Opinion
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
Sonoma County Super. Ct. No. SCV 232841
Jones, P.J.
Sandra Louise Noble, a bail bond agent, and American Surety Company (ASC) were the named defendants in an action for the wrongful arrest of a man for whom Noble had written two bail bonds (the Saldana action). ASC was the surety for bail bonds written by Noble as sub agent for ASC’s direct agent, A&L Bail Bonds. After the Saldana action settled, ASC brought an action against A&L Bail Bonds and its owner, Alina Sierra Castor (collectively, Castor), to recover settlement costs and attorney fees it incurred in defending the Saldana action. Castor cross-complained against ASC and Noble for equitable indemnity of those costs and fees. Noble cross-complained against Castor for reimbursement of business expenses in an unrelated bail bond matter.
The judgment following a court trial ordered that ASC recover $184,231.37 from Castor as damages for the Saldana action and the present action; that Castor was entitled to an offset of $52,327.90 by way of her cross-complaint against ASC; that Castor recover $65,613 from Noble as partial equitable indemnity by way of her cross-complaint against Noble; and that Noble take nothing by way of her cross-complaint against Castor.
Noble appeals the judgment ordering her to indemnify Castor and awarding her nothing in her cross-complaint. She contends the court’s findings do not support a conclusion that Castor was entitled to indemnification from her, that the court’s findings are not supported by substantial evidence, and that the court’s statement of decision is defective for failing to explain why she was not entitled to reimbursement of business expenses from Castor.
Castor cross-appeals against Noble, contending the court erroneously excluded evidence that would have entitled her to a larger amount of indemnification from Noble. Alternatively, she contends the court’s amount of indemnification awarded is disproportionate to Noble’s fault, and that there is insufficient evidence to support the court’s finding that she was partially responsible for ASC’s damages.
Castor has not appealed the judgment as to ASC.
BACKGROUND
The Parties and the Bail Bond Business
Respondent Castor is a bail bond agent who, with her late husband Larry Castor, established a bail bond agency in Rohnert Park in 1991 under the name of Alina Larry Bail Bonds. It is familiarly known as A&L Bail Bonds.
Larry Castor died in an automobile accident on March 8, 1997. He was never a party to this action.
American Surety Company (ASC) is a bail bond surety which backed bail arranged by A&L Bail Bonds. A bail bond business posts bail for a criminal defendant in the penal amount set by the arraigning court. The defendant must normally pay 10 percent of the penal amount of the bail, e.g., if bail is set at $10,000, the defendant must pay a “premium” of $1,000 to have a bond posted. If the defendant fails to appear as scheduled, bail is forfeited, making the surety statutorily obligated for the full penal amount of the bail. The agent also usually requires the defendant to put up some collateral, such as a lien on property, before agreeing to write a bail bond. The forfeited bail can be exonerated by surrender or apprehension of the defendant.
In exchange for the surety’s promise to stand behind the full penal amount, the agent agrees to indemnify the surety for any costs incurred from the writing of bail. The surety also receives 10 percent of the premium, e.g., $100 in the $10,000 bail example, as costs of the bail bond.
Another 10 percent of the premium, e.g., $100 in the $10,000 bail example, is set aside by the surety in an indemnity fund, commonly known as a “build-up fund” or “BUF,” which is held for the agent’s benefit. The agent retains the remaining 80 percent of the premium, e.g., $800 in the $10,000 bail example, as compensation. The agent owns the BUF, but the surety holds it as a fiduciary. By statute and contract, the surety may use the BUF to defray costs that might arise from the agent who is writing the bail bonds. Generally, an agent is contractually obligated to indemnify or reimburse the surety if the surety incurs costs that arise from writing the bail.
Appellant Noble was a friend of Castor whom the Castors first employed as a bail solicitor. She became a licensed bail bond agent in 1992. Thereafter, she and the Castors entered into an oral agreement whereby she set up an office in Santa Cruz to write bonds which she obtained from the Castors. The office was to serve Santa Cruz and Santa Clara Counties.
1994 Agreement
In 1993, ASC and the Castors executed a bail bond agreement by which the Castors agreed to be 100 percent liable for all costs incurred from bonds written under the agreement. Noble was not a party to this agreement.
On January 26, 1994, ASC, as “company,” Noble, as “representative,” and the Castors, as “associated representative,” entered into another bail bond agreement. Under the contract “representative” and “associated representative” were sometimes collectively referred to as the “representative parties.” The general purpose of the agreement was for ASC to appoint Nobel “solely for the purpose of executing bail bonds and binding [ASC]” on those bonds in California.
Section 3(b) of the agreement imposed a duty on the “representative” to, inter alia, use “good faith best efforts” to carry out the terms, conditions and intent of the agreement in an efficient and profitable manner and to deal fairly and in good faith with ASC in all respects.
Section 11 of the agreement required the representative to notify ASC immediately of any bond forfeiture, and to then take any action directed by ASC. It permitted ASC to then take one of several actions, including having the representative pay the forfeiture directly, having the forfeiture paid from the BUF, or having the representative reimburse the company.
Section 17 of the agreement provided that the Castors were jointly and severally 100 percent liable to indemnify ASC for all costs incurred in writing a bail bond and Noble would have zero liability. Section 17 also stated that ASC’s rights thereunder “shall be in addition to, and not in derogation of, any and all liabilities the representative parties may otherwise have at law and/or equity for nonperformance of the agreement.”
Thereafter, when Noble wrote a bail bond, the amount representing 10 percent of the premium set aside for the BUF was put into an account for A&L Bail Bonds. Other than the 10 percent for the BUF and the 10 percent paid to ASC as the cost of the bail bond, Noble retained the balance of the premium; none of it went to A&L Bail Bonds. ASC considered A&L Bail Bonds its direct agent and Noble a sub agent for A&L Bail Bonds.
