Opinion
NOT TO BE PUBLISHED
Santa Cruz County Super. Ct. No. CV145493
ELIA, J.Appellants Michael and Jill Corrigan, Corrigan Construction, and Michael Tansy appeal from an order dismissing their cross-complaint against respondents Robert and Patricia Pendo and Paul and Mary Savage, individually and as trustees of their respective family trusts. The underlying action resulted from landslides occurring on the 11 plaintiffs' property, resulting in damage to their six homes. Appellants contend that the trial court erred as a matter of law by finding a good-faith settlement between respondents and the plaintiffs, because the intent and effect of the settlement was to cut off appellants' indemnity and contribution rights against respondents. We find no abuse of discretion or inconsistency with the purpose and language of Code of Civil Procedure section 877.6. Accordingly, we will affirm the order of dismissal.
All further statutory references are to the Code of Civil Procedure.
The "Statement of the Case" in appellants' opening brief is of limited use, as it cites pleadings in lieu of evidence to support their factual assertions. Respondents assert some facts with no record reference at all. This court will disregard any material factual statements that are not supported by a citation to the record, as required by California Rules of Court, rule 8.204(a)(1)(C).
In the 1980s respondents owned 18 acres in Watsonville. A portion of that land, consisting of lots 19 to 24 in what later became a 31-lot subdivision, was referred to by respondents as the "Subject Property" and is at issue in this appeal. Respondents had bought their land in 1978 or 1979, but they did not conduct any development there. In 1981 they submitted a proposal to develop four lots on Jehl Street, which was not on or adjacent to the property where the landslide occurred. The City of Watsonville (City) rejected the proposal, and respondents decided to sell that property instead. They also proceeded to build an apartment complex on an adjacent parcel on Lassen Way. They found it necessary to remove dirt from that site, and the City planning department permitted them to place that dirt on the Subject Property. In 1985 the fill operation began; it involved placing the fill on lots 17 through 29 of the Subject Property and reconstructing a City bicycle path. The soil had been tested and found to have a safety factor of 1.02, which meant that it was not suitable for a structure.
In March 1988 respondents sold an option to purchase the Subject Property to OWOM, Inc., and they executed a "Notice of Non-Responsibility" stating that none of them was responsible for any claims arising from improvement work performed by OWOM on the property.
Respondents transferred title to OWOM on January 27, 1989, and within days, OWOM sold the property to Benno Pabst. The president of OWOM, David Wray, was a civil engineer. In the course of the transaction Wray advised Pabst that the soil needed to be compacted. According to Wray, he also disclosed to Pabst the inadequacy of the soil for construction. Pabst, however, stated that Wray had not told him that the fill embankment was unstable at the Subject Property or that the safety factor was inadequate for a housing development. According to Pabst, Wray stated that he had begun the engineering work and document preparation to subdivide the property and develop single-family residences there. Pabst conveyed title to Willowcreek Subdivision, a partnership in which he was the general partner.
From 1988 to 1992 Wray continued to provide engineering services to Willowcreek, and OWOM acted as project manager in the development work. Pabst removed the 1985 fill and replaced it with engineered soil compacted to 90 percent, as instructed by Wray. Pabst affirmed that respondents had no involvement in the construction of the Willowcreek Subdivision. Wray declared that OWOM performed no construction activities on the property at any time. Although it had proposed to consult on construction management to the subdivision, the proposal was not accepted, and other than a "limited cost analysis" in January 1993, OWOM conducted no activities there after the acquisition by the Willowcreek partnership.
In 1993 Pabst's lenders foreclosed on the property. In 1994, appellants purchased the project and plans from the banks and completed construction on the 31 lots. In 1995 and 1996 they sold the six houses on the Subject Property (lots 19 through 24) to the plaintiffs in the underlying lawsuit.
In constructing the homes appellants had used the improvement plans prepared by Wray in 1990. In 1998, the hillside behind lots 16, 17, and 18 gave way, causing significant damage to those three properties. The owners of lots 16 and 17 sued appellants (who had retained lot 18), and the action was eventually settled. One of the conditions of the settlement, that repair be made to prevent further slides, was apparently never fulfilled.
