable person would estimate the Settling Parties’ liability to be.
As in the Boss Ventures/Villa motion, Wolfenden’s argument centers on the discrepancy between the Fulfords’ claimed damages of $1,253,483.03 and the amount the Settling Parties are paying in settlement (here, less than 5% of that figure). More specifically, Wolfenden’s expert estimated each of the Settling Parties’ exposure by comparing the claimed damages/costs of repair to each Settling Party’s scope of work. (See generally Lum Decl.) He provides the following liability estimates:
· Aruba: $60,450.31 (against a settlement of $12,500)
· Dyna-Lux: $23,582.78 (against a settlement of $5,000)
· All-Tops: $34,127.09 (against a settlement of $5,000)
Wolfenden’s expert’s declaration contains no similar analysis for Qwest.
This analysis is flawed because it rests entirely on the Fulfords’ claimed damages, i.e., the most plaintiff-friendly figure possible. As the Court explained in the earlier order, Wolfenden ignores his own argument, advanced elsewhere (ROA 790), that the Fulfords may not recover anything approaching this amount. Among other things, Wolfenden maintains that the Fulfords knew of the defects at issue when they purchased the property, and they used those defects as grounds to negotiate the sale price down.
As explained in Stambaugh v. Superior Court (1976) 62 Cal.App.3d 231, a settlor’s “good faith will not be determined by the proportion his settlement bears to the damages of the claimant. For the damages are often speculative, and the probability of legal liability therefor is often uncertain or remote.” (Id., at p. 238. Wolfenden argues Stambaugh is irreconcilable with Tech-Bilt, but Tech-Bilt quotes Stambaugh’s discussion of speculative damages approvingly. See 38 Cal.3d at p. 499.) Because his expert’s analysis is based on the Fulfords’ claimed damages rather than a realistic assessment of the Fulfords’ potential recovery, Wolfenden has not met his initial burden of showing the settlement is so far “out of the ballpark” that it was not made in good faith.