Saldana Litigation
In January 1997 Noble, advertising as Noble Bail Bonds, issued two bail bonds to Armando Saldana. When Saldana failed to appear as scheduled in San Jose, the court issued a bail forfeiture notice to Noble. In March 1997, Noble apprehended Saldana with the assistance of fugitive apprehension agents. His bail was reset at a higher amount, and he arranged for a different bail bond agent to post the bond. According to a complaint Saldana filed with the Insurance Commissioner against Noble in June 1997, his decision to use a different agent provoked an angry reaction from Noble.
The apprehension occurred during the same week Noble was assisting Castor make arrangements for Larry Castor’s funeral.
Michael Whitlock is ASC’s vice president of marketing whose duties include supervising ASC agents. Noble notified Whitlock of Saldana’s complaint to the Insurance Commissioner, and on June 19, 1997, he notified Castor of it. His letter reminded her that she was an in demnitor under the 1994 bail agreement and informed her that she would be responsible to reimburse ASC for all costs incurred in the defense of any legal action taken by Saldana. He received no reply from her contesting her in demnitor status.
On October 23, 1997, Noble terminated her association with A&L Bail Bonds. On October 28, 1997, Whitlock, on behalf of ASC, and Noble executed a contract making her a direct agent of ASC.
In March 1998, Saldana filed a lawsuit against Noble and ASC alleging various tort causes of action, all stemming from his apprehension by Noble and its aftermath. Whitlock telephoned Noble to inform her of the suit, and she telephoned Castor. Noble testified that she asked Castor “what do you want me to do?” Castor replied that Noble would have to talk to ASC about the matter, and then hung up.
On March 23, 1998, Whitlock sent Noble the Saldana summons and complaint. His accompanying letter stated that ASC would hold Castor liable for any losses, costs or expenses associated with the Saldana action under the 1994 bail bond agreement. He copied the letter and summons to Castor. He never received a communication from Castor challenging her responsibility for the lawsuit costs. Castor never intervened in the Saldana action.
ASC, which is headquartered in Indiana, had no retained counsel in San Francisco in 1998. After Whitlock received the Saldana summons and complaint and informed Castor and Noble of them, he asked Noble if she could recommend an attorney to defend the action. Noble obtained the name of Jeffrey Kirk from several Santa Cruz criminal defense attorneys with whom she had worked. She spoke to Kirk and gave his name and phone number to Whitlock as an attorney he might want to contact. On April 4, 1998, Kirk and Whitlock on behalf of ASC executed a retainer agreement. Castor had no involvement in Kirk’s selection.
Apparently Whitlock did not ask ASC’s local business agent, whose office was then in Burlingame, to recommend an attorney.
On April 16, 1998, Whitlock notified Castor by letter that ASC had withdrawn $2,000 from her BUF to pay attorney fees in the Saldana litigation.
This sum apparently represented the initial retainer fee to Kirk.
Castor testified that shortly after she learned that Kirk had been retained, she telephoned Whitlock to ask who had engaged Kirk. Whitlock replied that ASC made the decision; it was not Castor’s decision to make.
On April 22, 1998, Castor sent a letter to John (Jack) Whitlock, Michael Whitlock’s father and one of the founding partners of ASC. Her letter complained that it was inappropriate to have excluded her from “these discussions,” given that, according to the bail bond agreement, she would ultimately be liable for the expenses of the Saldana lawsuit. She was referring to discussions between Noble and Michael Whitlock. Prior to sending the letter she had discussed the issue of her liability with Michael Whitlock, and he had made it clear to her that ASC expected her to be ultimately responsible for the costs of the Saldana lawsuit. She sent it to Jack Whitlock rather than Michael Whitlock because Jack Whitlock had signed up her husband Larry as an ASC agent and they dealt more often with Jack Whitlock. She did not copy the letter to Noble.
Jack Whitlock sent Castor’s letter to Michael Whitlock, with the notation that “if she’s liable, she has to be in the loop.” Michael Whitlock understood the notation to mean that Castor needed to be kept informed of the progress of the Saldana litigation. On April 24, Michael Whitlock wrote Castor telling her that if ASC ever learned that Noble acted inappropriately in apprehending Saldana, ASC would consider using separate counsel. He also informed her ASC was using her BUF to fund attorney fees, and he invited her to discuss any concerns about the attorney ASC selected to defend the Saldana action. Thereafter, he communicated to her the actions being taken, e.g., discovery requests, pleadings, and he copied the documents to her. He also notified her in writing every time ASC paid an attorney bill from her BUF, with a copy of the payment check, e.g., June 10 and November 16, 1998, July 17 and September 5, 1999, August 10 and August 30, 2000. He included copies of progress reports from Kirk.
Castor testified that she had three telephone conversations with attorney Kirk. In one he telephoned to obtain information from her; in one he informed her of an upcoming settlement conference; and in one he telephoned to say there was no settlement. He did not ask her to participate in the settlement. He refused to answer any of her questions because she was not his client. She did not consult with any other attorney about needing her own representation in the Saldana action.
Shortly before October 10, 2000, Kirk terminated his defense of the Saldana action to take a job with a corporation. During his retention, Castor expressed to Michael Whitlock her concern that Noble had recommended Kirk, and, as Whitlock testified, “there was some friction there.” Kirk’s departure, Whitlock felt, gave Castor the opportunity to recommend a defense attorney. He notified Noble and Castor that ASC was seeking new counsel. He made clear to Castor that ASC would have “final say” in the selection of its attorney, the same position it took regarding attorneys when the litigation began. In November 2000, Whitlock executed a retainer agreement with Jon Zimmerman of the firm of Robinson and Woods. Castor had recommended Zimmerman, with whom she had consulted the previous month regarding her belief that Noble was at fault in the Saldana matter. Whitlock instructed Zimmerman to copy all filings except billings to Castor because it was important that she, as in demnitor on the 1994 bail bond agreement, be “kept in the loop.”