The settlement did not end the litigation, as residual disputes became the subject of an appeal in this court, H028192.
Between 2000 and 2002 landslides in nearby Struve Slough damaged the six lots constituting the Subject Property and threatened to cause further harm. Eleven plaintiffs residing on the six subject lots filed three lawsuits against appellants and others, but not against respondents. In each case appellants cross-complained for equitable indemnity against several parties, including respondents. The 11 plaintiffs settled with all defendants except appellants. In November 2005, however, the plaintiffs settled the balance of their claims against appellants for $850,000, and the three actions were dismissed.
Appellants' cross-complaint against respondents remained, however, with trial set for January 17, 2006. Respondents then settled with the plaintiffs for a total of $17,500 and moved for an order approving the settlement. On January 9, 2006, after a hearing, the trial court granted the motion, finding the settlement to have been made in good faith pursuant to section 877.6. The order included a dismissal of appellants' cross-complaints in all three cases.
This court summarily denied a petition for a writ of mandate following the trial court's order. Respondents now question the appealability of the order. Their suggestion that Main Fiber Products, Inc. v. Morgan & Franz Ins. Agency (1999) 73 Cal.App.4th 1130 precludes appellate review in the circumstances presented here is not well taken. That court, while emphasizing the statutory requirement that an aggrieved party proceed by writ petition, expressly declined to decide whether review will lie by appeal from the judgment if the appellant has already sought and been denied a writ of mandate. We will therefore follow Wilshire Ins. Co. v. Tuff Boy Holding, Inc. (2001) 86 Cal.App.4th 627, 635-637 and proceed with the merits on the assumption that appeal from an order approving a good-faith settlement is permitted following the appellate court's summary denial of a writ petition.
Appellants challenge the dismissal of their cross-complaint on the ground that the settlement between respondents and the plaintiffs did not include a setoff to appellants. In appellants' view, the purpose and effect of the settlement negotiated by respondents' attorney "obviously was to shield [respondents] [from] appellants' cross-complaints for contribution and comparative fault." Thus, appellants argue, the trial court's order was "manifestly unfair," as it "stripped" them of their ability to seek up to $850,000 in indemnity from respondents and provided a windfall to the plaintiffs.
1. Standard of Review
Appellants present the issue before us as a question of law subject to independent review. They acknowledge the general rule that judicial approval of a settlement is reviewed for abuse of discretion and that factual disputes are resolved in accordance with the lower court's judgment if supported by substantial evidence. (Norco Delivery Service, Inc. v. Owen-Corning Fiberglas, Inc. (1998) 64 Cal.App.4th 955, 962; cf. Erreca's v. Superior Court (1993) 19 Cal.App.4th 1475, 1489 [in good-faith settlement approval process, evaluating allocation of settlement proceeds is committed to trial court's sound discretion].) Appellants maintain that here the facts are undisputed, thus requiring only determination of whether the ruling here was "unfair and confiscatory" as a matter of law. The reason the settlement was unfair, according to appellants, is that they received no setoff attributable to respondents' liability. They do not take issue with the court's finding that the amount of the settlement was reasonable in light of respondents' liability for the damage caused by the landslides; indeed, they insist that this was "irrelevant."
The success of appellants' position, however, depends on a finding that respondents are liable for indemnity and contribution to appellants. The trial court impliedly found that respondents were not liable to appellants. The court's determination of reasonableness having been based on this predicate fact, its approval of the resulting settlement was a matter within its broad discretion. Accordingly, we review the ruling for abuse of that discretion.
2. Good-Faith Settlement Determination
In an action involving two or more alleged tortfeasors, a party who settles in good faith may be discharged from liability to a nonsettling defendant for equitable contribution or comparative indemnity. (§ 877.6, subds. (a), (b).) Subdivision (c) of the statute provides that a determination that a settlement has been made in good faith "shall bar any other joint tortfeasor . . . from any further claims against the settling tortfeasor . . . for equitable comparative contribution, or partial or comparative indemnity, based on comparative negligence or comparative fault."
