Opinion
NOT TO BE PUBLISHED
APPEAL from a judgment of the Superior Court of San Diego County No. 37-2007-00081491- CU-BC-CTL, Linda B. Quinn, Judge.
BENKE, Acting P. J.
In this construction defect case the record shows respondent owed appellant a duty to defend a claim a third party made against appellant, that respondent failed to fulfill its duty to defend, and that appellant incurred a substantial amount in providing its own defense to the third party claim. Given this record, appellant was entitled to a trial on the issue of the amount of its damages. Thus, we reverse an amended judgment which foreclosed any determination of appellant's damages.
In reaching this disposition, we reject respondent's contention appellant could not move for a new trial following entry of an amended judgment and that therefore its appeal from an order denying the motion for new trial did not preserve its right to contest the merits of the amended judgment. We treat the amended judgment as having the effect of vacating a prior order granting appellant's motion for judgment notwithstanding the verdict, thereby substantially affecting appellant's rights and giving appellant the right to move for a new trial following entry of the amended judgment. Appellant filed a timely notice of appeal from the trial court's order denying its motion for new trial, thus preserving its right to appeal from the amended judgment.
FACTUAL AND PROCEDURAL BACKGROUND
1. Parties
Cross-complainant, cross-defendant and appellant Inland California, Inc. (Inland), is a general contractor and it was retained to convert a San Diego hotel property to a "timeshare" facility. Inland gave a demolition and drywall subcontract to Apache Construction, Inc. (Apache), and an electrical subcontract to cross-defendant, cross-complainant and respondent G.A. Abell, Inc., dba Precision Electric Company (Precision).
2. Litigation
a. Complaints and Cross-Complaints
After its work was complete, Apache submitted claims to Inland for extra demolition and drywall work it was required to perform. Inland refused to pay the claim for extra work and Apache initiated this litigation by filing a complaint against Inland.
Inland believed Apache's claims for extra work grew out of deficient electrical work performed by Precision and tendered defense of Apache's claim to Precision. Inland relied on a broad form indemnity clause in Precision's subcontract. Precision failed to provide Inland with any defense to Apache's claim and Inland filed a cross-complaint against Precision which sought express indemnity and declaratory relief.
In addition to filing a cross-complaint against Precision, Inland withheld $98,000 in progress payments which were otherwise due Precision. By way of its own cross-complaint against Inland, Precision sought the withheld progress payments from Inland.
b. Mediation and Jury Trial
Apache's initial claim for extra work was resolved by way of mediation prior to trial. As a result of the mediation, Inland paid Apache $275,000. According to Inland, it spent $174,000 defending the Apache claim.
Inland's and Precision's claims against each other were tried to a jury. The jury returned a special verdict form which was conflicting in many respects. Notwithstanding the conflicts, on appeal the parties agree that with respect to Inland's indemnity claim the jury determined: Inland was not entitled to indemnity for the amounts it paid Apache; Precision was however obligated to provide a defense to Apache's claims; nonetheless Inland did not timely tender defense of the Apache to Precision. Following the instructions and verdict form it was given, having determined Inland did not timely tender defense of the Apache claim to Precision, the jury made no determination as to how much damage Inland suffered by virtue of Precision's failure to defend the Apache claim.
At trial, Inland conceded Precision earned the $98,000 in progress payments Inland withheld. However, Inland argued that under the terms of the subcontract it had a right to withhold the payments until its indemnity claim against Precision was resolved and that Precision was not harmed by its retention of the progress payments. On these issues, the jury agreed with Inland: the jury found Precision did not suffer any delay or consequential damages and that Inland and Precision had a good faith dispute as to Precision's right to payment.
c. Posttrial Motions and Orders
The trial court accepted the jury's verdict and on April 8, 2009, entered a judgment in Precision's favor for $98,331. 27. The April 8 judgment awarded Precision its costs and attorney fees in an amount to be determined by way of posttrial motion. Precision served Inland with a notice of entry of judgment on April 13, 2009.
On April 22, 2009, Inland moved for a partial judgment notwithstanding the verdict (JNOV). In its motion, Inland argued its failure to timely provide Precision with notice of Apache's claim did not deprive it of its right to recover its reasonable defense costs from Precision. In a separate motion, Precision moved for an order determining it was the prevailing party and that as such it was entitled to recover its costs, including attorney fees.