After Zimmerman’s retention, Whitlock continued to notify Castor by letter of ASC’s withdrawals from her BUF to reimburse ASC for fees and expenses it had incurred in the Saldana litigation, e.g., April 3, April 4, November 16, 2001, January 14, 2002. His letters invited her to call him if she had any questions; he received no inquiries from her. The last withdrawal was February 27, 2002.
During the course of the Saldana litigation, Castor’s BUF was depleted, as Whitlock informed her. Over the course of the Saldana litigation Castor frequently expressed her belief to Whitlock that Noble was liable for the Saldana action and should be paying for the lawsuit. She never provided Whitlock any evidence that Noble was responsible for the costs ASC incurred in defending and settling the Saldana case.
The Saldana case settled in January 2002. ASC funded the settlement and paid defense costs, which exceeded Castor’s BUF. On September 20, 2002, Whitlock, on behalf of ASC, demanded reimbursement of $124,231.37 for ASC’s out of pocket expenses in the Saldana litigation. The present action ensued when Castor rejected the demand.
Present Action
a. ASC Complaint
ASC brought an action against Castor for breach of the 1994 bail bond agreement. It sought damages of $131,231.37, which represented the balance of its loss: the amount it paid in fees and expenses in the Saldana case, minus the sums it removed from Castor’s BUF, pursuant to its right to do so under the agreement. It also sought attorney fees and costs of collecting its loss.
b. Castor Cross-Complaint
Castor cross-complained against ASC and Noble for equitable indemnity and comparative contribution, declaratory relief, and breach of the 1994 bail bond agreement. As amended, her cross-complaint made the following general allegations: Noble became an independent agent of A&L Bail Bonds in 1991 and continued as such until October 28, 1997. As consideration for her independent agency with A&L Bail Bonds and supply of bail bonds from A&L Bail Bonds, Noble paid a percentage of A&L Bail Bonds’s bond costs and agreed to assume all liability in connection with certain bonds she issued as an independent bail agent operating in a designated territory. The 1994 bail bond agreement permitted ASC to ask for reimbursement from Noble under its special indemnity provisions. Throughout her agency, Noble paid the percentage of the bond fee of each bond supplied by A&L Bail Bonds and assumed all liability in connection with those bonds. From the inception of the Saldana case, Castor notified ASC and Noble that Noble’s defense and indemnity should not be paid from A&L Bail Bonds’s BUF; that Noble should be accountable for her actions and pay her defense and indemnity; and that ASC should ask Noble to pay for her indemnity and defense. She also raised the issue of conflict of interest, requested separate attorneys, asked to retain counsel, and requested to be included in the management of the litigation. ASC and Noble did not thereafter comply with her requests. Noble promised Castor that she would reimburse A&L Bail Bonds from the proceeds on the collateral that Saldana’s parents had put up on the bail bond she issued to Saldana. ASC and Noble failed to manage and control the Saldana litigation properly, incurring unnecessary fees and expenses, and excluded her from participating in the management and control of the litigation. Had A&L Bail Bonds been allowed to participate, it would have acted in a manner that would have substantially reduced the fees incurred in the litigation. Noble proposed reimbursement in April 1998 but never reimbursed Castor for her acts that created the liability. ASC and Noble suppressed the January 2002 settlement from Castor. Within the past four years ASC has wrongfully deducted expenses and costs from A&L Bail Bond’s BUF so as to exhaust that account, despite Castor’s objection thereto.
Castor’s first cause of action for equitable indemnity specifically alleged that if she was determined to be liable to ASC for the damages it sought for defending and settling the Saldana case, her liability could only be due to the failure of ASC and Noble to meet their contractual and statutory obligations under the law, active negligence, failure to meet their standard of care, carelessness, and other unlawful conduct in the matters alleged in ASC’s complaint, such that ASC and Noble would therefore be liable and bound to hold Castor harmless for all sums she was adjudged to owe ASC on account of ASC’s claims. Given the circumstances of the Saldana litigation and the special relationships between ASC, Castor, and Noble, ASC and Noble were obligated to indemnify Castor from any liability based on ASC’s claims.
Castor’s second cause of action for comparative contribution alleged that if she was not to be fully indemnified by ASC and Noble, they would be concurrent tortfeasors, entitling her to partial indemnity, partial contribution, or equitable indemnity as contribution from them, as determined by the proportional degree of fault attributable to the conduct of ASC and Noble.
c. Noble’s Cross-Complaint
Noble cross-complained against Castor for indemnity and unlawful business practices. She alleged that she was employed as a sub agent of Castor’s bail bonds business from 1992 through October 1997. Castor failed to reimburse her for expenses and wrongfully withheld monies she was due.
Statement of Decision
A court trial took place over 10 days. The court’s statement of decision enumerated four controverted issues: (1) Did “Ms. Castor breach [] her contractual duty to [ASC] by failing to tender upon demand the sums expended by [ASC] in defending the underlying Saldana action[?]” (2) Did ASC “breach[] any duty to Ms. Castor when it provided the defense fees and costs and settlement of the Saldana action[?]” (3) Was Castor “entitled to an off-set from her obligation to indemnify [ASC] due to the conflict of interest of attorneys [] Kirk and [] Zimmerman had with respect to representing both Ms. Noble and [ASC][?]” and (4) Did Noble owe equitable indemnity or equitable contribution to Castor in the event Castor owed indemnification to ASC?
The court made the following findings:
Under clause 17 of the 1994 bail bond agreement, the Castors were wholly liable for indemnifying ASC; Noble had no such liability. The 1994 agreement referred to a 1993 agreement between ASC and the Castors which also provided that the Castors were wholly liable to indemnify ASC for any damages resulting from claims arising from the issuance of bail.