Section 877.6 authorizes the court to determine the good faith of such settlements, thereby obviating the risk that the most culpable defendant will escape with an unreasonably low settlement that exposes the remaining defendants to a judgment in excess of their share of the liability. Good faith is determined by consideration of the "Tech-Bilt factors." (Tech-Bilt, Inc. v. Woodward-Clyde Associates (1985) 38 Cal.3d 488, 499.) One of the most important of these factors is the settling party's proportionate liability. (Toyota Motor Sales U.S.A., Inc. v. Superior Court (1990) 220 Cal.App.3d 864, 871.) " '[A] defendant's settlement figure must not be grossly disproportionate to what a reasonable person, at the time of the settlement, would estimate the settling defendant's liability to be.' [Citation.] The party asserting the lack of good faith, who has the burden of proof on that issue (§ 877.6, subd. (d)), should be permitted to demonstrate, if he can, that the settlement is so far 'out of the ballpark' in relation to these factors as to be inconsistent with the equitable objectives of the statute." (Tech-Bilt, Inc. v. Woodward-Clyde Associates, supra, 38 Cal.3d at pp. 499-500.)
Here the trial court determined that the settlement between respondents and the plaintiffs reflected respondents' proportionate degree of fault in causing the damage. Respondents' nonliability was attributable not just to the bar of the statute of limitations, but to the fact that they didn't develop the property, represent the property as suitable, or conduct any operations on the property after placing fill there, fill that was replaced when Pabst took title. As noted above, appellants do not challenge this finding.
They also do not directly take issue with the court's finding that no collusion occurred in the settlement. Indirectly, appellants do suggest collusion by asserting that the "obvious purpose" and effect of the settlement was to "cut off" their indemnity and contribution rights. Even if we were to consider this a developed argument, it would be unavailing, as no additional indemnity or contribution would have been available to appellants in any event in light of the trial court's judgment as to liability. The court stated that appellants had not demonstrated collusion or shown that the settlement was disproportionally low or otherwise unfair to them. While appellants insist that scrutiny of the settlement "cannot conceivably" meet the test of reasonableness and good faith, they offer no factual basis for finding otherwise. Respondents presented ample declaration evidence from expert engineers and percipient witnesses that respondents had no liability for the damage to plaintiffs' property. Instead, the soil movement was attributed to improvements that overstressed the main retaining wall, a defective underground drainage system, and improper maintenance of the subdivision since its construction. Respondents' original soils engineer, Harold Grice, described the opinion he prepared for respondents, in which he stated that the fill embankment had a factor of safety of 1.02, meaning that "the material will support itself only" and that "the material was slightly more than stable." Respondents' fill operation was completed in August 1985 as incidental fill, not structural fill for housing, and they did no more work on that site thereafter. Appellants were unable to establish any relationship between respondents and those associated with the later development of the property. Even when OWOM, Inc. was conducting tests in contemplation of acquiring the property for development, respondents executed a notice of non-responsibility regarding that operation. Respondents sold the option to OWOM as "unimproved land." Appellants used old plans created by Wray without permission or approval of deviations from those plans. Respondents offered to settle directly with appellants for $10,000 but appellants never responded. The $17,500 settlement reached with plaintiffs was close to the figure reached by the mediator for the liability of respondents and their soils engineer, Harold Grice, together.
Likewise, there was no showing of liability of respondents on appellants' cross-complaint. The court impliedly found not only that respondents were protected by the bar of the statute of limitations but that they bore no responsibility for which appellants could obtain indemnity. These points are not irrelevant and they vitiate appellants' argument on appeal. Here respondents' counsel represented that respondents were elderly and in precarious health and settled with the plaintiffs only to avoid the stress of proving their nonliability through a trial.