On June 11, 2009, the trial court granted Inland's motion. By way of a minute order, the trial court stated: "[Inland's] Motion for Partial [JNOV] is granted. In this case, the verdict form is inaccurate which leads to confusion. Special Verdict Form Question 3 is inaccurate as there is no 'timeliness requirement.' "
In the same June 11, 2009 minute order in which it granted Inland's motion for a partial JNOV, the trial court granted Precision's cost and attorney fees motion: "[Precision] is determined to be the prevailing party. Precision achieved its litigation objectives by: 1) recovering the $98,331.27 in contract balance from Inland; and 2) successfully defending the indemnity claim. Precision is awarded reasonable attorney fees in the amount of $303,739.25 and costs in the amount of $23,832.09."
On June 19, 2009, Inland moved for reconsideration of the trial court's order determining Precision was the prevailing party and awarding Precision its costs and attorney fees. Inland argued that because the jury found Precision owed Inland a duty to defend and the trial court determined the duty to defend was not subject to any time limitations, the trial court could not determine which party was the prevailing party until it determined how much Precision owed Inland for breach of the duty to defend.
On July 8, 2009, the trial court entered an amended judgment which merely reflected its award of costs and attorney fees to Precision. The amended judgment made no reference to the trial court's intervening order granting Inland's motion for a partial JNOV, but was, with the exception of the award of costs and attorney fees, precisely the same judgment it entered on April 8, 2009.
On July 22, 2009, Inland filed a notice of intention to move for a new trial and notice of intention to vacate the amended judgment. Inland argued the trial court should vacate its amended judgment and conduct further proceedings limited to determination of its damages.
On July 24, 2009, the trial court denied Inland's motion for reconsideration. In a telephonic hearing, the trial court stated: "[T]he effect of the judgment notwithstanding the verdict, in the absence of a motion for a new trial, was, for [Inland], a victory without a prize."
On August 28, 2009, the trial court denied Inland's motions for a new trial and to vacate the judgment. The trial court found that its amended judgment did not alter Inland's substantial rights and accordingly did not extend the time in which Inland could make a motion for new trial. Accordingly, the trial court found Inland's motion for new trial was untimely. In denying the motion to vacate the amended judgment, the trial court stated: "Although the court granted Inland's JNOV, it does not change the ultimate result of the jury verdict and no amendment is necessary."
d. Notices of Appeal
Inland filed three notices of appeal. On August 7, 2009, it filed a notice of appeal from the trial court's order awarding Precision its costs and attorney fees. On September 9, 2009, Inland filed a notice of appeal from the July 8, 2009 amended judgment. On September 10, 2009, Inland filed a notice of appeal from the trial court's order denying its motion to vacate the amended judgment.
DISCUSSION
I
We begin with Precision's contention we have no power to review the merits of the trial court's amended judgment, but must limit Inland's appeal to its contention the trial court erred in determining Precision was the prevailing party and awarding Precision its costs and attorney fees. We find no such limitation on the scope of Inland's appeal.
A. Motions for New Trial
Code of Civil Procedure section 657 provides: "The verdict may be vacated and any other decision may be modified or vacated, in whole or in part, and a new or further trial granted on all or part of the issues, on the application of the party aggrieved, for any of the following causes, materially affecting the substantial rights of such party: [¶]... [¶]
"5. Excessive or inadequate damages."
As we have noted, by way of its motion for new trial, Inland argued the amended judgment was erroneous because it did not provide it with any damages for Precision's failure to provide it a defense. Thus, it was cognizable under Code of Civil Procedure section 657(5). Contrary to Precision's argument on appeal, the amended judgment was subject to a motion for new trial because it did substantially alter Inland's rights as they existed prior to entry of the amended judgment.
"There can be only one final judgment in an action. If for any reason a judgment is vacated and another and different judgment is entered in lieu thereof, as was the case here, the new and different judgment becomes the only judgment in the case. It furnishes the sole guide as to the respective rights and obligations of the parties to the action and is the judgment referred to in section 659 of the Code of Civil Procedure, wherein it is provided that new trial proceedings must be instituted 'within ten (10) days after receiving written notice of the entry of the judgment'. We entertain no doubt as to the appealability of such new and different judgment nor as to the extension of time for such appeal resulting from a subsequently and seasonably instituted proceeding for new trial." (Amell v. Amell (1937) 10 Cal.2d 153, 155; see also Moklofsky v. Moklofsy (1947) 79 Cal.App.2d 259, 264-265; Gossman v. Gossman (1942) 52 Cal.App.2d 184, 199.) The right to seek redress from a new or amended judgment is of course subject to the requirement that in fact the new judgment substantially alter the rights of the moving party. (See e.g. Torres v. City of San Diego (2007) 154 Cal.App.4th 214, 222 [time to appeal runs from amended judgment only when amended judgment changes substantial rights of party, determination of costs and attorney fees not substantial change].)