“This trial follows a perfect storm of litigation (the Saldana case), in which, from a defense perspective, anything that could go wrong, went wrong.” Defense attorneys Kirk and Zimmerman “were placed into a conflict situation in this triparte relationship.” They realized a contractual relationship existed among ASC, Castor, and Noble, and “the duties they owed to each other.” The attorneys knew that Castor’s BUF “was somehow involved, but beyond that they did not know much more of the relationship.” ASC retained first Kirk and then Zimmerman to represent it and Noble’s interests in the Saldana case. Because Noble was authorized to apprehend Saldana on receipt of a notice of forfeiture, ASC “did not see any conflict of interest in” Kirk and Zimmerman’s dual representation.
Unbeknownst to ASC or Noble, Castor met with Zimmerman in late October 2000 and attributed blame in the Saldana case to Noble. Zimmerman did not then inform ASC or Noble of Castor’s claims but instead agreed to represent ASC and Noble regarding Saldana’s claims. Zimmerman failed to obtain a written waiver of any conflict of interest regarding Castor’s claims that Noble was at fault.
“The picture is very much clouded by the fact that there is no love lost between” Noble and Castor. “Unfortunately, they allowed their personal animus to cloud their judgment and direct their actions, which has harmed their respective interests. Further clouding the picture” was the inability of Noble or Castor to give simple, straightforward answers during their trial examination, which cast doubt on their credibility and made both of them less than credible witnesses. “It is easy to see in hindsight that [ASC, Noble, and Castor] should have met with counsel, early on, to decide upon a united defense in the Saldana action. Even if they failed to come to a united defense, the parties and counsel would have been aware of the conflicts[,] and separate counsel could have been obtained which may have prevented the instant litigation. Instead, the court finds both Castor and Noble were more concerned with pointing fingers at each other and blaming one another than working together with ASC to resolve” the Saldana case and avoid a second lawsuit.
Attorney Kirk “was hired by [] Noble, would not communicate with [] Castor and did virtually nothing to bring the case to resolution.” He was paid by Castor’s BUF and reported to ASC. He never protected the interests of Castor or A&L Bail Bonds, and he “started the Saldana defense down a road without a clear vision as to where he was headed.” He provided the court bills totaling, to date, $31,371.20. He would not communicate with Castor and did “virtually nothing” to resolve the Saldana case. “[T]o the extent he represented anyone’s interest,” he represented Noble.
The second defense attorney, Zimmerman, had a “scorched earth” defense. ASC did not actively or aggressively manage him or his firm until Castor’s BUF was nearly depleted. His firm’s bill, not including experts, totaled $145,783.65. “The court believes that [] Zimmerman would have handled the defense differently had he known [] Castor’s BUF. . . was the source of funds for the defense.”
The 1994 bail bond agreement obligated Castor to indemnify ASC for all funds expended in defending the Saldana action, but ASC, as a fiduciary, had a duty to insure the funds were expended reasonably and that Castor was not being harmed. Pursuant to the 1994 agreement, ASC depleted Castor’s BUF during the defense of the Saldana action as defense costs came due. By the time the Saldana action settled, the funds remaining in Castor’s BUF were insufficient to pay defense costs and to fund the settlement. ASC withdrew $141,893.70 from A&L Bail Bonds’s BUF, and spent an additional $131,231.37 to defend and settle the Saldana case. It also spent $73,000 in its claim for indemnification against Castor. The 1994 agreement contains an attorney fee clause with respect to costs incurred in enforcing Castor’s indemnity obligation.
All parties agree that “in the liability ‘chain’ or pyramid, the mantra, ‘The surety does not pay’ is generally true. However, the surety cannot ignore fiduciary duties it owes its ‘associated representatives.’” If the surety ignores its duties, it must then pay or not recover its full expenses.
ASC had legal and equitable obligations to see that Castor’s BUF was spent in a prudent manner. It had an obligation to inform retained counsel about the “unique” relationship of ASC, Noble, and Castor. Counsel here were not adequately informed and did not adequately protect the parties. “That failure led to the instant case. The parties and the retained counsel all bear some responsibility for the second lawsuit.”
The claims of all parties were timely presented. The statute of limitations did not begin to run until the Saldana case was settled in 2002.
Castor was entitled to partial equitable indemnity against Noble.
ASC had an obligation to ensure that the BUF was reasonably expended and to inform counsel of the unique relationship of ASC, Castor, and Noble. Therefore, the court ordered that ASC recover from Castor $111,231.37 as past economic damages and $73,000 as damages in the instant case, a total of $184,231.37. It ordered that Castor was entitled to an offset of $52,327.90 from the previous BUF payments by way of her cross-complaint against ASC, making ASC’s “net” damages $131,903.47. It ordered that Castor recover from Noble $65,613 as partial equitable indemnity, plus statutory costs according to proof, and that Noble take nothing by way of her cross-complaint.
Judgment was entered accordingly.
DISCUSSION
I. Noble’s Appeal
A. Inadequate Statement of Decision Regarding Noble’s Liability
Noble contends the trial court’s statement is defective because it lacks sufficient findings, on the controverted issues on which Castor tried her case, to hold Noble liable for partial equitable indemnification of Castor.
Code of Civil Procedure section 632 requires the trial court, on request of any party, to issue a statement of decision explaining the factual and legal basis of its decision as to each principal controverted issue at trial. The statute requires the court to state only ultimate, not evidentiary, facts. (People v. Casa Blanca Convalescent Homes, Inc. (1984) 159 Cal.App.3d 509, 524 (Casa Blanca), overruled on other grounds in Cel-Tech Communications, Inc. v. Los Angeles Cellular Telephone Co. (1999) 20 Cal.4th 163.)