Appellants assume without argument that their cross-complaint was timely notwithstanding section 337.15, citing Tech-Bilt and Valley Circle Estates v. VTN Consolidated, Inc. (1983) 33 Cal.3d 604. Their reliance on these cases is misdirected. It is true that subdivision (c) of section 337.15 "clearly allows those parties who cannot be reached in a direct action to nonetheless be reached in a derivative action for indemnity pursuant to a cross-complaint brought in a direct action which has been timely filed under subdivision (a)." (Valley Circle Estates v. VTN Consolidated, Inc., supra, 33 Cal.3d at pp. 610-611.) However, this is not such a derivative action. In order to meet the exception stated in subdivision (c), the cross-complaint must have been filed pursuant to section 428.10, subdivision (b)—that is, it must have "arise[n] out of the same transaction, occurrence, or series of transactions or occurrences as the cause brought against [the cross complainant]." The cross-complaint at issue here is not transactionally related to the complaint; appellants do not argue otherwise in their reply brief. We agree with respondents that appellants' cross-complaint against them would have been barred by section 337.15, the applicable statute of limitations in this case. (Compare Valley Circle Estates v. VTN Consolidated, Inc., supra, 33 Cal.3d at pp. 610-611 [defendant contractor's cross-complaint against subcontractor timely where both participated in the same project for which contractor was timely sued and cross-complaint was for negligence in that project] with Sandy v. Superior Court (1998) 201 Cal.App.3d 1277, 1280 [cross-complaint for indemnity by developer against architect untimely where neither transactional relationship nor joint tortfeasor relationship between them existed].) To paraphrase this court's analysis in Sandy v. Superior Court, supra, 201 Cal.App.3d at page 1284, if the cross-complaint rests on the theory that the plaintiffs' damages are partly due to respondents' negligence back in 1985, section 337.15 bars the claim, whether it is the plaintiffs or appellants asserting that liability.
That appellants did not receive any benefit from the settlement between respondents and plaintiffs does not preclude a finding that the settlement between cross-defendants and the plaintiffs was in good faith. Given the amount of the settlement and appellants' apparent knowledge of ongoing settlement negotiations, the trial court could reasonably have concluded that the settlement amount was reasonable and that the agreement was not collusive and was made in good faith. If appellants had wanted to prevent any undue "windfall" to the plaintiffs, they could have negotiated a term addressing that contingency in their settlement agreement with the plaintiffs.
The plaintiffs' attorney submitted a declaration explaining that during the mediation there were no discussions of indemnity and contribution, and the settlement was not conditioned on appellants' pursuit of indemnity against respondents.
Respondents appropriately cite Widson v. International Harvester Co. (1984) 153 Cal.App.3d 45, 57 [superseded by statute on an unrelated point], where the appellate court determined that sections 877 and 877.6 made it "'very clear' [that] the cross-defendant in a multiparty suit may make a good faith settlement with the plaintiff before trial." Widson also addresses appellants' suggestion that the ruling in this case contravenes the public policy favoring settlement. The court observed that "the strong public policy expressed in sections 877 and 877.6 is to encourage settlement by permitting a defendant or cross-defendant to settle directly with the plaintiff even though the cross-defendant's exposure is contingent upon the initial liability of the main defendant. A cross-defendant should be given the opportunity to evaluate the exposure and to buy his or her peace if he can." (Id. at p. 58.) It also made no difference in that case that the plaintiff was unable to reach the cross-defendant because of the bar of the statute of limitations. In the Widson court's view, "It would be unreasonable to hold that because [the cross-defendant] was not a defendant it lost its ability to resolve its exposure to the plaintiff." (Id. at p. 58.) Furthermore, even the settling party's payment of less than its "theoretical proportion or fair share of the plaintiff's case does not necessarily make the settlement a bad faith settlement." (Ibid.)
Mattco Forge, Inc. v. Arthur Young & Co. (1995) 38 Cal.App.4th 1337 does not help appellants. There the trial court abused its discretion in finding a good-faith settlement because there was no examination of the settling defendant's proportionate liability; instead, the court relied solely on the appellant's denial of liability and its unwillingness to make a reasonable settlement offer to the plaintiff. Those circumstances are not presented here. Also inapposite is Be v. Western Truck Exchange (1997) 55 Cal.App.4th 1139, 1143, where the focus was the applicability of section 877 to postjudgment settlements. The court held that the statute was not applicable in such a case, as the policy of avoiding trials is not met when settlement follows trial. The trial court therefore had erroneously found a good-faith settlement and dismissed the cross-complaint.
We thus find no error in the trial court's finding of good faith and consequent approval of the settlement here. No abuse of discretion appears on this record.
Disposition
The order is affirmed. Costs on appeal are awarded to respondents.
WE CONCUR: RUSHING, P. J., PREMO, J.