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Developers Surety and Indemnity Company v. Old Auburn 2005

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA THIRD APPELLATE DISTRICT (Placer)


November 1, 2011

DEVELOPERS SURETY AND INDEMNITY COMPANY, CROSS-COMPLAINANT AND RESPONDENT,
v.
OLD AUBURN 2005, L.P., ET AL., CROSS-DEFENDANTS AND APPELLANTS.

(Super. Ct. No. SCV24220)

The opinion of the court was delivered by: Hull ,j.

Developers Surety and Indemnity Co. v. Old Auburn 2005

CA3

NOT TO BE PUBLISHED

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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

After defendant and cross-complainant Developers Surety and Indemnity Company (Developers) paid plaintiff J.D. Pasquetti, Inc. (Pasquetti) $225,000 in settlement of plaintiff's claims against Developers and defendant and cross-defendant Old Auburn 2005, L.P. (Old Auburn), arising out of a construction dispute, Developers sought and obtained summary judgment on its cross-complaint for indemnity against Old Auburn, Greg N. Vincent, Dawn R. Vincent-Tarantino, and Kelvin Homes (collectively Indemnitors). Indemnitors appeal, contending issues of fact exist as to various defenses they had to Pasquetti's underlying claims. In granting summary judgment, the trial court concluded those defenses were not at issue, because Indemnitors failed to raise any affirmative defenses to the cross-complaint.

We reverse. While the answer to the cross-complaint may not have raised any affirmative defenses, the cross-complaint itself alleged only that Developers is entitled to indemnity "[i]n the event Developers is held liable to [Pasquetti]." Because Developers voluntarily agreed to pay the $225,000, it was never "held liable" to Pasquetti. Hence, Developers is not entitled to summary judgment on the cross-complaint as alleged.

Facts and Proceedings

On November 20, 2007, Pasquetti entered into a contract with Old Auburn to perform construction work on Woodbridge Estates Unit 2, located at 3605 Old Auburn Road in Roseville (the Project).

On June 13, 2008, Indemnitors executed an indemnity agreement (the Indemnity Agreement) whereby they agreed to indemnify Developers "against any and all liability, loss, claims, demands, costs, damages, attorneys' fees and expenses . . . which [Developers] may sustain or incur by reason of or in consequence of the execution and delivery by [Developers] of any Bond on behalf of [Old Auburn] . . . ."

The following month, Developers issued a labor and materials bond on behalf of Old Auburn for the Project in the amount of $306,288 (the Bond).

On January 16, 2009, Pasquetti filed suit against Old Auburn, Developers and others for, among other things, breach of contract and recovery on the Bond. Pasquetti claimed it was owed $326,117.39 on the Project.

On March 23, 2009, Developers filed a cross-complaint against Indemnitors asserting, among other things, that, "[i]n the event Developers is held liable to J.D. Pasquetti, Inc. under the payment bond, Developers is entitled to complete indemnification from [Indemnitors] under the terms of the Indemnity Agreement."

On May 12, 2009, Old Auburn filed an answer to the complaint asserting six affirmative defenses, including negligence and fault by Pasquetti, failure to mitigate damages, comparative fault and willful misconduct.

On June 24, 2009, Indemnitors filed a general denial to the cross-complaint, including an assertion that they "reserve the right to assert affirmative defenses at a later date."

On or about November 24, 2009, Developers paid Pasquetti $225,000 in settlement of the complaint. On December 10, 2009, Pasquetti dismissed the complaint as to Developers and Old Auburn.

On March 12, 2010, Developers moved for summary judgment on its cross-complaint. Indemnitors filed opposition, asserting there were triable issues of fact on various defenses to the underlying claims by Pasquetti and whether the settlement with Pasquetti was reasonable. Developers responded that Indemnitors failed to raise any affirmative defenses to the cross-complaint and Developers had an absolute right under the Indemnity Agreement to settle with Pasquetti.

On July 19, 2010, the trial court granted Developers' motion for summary judgment. The court explained that, because Indemnitors failed to assert any affirmative defenses to the cross-complaint, the reasonableness of the settlement is not at issue. The court entered judgment for Developers in the amount of $225,000.

Discussion

Indemnitors contend the trial court erred in finding there are no triable issues of fact on the cross-complaint. They assert the Indemnity Agreement did not give Developers the power to settle with Pasquetti "'willy nilly' and without guidelines or parameters." Indemnitors argue Developers failed to abide by its own rules as set forth in the Indemnity Agreement. Presumably, this latter is a reference to the fact that Developers paid Pasquetti despite the fact Pasquetti failed to file a timely mechanics lien, as asserted earlier in Indemnitors' opening brief. Indemnitors further contend the cross-complaint alleges the Indemnity Agreement provides that, in the event Developers is "held liable" to Pasquetti under the bond, it is entitled to indemnity. But, Indemnitors argue, Developers was never "held liable" to Pasquetti. Instead, Developers voluntarily settled with Pasquetti. Finally, Indemnitors assert the matters they raised in opposition to Developers' motion regarding defenses to Pasquetti's complaint did not relate to affirmative defenses but go "to the heart and sole [sic] of the rights of [Developers] in settling this matter without consultation, approval or input by [Indemnitors]."