“[I]t is for the trial court to determine what are the ‘principal controverted issues’--those on which the outcome of the case turns.” (Vukovich v. Radulovich (1991) 235 Cal.App.3d 281, 295.) Noble does not disagree that a principal controverted issue between her and Castor was correctly articulated in the court’s statement of decision, i.e., did Noble owe equitable indemnity or equitable contribution to Castor if Castor owed indemnification to ASC? Her argument, as we understand it, is that the statement of decision contains no factual basis to support a conclusion that Castor was entitled to partial equitable indemnity against her.
Indemnity is generally defined as the obligation resting on one party to make good a loss or damage incurred by another party. (E.L. White, Inc. v. City of Huntington Beach (1978) 21 Cal.3d 497, 506.) The obligation “may arise by virtue of express contractual language establishing a duty in one party to save another harmless upon the occurrence of specified circumstances.” (Ibid.) The obligation may also arise through equitable considerations which come into play either by contractual language that does not specifically deal with indemnification or by the equities of the particular case. (Id. at p. 507.) A claim based on contract language not specifically dealing with indemnification is customarily referred to as an implied contractual indemnity claim and is a form of equitable indemnity, subject to the rules governing equitable indemnity claims, including comparative principles. (Bay Development, Ltd. v. Superior Court (1990) 50 Cal.3d 1012, 1029-1030, 1033.)
An appellate court’s inquiry in cases of equitable indemnification is whether one party’s recovery, in whole or in part, is appropriate under all relevant circumstances. (Western Steamship Lines, Inc. v. San Pedro Peninsula Hospital (1994) 8 Cal.4th 100, 107.) “In determining the availability of equitable indemnity, each case must be evaluated in its own unique context to determine whether and to what extent one concurrent tortfeasor [or contracting party] is permitted to recover from another.” (Ibid.)
It is important to observe at the outset the reasons the trial court did not use to support its conclusion that Noble was equitably obligated to indemnify Castor, although Castor had asserted them during trial as appropriate reasons. First, the court made clear from the beginning of trial that it did not intend to determine Castor’s entitlement to indemnity based on Noble’s conduct during and after her apprehension of Saldana. Noble filed an in limine motion to exclude evidence relating to the Saldana litigation, arguing that the events were the subject of litigation which Castor chose not to join and which were settled and released. Nevertheless, the court did not grant Noble’s motion intoto, observing it needed some evidence of the Saldana action as to the basic facts to determine the present indemnity action. It stated that it did not “want to re-litigate the entire Saldana case” and that it would allow “some evidence, but I’m going to put a pretty tight clamp on it. If we start moving pretty far afield into the underlying litigation, I will pull it back rather quickly.” In fact, there was a fair amount of testimony regarding the circumstances of Saldana’s apprehension, but the statement of decision recites only the bare facts of the apprehension in three sentences. The statement of decision contains no findings to suggest that the court concluded Castor was entitled to indemnity from Noble because of the manner in which Noble handled Saldana’s bail forfeiture and apprehension. Rather, the court’s focus was on the subsequent Saldana lawsuit against Noble and ASC.
Second, Castor asserted in her pleadings and at trial that the Castors and Noble had an oral agreement that Noble would reimburse A&L Bail Bonds for any expenses the Castors or A&L Bail Bonds paid on Noble’s behalf. Noble’s testimony disputed the existence of such an agreement. The statement of decision does not mention directly or indirectly the existence or nonexistence of any oral agreement between them. Again, nothing in the statement of decision reasonably suggests that the court based its conclusion that Castor was entitled to indemnity on some oral promise from Noble to reimburse Castor, particularly in light of the court’s specific finding that the credibility of both parties throughout trial was dubious.
While we can readily discern from the statement of decision the bases the court did not use to conclude Noble was liable, it is considerably more difficult to ascertain why the court concluded she was obligated to indemnify Castor. The court clearly articulates the faults of the two attorneys and of ASC, and appears to lay most of the blame for the depletion of Castor’s BUF and high attorney fees at their feet. By contrast, it is unclear how Noble’s transgressions in connection with the Saldana litigation create any legal liability to require Noble to reimburse Castor for half the amount it concluded Castor owed ASC for the defense of the Saldana action and the present action.
Nevertheless, we examine the findings in the statement of decision, taken as a whole, in our effort to “fairly [ascertain] the court’s determination” of the material issue of Noble’s obligation of equitable indemnity to Castor. (Casa Blanca, supra, 159 Cal.App.3d at p. 525.)
The essence of the trial court’s specific and implied findings (see Casa Blanca, supra, 159 Cal.App.3d at p. 528) is that the Saldana litigation was mishandled; that had it not been mishandled it would have been less costly and might have prevented the present lawsuit; and that ASC, Castor, and Noble all contributed to the mishandling. Therefore, the court’s findings imply that, although Castor may have been expressly obligated by the 1994 bail bond agreement to pay all costs arising from the Saldana litigation, it was unfair to have her shoulder the entire amount of the loss incurred from the Saldana litigation and the present litigation because ASC and Noble could have conducted themselves in a manner that might have lessened the losses. Hence, ASC should not recoup from Castor all the settlement and defense costs it had paid in the Saldana litigation, and Noble, rather than not paying anything toward the Saldana litigation and present litigation, should assist Castor in paying the amount Castor was still contractually obligated to pay ASC.
Noble argues that the court’s factual findings that bear on the subject of her mishandling of the Saldana lawsuit are either speculative or irrelevant. She refers to the court’s finding (1) that “all three parties should have met with counsel” early in the litigation to decide on a united front, (2) that even if they did not agree on a common defense they would have been aware of conflicts of interest, but (3) Castor and Noble were more concerned with blaming each other than working together to resolve the Saldana lawsuit. She also refers to the court’s finding that ASC failed to meet its obligation to inform retained counsel adequately about the relationship of the three parties, that retained counsel did not adequately protect the parties, which led to the present case, and that the parties and counsel all bear some responsibility for the present lawsuit.
