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Mega RV Corp. v. HWH Corp.

California Court of Appeals, Fourth District, Third Division

April 30, 2014

MEGA RV CORPORATION, Cross-complainant, Cross-defendant and Appellant,
v.
HWH CORPORATION, Cross-defendant, Cross-complainant and Respondent.

Appeal from a judgment of the Superior Court of Orange County No. 30-2007-00100242, Jamoa A. Moberly, Judge.

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COUNSEL

Adam K. Obeid for Cross-complainant, Cross-defendant and Appellant.

David B. Dimitruk for Cross-defendant, Cross-complainant and Respondent.

OPINION

IKOLA, J.

This case began with a prosaic dispute. John and Dawn Ertz (collectively the Ertzes) purchased a motor home from retailer Mega RV Corporation (Mega RV). Citing alleged defects in the motor home, the Ertzes sued Mega RV, Country Coach, L.L.C. (Country Coach; the manufacturer of the motor home), and Bank of America, N.A. (Bank of America; the financier of the transaction) under the Song-Beverly Consumer Warranty Act (Act; Civ. Code, § 1790 et seq.).[1] Mega RV seemingly had little to fear. According to Mega RV’s appellate brief, “Country Coach was providing Mega RV with defense and indemnity in this case pursuant to contract and statute.”

Unfortunately for all parties to this case, an involuntary bankruptcy petition was filed against Country Coach in 2009. Suddenly, Mega RV faced the prospect of paying for its own defense and for any award of damages and attorney fees obtained by the Ertzes under the Act. (See § 1794.)

Mega RV devised a clever response to its predicament. Citing section 1792, which states in relevant part that “[t]he retail seller shall have a right of indemnity against the manufacturer in the amount of any liability under this section, ” Mega RV posited that component part manufacturers (not just the ultimate manufacturer of the final consumer good) are subject to liability and indemnity obligations under the Act. HWH Corporation (HWH) manufactured hydraulic components incorporated by Country Coach into the motor home ultimately sold to the Ertzes by Mega RV. Mega RV filed a cross-complaint against HWH, seeking total or partial indemnification from HWH under the Act.

But Mega RV’s stratagem backfired. The trial court concluded HWH was not required to indemnify Mega RV under the Act for any relief obtained by

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the Ertzes. Moreover, ruling on HWH’s cross-complaint, the court awarded $166,000 in damages to HWH and against Mega RV, reasoning that the “tort of another” doctrine justified this departure from the typical rule that a party pays its own attorney fees.

We agree with the portion of the judgment declaring that Mega RV is not entitled to indemnity from HWH. As we shall explain, a component part manufacturer is only subject to section 1792 obligations if it has provided an express warranty to the consumer pertaining to the component part at issue. But we disagree with the court’s application of the tort of another doctrine. We therefore strike the award of damages to HWH and affirm the judgment as modified.

FACTS

Pre-trial Procedural History

The Ertzes’ initial complaint was filed in December 2007; a first amended complaint was filed in October 2008. Both complaints featured causes of action under the Act and alternative causes of action under the California Uniform Commercial Code. The only difference between the two complaints was the addition of Bank of America as a defendant in the first amended complaint, alongside Country Coach and Mega RV.

An involuntary bankruptcy petition was filed against Country Coach in 2009. Mega RV moved to compel the joinder of HWH as a defendant in June 2010. The court granted the motion, thereby compelling plaintiffs (the Ertzes) to name HWH as a defendant. HWH was named as a defendant in the Ertzes’ December 2010 second amended complaint.

Mega RV’s August 2010 cross-complaint sought indemnity from HWH as well as declaratory relief. The key paragraph in Mega RV’s cross-complaint alleged as follows: The motor home “was designed and manufactured by Country Coach, integrating hydraulic systems and hydraulic parts... designed and manufactured by HWH. Specifically, the hydraulic system, hydraulic lines, and hydraulic parts that comprise the mechanisms that move the [motor home’s] slide outs were manufactured and supplied by HWH. Moreover, HWH provided an express warranty... for each of the hydraulic systems, hydraulic lines and hydraulic parts that it manufactured and which were integrated into the design and manufacture of the [motor home].” (Italics added.) Mega RV alleged it was entitled to indemnity under section 1792 based on an alleged breach of the implied warranty of merchantability by HWH.

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In its cross-complaint for declaratory relief and equitable indemnity, HWH contended the Act did not apply to it for several reasons, among which was the following allegation: The Act “does not apply to HWH because HWH did not issue an express warranty... to Country Coach, the Ertzes or Mega RV.” As part of its equitable indemnity cause of action, HWH alleged that cross-defendants (including Mega RV and the Ertzes) “were negligent in the way they either designed or manufactured the motor home or its component parts, diagnosed the causes and conditions in the motor home, and effectuated and failed to effectuate repairs to the motor home.... [S]uch negligence (1) caused the Ertz[es] damages, if any, (2) also caused the conditions in the motor home to not be repaired on which the Ertz[es] base their lawsuit against Mega RV, and (3) impaired HWH’s rights to effectuate repairs, if it was required to do so at all, and avoid the costs of this lawsuit.”

In June 2011, HWH and the Ertzes entered into a settlement agreement. Pursuant to the settlement agreement, the Ertzes paid HWH $2, 000 and dismissed HWH from the lawsuit with prejudice in exchange for a release of all claims by HWH. As recited in the settlement agreement, the Ertzes “independently determined to their own satisfaction that HWH... did not cause or contribute to causing the hydraulic leaks that... the Motor Home [is alleged to have] sustained.” The court denied HWH’s Code of Civil Procedure section 877.6 motion for an order determining the settlement was in good faith.

Just before trial was set to begin, the Ertzes, Mega RV, and Bank of America agreed to submit the matter to binding arbitration. The court stayed Mega RV’s cross-complaint against HWH. But HWH opposed a stay of the trial on its cross-complaint. The court allowed HWH’s cross-complaint to proceed to a separate trial (even though it was premised on indemnity and declaratory relief issues that only needed to be decided if the Ertzes established the liability of Mega RV in the first place).[2]

Evidence at Trial

HWH is located in Iowa. HWH does not manufacture motor homes. HWH manufactures component parts and supplies those parts (primarily “leveling systems and slide-out mechanisms”) to manufacturers of motor homes (and other vehicles). HWH does not manufacture every part used in its slide-out hydraulic systems. For instance, HWH purchases hoses from Eaton Corporation and Parker Hannifin Corporation. HWH has sold components to Country Coach for more than 20 years. Country Coach placed purchase orders and

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HWH shipped the components from Iowa to Country Coach in Oregon by common carrier. HWH did not provide engineering services to Country Coach regarding the construction of its motor homes.

At all relevant times, Mega RV was an authorized Country Coach warranty repair and service center, but was not an authorized HWH warranty repair or service center. Country Coach maintained a policy of requesting its warranty repair providers to send replaced parts to Country Coach, in part to effectuate reimbursement from the manufacturer of the part or component when appropriate.

The Country Coach motor home purchased by the Ertzes from Mega RV featured four slide-out rooms. A slide-out is a box that extends from the motor home to provide additional living space. Hydraulic components sold by HWH to Country Coach were integral to the operation of the slide-out rooms in the Ertzes’ motor home.

John Ertz received two written warranties from Country Coach at the time he purchased the motor home. There is no mention in John’s testimony about any warranty from HWH. Much of John’s testimony pertains to the problems he had with his motor home and the efforts undertaken to repair his motor home. HWH is not mentioned during this testimony. John does not recall receiving any communications at any time from HWH. John did not attempt to notify HWH at any time of problems with his motor ...


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