Developers counter that a summary judgment motion is restricted by the scope of the issues raised in the pleadings and, here, because Indemnitors failed to raise any affirmative defenses to the cross-complaint, any such purported defenses are not at issue. However, as it turns out, Developers here becomes the victim of its own argument.

"'The purpose of a summary judgment proceeding is to permit a party to show that material factual claims arising from the pleadings need not be tried because they are not in dispute.' [Citation.] 'The function of the pleadings in a motion for summary judgment is to delimit the scope of the issues: the function of the affidavits or declarations is to disclose whether there is any triable issue of fact within the issues delimited by the pleadings.'" (FPI Development, Inc. v. Nakashima (1991) 231 Cal.App.3d 367, 381.)

We independently review an order granting summary judgment, considering the evidence presented in support and opposition to the motion in the light most favorable to the nonmoving party. (Saelzler v. Advanced Group 400 (2001) 25 Cal.4th 763, 768; Hersant v. Department of Social Services (1997) 57 Cal.App.4th 997, 1001.) In performing our independent review function, "we apply the same three-step analysis as the trial court. First, we identify the issues framed by the pleadings. Next, we determine whether the moving party has established facts justifying judgment in its favor. Finally, if the moving party has carried its initial burden, we decide whether the opposing party has demonstrated the existence of a triable, material fact issue." (Chavez v. Carpenter (2001) 91 Cal.App.4th 1433, 1438.)

The cross-complaint contains three causes of action: (1) indemnity; (2) specific performance of a separate obligation to provide collateral security; and (3) declaratory relief. As the basis for its motion for summary judgment, Developers asserted "no triable issues of fact exist as to any material fact necessary to establish cross-defendants' liability for breach of the Indemnity Agreement . . . ." In its memorandum in support, Developers argued it is entitled to summary judgment on the first cause of action for breach of the indemnity agreement and third cause of action for declaratory relief as derivative of the first, thereby rendering resolution of the second cause of action moot. Thus, Developers essentially sought summary judgment on the first cause of action.

That claim alleges Developers issued the Bond for the Project and Indemnitors executed the Indemnity Agreement "under which [Indemnitors] agreed to indemnify Developers against any and all liability, loss, claims, demands, costs, damages, attorney's fees and expenses [Developers] incurs as a consequence of the issuance of the bond." It further alleges Developers has been named a defendant in the complaint, which alleges Pasquetti provided labor and materials for the Project for which it was not paid and for which Developers is liable under the Bond. Finally, the complaint alleges: "In the event Developers is held liable to J.D. Pasquetti, Inc. under the payment bond, Developers is entitled to complete indemnification from [Indemnitors] under the terms of the Indemnity Agreement." (Italics added.)

To underscore the foregoing, the third cause of action, which Developers asserts is derivative of the first, alleges a dispute has arisen between the parties, to wit: "Developers claims that any damages awarded to J.D. Pasquetti, Inc. in the underlying action are the obligation of [Indemnitors], whereas Developers believes that [Indemnitors] claim that any damages recovered by J.D. Pasquetti, Inc. in the underlying action are the obligation of Developers under the payment bond." (Italics added.)

When Indemnitors filed their general denial to the cross-complaint, they were denying the foregoing allegations. Although Indemnitors did not assert any affirmative defenses relating to defenses Old Auburn might have had to the claims of Pasquetti, those defenses would presumably have to be resolved in determining whether Developers is "held liable" to Pasquetti under the Bond or whether Pasquetti is "awarded" anything in the underlying action. A party who voluntarily pays an opposing party is not "held liable" to such party and such party is not "awarded" the payment, under the ordinary and common meaning of those terms.

In their separate statement in support of summary judgment, Developers asserted the provisions of the Indemnity Agreement gave it absolute discretion to determine whether any claims under the Bond shall be paid. Indemnitors failed to respond to Developers' separate statement and, therefore, failed to refute this fact. However, this is a fact that is not put in issue by the pleadings. Developers did not allege it is entitled to indemnity for any amount paid on the Bond.

If the trial court is to hold Indemnitors strictly to the language of their answer, then Developers must likewise be held strictly to the language of its cross-complaint. In this instance, the cross-complaint alleged Indemnitors are required to indemnify Developers in the event Developers is "held liable" on Pasquetti's claims. Developers' motion for summary judgment did not establish that they were "held liable" to Pasquetti. Hence, Developers was not entitled to summary judgment.

Disposition

The judgment is reversed and the matter is remanded to the trial court with directions to vacate its order granting Developers' motion for summary judgment and to enter a new order denying the motion. Indemnitors are entitled to their costs on appeal.

We concur: BLEASE , Acting P.J. MURRAY , J.

20111101

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