In our view, here the trial court did not alter its judgment once, but in fact the trial court modified its judgment twice. As we have noted and as Inland stresses, on June 11, 2009, the trial court granted Inland's motion for a partial JNOV, finding Precision's duty to defend was not subject to any time limitation and that the special verdict form was inaccurate. Upon filing the minute order granting the partial JNOV, the trial court modified its original judgment. (Catania v. Halcyon Steamship Co. (1975) 44 Cal.App.3d 348, 352 [judgment on motion for JNOV rendered when order granting JNOV entered in minutes and time period to challenge judgment commenced at that point]; see also Gossman v. Gossman, supra, 52 Cal.App.2d at pp. 196-197.) Importantly, the change effected by entry of the partial JNOV was substantive in that it recognized that Inland established its right to a defense to the Apache claim. Thus, from June 11, 2009, all the timeframes in which either party could challenge the judgment as modified by the order granting the JNOV commenced anew. (Catania v. Halcyon Steamship Co., supra, 44 Cal.App.3d at p. 352.)
As we have noted, the trial court thereafter entered an amended judgment on July 8, 2009. As we have also noted, the amended judgment made no reference to the trial court's intervening order granting the partial JNOV and instead repeated without material change the provisions of its original judgment. Unless we are to treat the order granting the partial JNOV as a complete nullity, we can only interpret the trial court's effective re-entry of its original judgment as a second modification of judgment. The second modification had the effect of vacating the modified judgment the trial court entered upon granting the partial JNOV. By effectively vacating what was Inland's success on its motion for a partial JNOV, the trial court again modified its judgment in a substantive manner and the time frames in which to challenge the new judgment commenced again upon its entry. (See Catania v. Halcyon Steamship Co., supra, 44 Cal.App.3d at p. 352.)
Thus, contrary to the trial court's later order denying Inland's motion for a new trial, the motion was timely and the time to appeal was extended to 30 days after entry of the trial court's order denying the motion. (Cal. Rules of Court, rule 8.108 (b)(A).) Inland filed its notice of appeal well within that period of time.
II
Turning to the merits of Inland's appeal, there is very little dispute. Civil Code section 2778(3) provides that in interpreting indemnity contracts, unless another intent appears: "An indemnity against claims, demands, or liability, expressly, or in other equivalent terms, embraces the costs of defense against such claims, demands, or liability incurred in good faith, and in the exercise of a reasonable discretion." Here the broad form indemnity Precision provided Inland is entirely consistent with Civil Code section 2778(3).
Under Civil Code section 2778(3), an indemnitee's failure to request a defense, or to notify the indemnitor of the third party action, and to then unilaterally conduct its own defense, does not forfeit the indemnitee's right to reimbursement of its defense costs. (City of Watsonville v. Corrigan (2007) 149 Cal.App.4th 1542, 1548-1549; see also Crawford v. Weather Shield Mfg., Inc. (2008) 44 Cal.4th 541, 557.) Where an indemnitee has not given notice of a claim, but has conducted its own defense, it must only prove its defense costs were incurred in good faith and in the exercise of reasonable discretion. (City of Watsonville v. Corrigan, supra, 149 Cal.App.4th at pp. 1548-1549.)
In light of the foregoing, the special verdict form was erroneous in first asking the jury to determine whether Inland made a timely request for a defense and, having found Inland's tender was untimely, then directing the jury not to determine whether Inland was damaged. Contrary to the special verdict form, Inland was entitled to recover the defense costs it incurred in good faith and reasonably, without regard to when it tendered the defense of the Apache claims to Precision. Thus, the jury having determined Inland was entitled to a defense, should have been permitted to determine the amount of defense costs Inland incurred. The amended judgment, which awarded no damages to Inland, was erroneous and the trial court should have granted Inland's motion for a new trial on the grounds Inland's damages were inadequate. (Code Civ. Proc., § 657(5).)
Thus, the amended judgment must be reversed and remanded for a determination of Inland's damages. Because Inland's damages for breach of the duty to defend may exceed the amount awarded to Precision, the trial court's determination Precision was the prevailing party must also be reversed. Once the trial court has determined Inland's damages, it must then, consistent with the provisions of Code of Civil Procedure section 1032, subdivision (a)(4), determine which party prevailed, if any, and accordingly which party, if any, is entitled to recover costs and attorney fees.
DISPOSITION
The amended judgment is reversed and remanded for further proceedings consistent with the views we have expressed.
WE CONCUR: McDONALD, J., McINTYRE, J.