Considered in isolation these individual findings arguably do not explain why the court concluded Castor was entitled to indemnity from Noble. But in the context of the entire statement of decision, they reflect the court’s implied determination that Castor was entitled to restitution from Noble under an implied contractual indemnity theory. The court found that the 1994 bail bond agreement was “the operative contract” among ASC, Castor, and Noble, noting that it specified that Noble would have zero liability and Castor would have 100 percent liability to indemnify ASC for damages arising from bail Noble issued pursuant to the agreement. It found that the two attorneys did not necessarily realize the contractual relationship that existed among ASC, Castor and Noble and “the duties they owed to each other.”
Implicit in this finding is a finding, based on the 1994 bail agreement, that Noble was Castor’s agent. An agent’s relationship to her principal is essentially fiduciary in character, obligating the agent to act in the principal’s best interest and binding the agent to principles of good faith and honesty. (Nguyen v. Scott (1988) 206 Cal.App.3d 725, 733; Whittaker v. Otto (1961) 188 Cal.App.2d 619, 624; see also Engalla v. Permanente Medical Group, Inc. (1997) 15 Cal.4th 951, 977.) The trial court thus impliedly concluded that Noble, knowing Castor was 100 percent liable under the 1994 bail bond agreement to indemnify ASC for damages resulting from claims on the Saldana bail bonds Noble herself wrote, had a duty as Castor’s agent to help minimize Castor’s indemnification obligation, particularly in order to avoid depleting Castor’s BUF so that Castor would not have to satisfy the obligation out-of-pocket. Stated slightly differently, Noble had a duty to avoid conduct that would increase the amount of Castor’s indemnification obligation, an amount that inevitably increased the longer the Saldana litigation remained unresolved. Conduct by Noble that had the effect of protracting the Saldana litigation and contributing to the prosecution of the instant indemnity action, such as a lack of cooperation with and refusal to communicate with Castor, could thus be deemed a breach of her duty as an agent. Under those circumstances, the court could conclude that the equities entitled Castor to indemnity from Noble.
B. Insufficient Evidence
The problem in this case is that there is insufficient evidence to support the trial court’s specific and implied findings that Noble’s conduct delayed resolution of the Saldana litigation and thereby increased Castor’s contractual indemnification obligation to ASC and gave rise to the present action. To reiterate, the trial court’s essential finding was that the Saldana litigation was mismanaged, and that failure led to the present lawsuit. Indicative of the mismanagement, according to the statement of decision, were the failure of attorneys Kirk and Zimmerman to appreciate the potential conflict of interest among ASC, Castor and Noble in the Saldana litigation, and the failure of ASC, as a fiduciary under the 1994 bail bond agreement, to perform its duty to insure that Castor’s BUF was prudently expended in the Saldana litigation and to inform the attorneys of the unique relationship of ASC, Castor, and Noble.
However, the record does not contain evidence that Noble dictated the management of the Saldana litigation. Contrary to the court’s statement that Noble “hired” attorney Kirk, the undisputed evidence is that ASC did not have retained trial counsel in the Bay Area. Michael Whitlock of ASC, who had been served the Saldana summons and complaint, asked Noble for recommendations for an attorney to defend the action. Noble inquired among her criminal defense attorney acquaintances for names and suggested Kirk to Whitlock, but it was Whitlock who executed the retainer agreement with Kirk. There may be evidence, as the court found, that Kirk started the defense without a clear direction. There is evidence that he had little personal communication with Castor; that he did little, in two years of representing ASC and Noble, to resolve the case; and that Castor expressed concern to Whitlock that Kirk was not making progress. But there was no evidence that Noble misdirected Kirk, forbade his communication with Castor, or thwarted resolution. Furthermore, it is undisputed that Whitlock regularly apprised Castor of the status and expenses of the Saldana litigation during Kirk’s representation. That Castor and Noble were not on speaking terms did not keep Castor from being kept abreast of the litigation’s status.
The court did not specify the evidence of Kirk’s misguided defense, nor do the parties in their briefs, and Kirk did not testify.
Nor can the blame the court placed on attorney Zimmerman for mismanagement of the Saldana action be laid to Noble. It was Castor who, after consulting Zimmerman, recommended Zimmerman, and Whitlock who then retained him. Whitlock continued to inform Castor that attorney expenses were being taken from her BUF and the amount of the withdrawals, but Castor did not complain to ASC or Zimmerman of these expenses. In any case, the court laid the blame for Zimmerman’s defense strategy (“scorched earth”) and large bill on ASC for lack of oversight and breach of duty to insure the BUF was prudently spent, not to any duty of Noble. The court did not imply that Noble had a duty to inform Zimmerman that his expenses were being paid from Castor’s BUF, and there is no evidence that Zimmerman’s tactics or large expenses were due to anything such as Noble’s intransigence, dilatory responses to discovery, or insistence on unnecessary expenses. Castor was informed of the proposed settlement figure in the Saldana litigation and invited to participate in the settlement conference; there is no evidence that Noble prevented her participating.
Finally, the court may have been justifiably dismayed that attorneys Kirk and Zimmerman did not recognize the conflicts of interest among the participants of the Saldana defense, or, more troubling, recognized the conflicts but took no steps to remedy them. But that failure cannot be ascribed to Noble. Attorneys are ethically and professionally bound to avoid representation of adverse interests (Cal. Rules of Prof. Conduct, rule 3-310), and a principal function of an attorney is to advise. This function must be performed not only when requested; the attorney should volunteer advice when necessary to further a client’s objectives, alerting the client to the adverse consequences of not considering possible alternatives and to legal problems which are reasonably apparent even if outside the scope of the retention. “The rationale is that, as between the lay client and the attorney, the latter is more qualified to recognize and analyze the client’s legal needs.” (Nichols v. Keller (1993) 15 Cal.App.4th 1672, 1684.) It was not the duty of Noble to monitor the attorneys’ compliance with the rules of professional conduct. It was the obligation of the two attorneys to inform her--and Castor and ASC, for that matter--of potential conflicts, to advise whether they should seek separate counsel, and to obtain written waivers from them if they chose not to have separate representation.
In short, there is no evidence that Noble’s discord with Castor prevented or delayed the attorneys from investigating the Saldana claims thoroughly, obtaining pertinent documents, such as the 1994 bail bond agreement, conducting discovery, or negotiating settlements. Nor was there evidence that Noble’s animosity toward Castor prevented or kept ASC, Noble, or Castor from cooperating with the attorneys. While an agent’s failure or refusal to cooperate in litigation in which she is a named party and in which her principal is responsible for litigation expenses may be, in the abstract, a sound reason to require the agent to indemnify the principal as a matter of equity, there is no evidence in this record to support such an implied finding. We conclude the judgment granting partial equitable indemnity to Castor from Noble is unsupported by the evidence and must be reversed.
C. Defective Statement of Decision Regarding Noble’s Cross-Complaint
Noble contends the statement of decision is defective because it contains no factual or legal basis for its conclusion that she take nothing in her cross-complaint against Castor, when there was undisputed evidence that she had a right to reimbursement from Castor for her expenses in conjunction with the Castrejon bail bond.
Noble’s cross-complaint alleged that she had incurred expenses during her employment with A&L Bail Bonds which Castor had failed to reimburse and that Castor has wrongfully withheld monies due Noble.
The Castrejon matter involved a bail bond Noble wrote for Barbara Castrejon in 1997 under the 1994 bail bond agreement. Michael Whitlock testified that Castrejon had complained that Noble improperly recovered and surrendered Castrejon to jail. Noble billed Castrejon approximately $6,000 for the recovery costs. In November 1999, Noble requested Whitlock to pay her expenses related to the Castrejon bail bond out of Castrejon’s escrow that had been deposited with ASC. On November 12, 1999, Whitlock wrote Noble, apparently telling her there was some question as to whether she was entitled to reimbursement because of Casterjon’s complaints about Noble and that Castor opposed the reimbursement. In February 2000, Whitlock wrote Noble that he had discussed the proposed settlement of the Castrejon matter with Castor, and he and Castor agreed to accept the settlement offer to avert a potential lawsuit by Castrejon. ASC, at Castor’s insistence, paid expenses of $8,998.22 by check to Castor on October 30, 2000. Whitlock believed the payment resolved the Castrejon matter.
Castor testified that the $8,998.22 payment referred to amounts relating to Castrejon bail bond expenses. The payment included expenses Noble incurred related to the Castrejon bond. These expenses did not include the payments Noble made on the bond into Castor’s BUF or the cost of the bond to which ASC was entitled.
Noble testified that recovery-of-defendant-bailee costs are out-of-pocket expenses for which she sometimes requested reimbursement from A&L Bail Bonds, which had always honored her requests.
The parties submitted simultaneous written closing arguments. Noble’s closing argument asserted there was uncontradicted evidence that she incurred expenses relating to the “Castrejon bail,” that ASC recovered these costs and interest of $8,998.22 from Castrejon, that Castor insisted that ASC pay Castor these amounts, and that Castor had not paid them to Noble. Noble argued she was entitled to this sum plus prejudgment interest since December 4, 2000.
Castor’s closing argument asserted that Noble’s claim “after exposing Castor to yet another lawsuit for a ‘bad arrest’ of Cast[r]ejon” was time-barred. She further argued that Whitlock and Noble testified that only ASC had the right to make an escrow demand and collect as beneficiaries of the deed of trust, and that she testified emphatically that she never required ASC to send her the money; Whitlock sent it to her of his own accord.
The trial court’s tentative decision found that “all” claims were timely presented, impliedly a reference to the claims of all three parties to the action: ASC, Castor and Noble. After finding Castor was entitled to equitable indemnity against Noble, and specifying the amounts Castor owed ASC and Noble owed Castor, it stated that Noble “takes nothing by way of her cross-complaint . . .” Noble’s subsequent request for a statement of decision asked the court to explain the factual and legal basis for its decision respecting four controverted issues, including whether Noble take nothing by way of her cross-complaint.
The court’s statement of decision did not list the issue of whether Noble take nothing by way of her cross-complaint among its four “Issues in Controversy.” It simply reiterated that all claims were timely presented and that Noble take nothing by way of her cross-complaint.
Although the sum of money was not large, Noble’s entitlement to reimbursement of $8,998.22 of her expenses in the Castrejon bail bond matter was the principal controverted issue in her cross-complaint against Castor. The failure to determine a material issue in a statement of decision is reversible error if there is evidence that would support a finding in the opposing party’s favor. (Triple A Management Co. v. Frisone (1999) 69 Cal.App.4th 520, 536.) Noble presented evidence to show she was entitled to reimbursement, and, given the court’s finding that no claims were time-barred, there was no evidence to establish as a matter of law that she was precluded from recovery. The failure to determine the issue is prejudicial error.
Cross-Appeal
Castor contends the court’s ruling that limited the admission of evidence regarding the circumstances of Saldana’s apprehension was error because evidence of Noble’s “fault” in conjunction with Saldana’s arrest was “highly relevant” to the court’s weighing of equities.
A trial court has broad discretion in determining the relevance and admissibility of evidence. (Aguayo v. Crompton & Knowles Corp. (1986) 183 Cal.App.3d 1032, 1038.) Its ruling is reviewed by an appellate court under the abuse of discretion standard. (Hasson v. Ford Motor Co. (1982) 32 Cal.3d 388, 404.)
Evidence of Noble’s alleged tortious conduct in the apprehension of Saldana was relevant to the issues framed by Castor’s pleadings, in that Castor sought equitable indemnity and comparative contribution for any sums Castor should be found to owe ASC, as alleged in ASC’s complaint against Castor for breach of contract. In her cross-complaint Castor specifically references ASC’s complaint, which describes Saldana’s claims. Castor further alleged that any liability she may have to ASC could be due only to the active negligence, or other unlawful conduct of cross-defendants. Given these allegations, the court erred in limiting the presentation of evidence that pertained to Noble’s apprehension of Saldana.
However, Castor has failed to demonstrate prejudice from the court’s ruling. At no time did Castor make an offer of proof as to what her evidence would show. As we have recounted, despite the trial court’s expressed intent not to “re-litigate the entire Saldana case,” it recognized that it needed some evidence of the Saldana claims to determine the present indemnity action, and, in fact, considerable testimony regarding the circumstances of Saldana’s apprehension was introduced. Castor’s closing trial brief argued, albeit briefly, that Noble’s conduct was at least negligent. The court had the opportunity to factor Noble’s conduct during Saldana’s apprehension into its balance of equities. For these reasons we have no basis to conclude that Castor would have obtained a more favorable result absent the erroneous ruling.
The exhibits and testimony included: Saldana’s May 6, 1997 complaint to the Insurance Commissioner, describing Noble’s conduct in his apprehension; testimony of the attorney who represented Saldana in the latter’s tort action, enumerating at length the facts he intended to present to show Noble’s intentionally tortious conduct had the case gone to trial; Noble’s testimony that she took instruction from Larry Noble, who told her not to wait to track down a bailee who fails to appear, and that Larry Noble, whom she consulted about Saldana, recommended she try to get Saldana back to court and his bond reinstated; Noble’s letters to Saldana and his parents after he failed to make a court appearance; Noble’s testimony describing her apprehension of Saldana and explanation of why she acted as she did; Castor’s testimony that Noble had told her that she was concerned for her safety regarding Saldana’s apprehension, that she would want as much back-up as possible if she thought a fugitive was dangerous, that she would restrain him as soon as possible, and that Noble’s action in apprehending Saldana in his underwear was not legally wrong; Castor’s alternate testimony that Noble acted “outrageously” in her apprehension of Saldana and the arrest was inappropriate, that Noble arrested Saldana because she was upset that she did not get to write a second bond for Saldana, and that Noble had “plenty of opportunity” to have Saldana get dressed before arresting him; Michael Whitlock’s testimony that he did not think arresting Saldana in his underwear was wrong; the testimony of a bail bond expert who, after reviewing Saldana’s arrest documents, his declaration and deposition in his tort action, and the report of the fugitive apprehension agent, opined why Noble’s conduct was not wrong.
Castor also contends the court erred in assigning to her a larger percentage of liability for the amount ASC was to recover for defending the Saldana action and prosecuting the present action than it assigned to Noble. According to Castor’s calculation, the court’s orders resulted in Noble having to pay her 23.96 percent of the damages Castor owes ASC, even though, Castor argues, the court faulted her and Noble equally for not working together with ASC to resolve the Saldana action and avoid a second lawsuit, and it “fault[ed] Noble for wasting more than $31,000 on attorney Kirk, who would not communicate with Castor, and Noble and ASC for failing to advise their attorney Zimmerman that Castor’s BUF was the source of the funds for the defense.”
Castor’s arithmetic is not clear. The court’s statement of decision found that ASC withdrew $141,893.70 from A&L Bail Bonds’s BUF and expended another $131,231.37 of its own money to pay expenses in defending the Saldana action, a total of $273,125.07. It also spent $73,000 to pursue the present action against Castor. The court ordered ASC to recover from Castor $111,231.37 in past economic damages and $73,000 in damages in the present action, a total of $184,231.37. It ordered that Castor was entitled to a credit of $52,327.90 from “previous BUF payments” by way of her cross-complaint for indemnity against ASC, making ASC’s “net” damages from Castor $131,903.47. The court then effectively divided the obligation for the “net damages” equally between Castor and Noble, by ordering that Castor recover $65,613 from Noble as partial equitable indemnity.
We disagree with Castor that the statement of decision can be construed as faulting Noble for causing Kirk’s large bill or for not informing Zimmerman that Castor’s BUF was paying defense costs. As discussed, ante, not only is the finding in the statement of decision that Noble “hired” Kirk incorrect, there is no evidence that her behavior was responsible for the amount of Kirk’s bill. The court’s statement that it “believ[ed]” Zimmerman would have handled the Saldana defense differently had he known Castor’s BUF was funding it immediately follows a statement that ASC did not actively or aggressively manage Zimmerman or his firm until Castor’s BUF was nearly depleted. Read together, the two sentences most reasonably imply the court blamed ASC for not informing Zimmerman.
However, given our conclusion that there is insufficient evidence to support any implied findings that Noble’s conduct contributed to the mismanagement of the Saldana litigation and resulting present lawsuit, Castor’s “erroneous proportion” contention is now moot.
Castor finally contends there is insufficient evidence to support the court’s finding that she was partially at fault for the mismanagement of the Saldana litigation. Again, her contention is moot as against Noble, in light of our conclusion. To the extent her contention may be valid as against ASC, she cannot pursue it in this appeal because she did not appeal the judgment as to ASC.
DISPOSITION
The judgment is reversed to the extent it orders that Castor shall recover partial equitable indemnity plus statutory costs from Noble, and it fails to determine the issue of Noble’s entitlement to recover expenses in the Castrejon matter. It is remanded with directions to make findings on the latter issue. (See Triple A Management Co. v. Frisone, supra, 69 Cal.App.4th at p. 537.) In all other respects it is affirmed. Appellant to recover costs on appeal.
We concur: Simons, J., Needham, J.