Opinion
G053358
02-14-2018
BANN-SHIANG LIZA YU, Plaintiff and Appellant, v. WEST BEND MUTUAL INSURANCE COMPANY, Defendant and Respondent.
Lex Opus, Mohammed K. Ghods, Jeremy A. Rhyne, Sandra J. Vivonia and Lori L. Speak for Plaintiff and Appellant. Kirtland & Packard and Robert A. Muhlbach for Defendant and Respondent.
ORDER MODIFYING OPINION AND DENYING PETITION FOR REHEARING; NO CHANGE IN JUDGMENT
It is ordered that the opinion filed on February 14, 2018 be modified as follows:
On page 2, the second sentence in the third paragraph is deleted and replaced with the following:
"We therefore reverse and remand with directions to grant plaintiff's motion for new trial and to retry the entire matter."
On page 10, in the DISPOSITION, after the first sentence, the following sentence shall be added:
"The entire matter shall be retried."
The petition for rehearing is DENIED. This modification does not change the judgment.
THOMPSON, J. WE CONCUR: MOORE, ACTING P. J. ARONSON, J.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. (Super. Ct. No. 30-2009-00255065) OPINION Appeal from a judgment of the Superior Court of Orange County, Kim Garlin Dunning, Judge. Reversed and remanded with directions. Lex Opus, Mohammed K. Ghods, Jeremy A. Rhyne, Sandra J. Vivonia and Lori L. Speak for Plaintiff and Appellant. Kirtland & Packard and Robert A. Muhlbach for Defendant and Respondent.
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Plaintiff Bann-Shiang Liza Yu appeals from a judgment entered by the court in favor of defendant West Bend Mutual Insurance Company despite her demand for a jury trial. Plaintiff sued defendant for breach of contract, bad faith, and equitable contribution, indemnity, and subrogation, all based on assignments of rights by parties and their insurers with whom she had settled an underlying construction defect action.
Plaintiff claims the court violated her right to a jury trial by entering judgment in favor of defendant without using a proper procedural vehicle. She also argues the court erroneously interpreted the underlying settlement agreements and assignments of rights. Finally, she contends the court erroneously dismissed her peremptory challenge. (Code Civ. Proc., § 170.6; all further statutory references are to this code.)
We agree there was no proper procedural vehicle for the court to enter judgment in favor of defendant. We therefore reverse and remand with directions to grant plaintiff's motion for new trial. This disposition moots plaintiff's other claims.
The disqualification issue is moot because the case has since been reassigned for all purposes to another judge.
FACTS AND PROCEDURAL HISTORY
Based on our resolution we set out only an abbreviated summary of the facts.
Plaintiff, the developer of the Candlewood Suites Hotel, entered into a contract (ATMI Contract) with ATMI Design Build (ATMI) to act as the general contractor and Himes Peters Jepsen Architects (HPJA) to act as the architects to design and construct the hotel (Project).
Defendant insured ATMI, issuing annual comprehensive general liability policies for the period June 30, 2000 through June 30, 2003 (West Bend Policy). Thereafter ATMI was insured by American Zurich Insurance Company (American Zurich) and Zurich American Insurance Company (Zurich American; sometimes collectively Zurich).
Problems developed during construction that ultimately led to plaintiff filing a construction defect action against ATMI, HPJA, and other parties in October 2004 (Underlying Action). In the Underlying Action ATMI was defended by Zurich American and American Zurich. HPJA was defended by American Zurich.
In 2008 plaintiff settled the Underlying Action, entering into a Settlement Agreement and Mutual Release (Settlement Agreement) with ATMI Insureds and several additional parties (collectively with ATMI Insureds, ATMI Parties). Neither American Zurich nor Zurich American was a party to the Settlement Agreement; plaintiff also entered into a Memorandum of Understanding re Settlement with HPJA (HPJA Agreement), to which Zurich American was a party
Pursuant to the Settlement Agreement, the ATMI Parties agreed to pay $6 million to plaintiff, with $4 million paid by Zurich and $2 million paid by ATMI.
In the Settlement Agreement the ATMI Parties assigned to plaintiff all claims and rights they had in connection with the Underlying Action construction of the Project. The assignment included "without limitation any rights to which Zurich would otherwise become subrogated through the Zurich/ATMI Policies."
Under the HPJA Agreement, HPJA stipulated to judgment in the sum of $10 million in favor of plaintiff. HPJA was to assign to plaintiff all of its claims against any party in the Underlying Action, and any insurers (other than Zurich American) whose policies might afford coverage to HPJA based on failure to defend the Underlying Action. Zurich American agreed to assign to plaintiff its right to recover money it paid in defense or indemnity, including its equitable indemnity, equitable contribution, and equitable subrogation rights.
In 2010 plaintiff and Zurich executed an Acknowledgement of Assignment of Claims (Acknowledgement), reciting that Zurich had consented to the settlement of the Underlying Action. The Acknowledgement quoted the language of the assignment of claims and stated Zurich had "expressly agreed" to that provision as part of the settlement. The Acknowledgement was executed "to further clarify the Plaintiff Yu has been assigned these rights by Zurich which she may pursue in her sole discretion."
In 2009 plaintiff filed this action against defendant and 17 other insurers; various settling parties had assigned plaintiff rights they may have had against the insurers. The complaint alleged causes of action for declaratory relief, breach of contract, bad faith/breach of the implied covenant of good faith and fair dealing, and equitable subrogation/contribution/indemnity. The trial court determined the case was complex. (Cal. Rules of Court, rule 3.400(a), (c).)
Subsequently, the court bifurcated the action into Phase I and Phase II. Phase I trials were to resolve coverage issues under the policies. If there were any issues remaining after completion of the Phase I trials, there were to be Phase II trials.
Prior to the Phase I trial between plaintiff and defendant, they executed a joint stipulation of facts and disputed issues. The parties agreed that in the Phase I trial the court would decide whether certain delineated issues should be tried by the court or a jury. These issues dealt primarily with the scope of rights assigned by Zurich to plaintiff and whether HPJA had any rights under the West Bend Policy. If the court determined those were legal questions, it would then decide them.
The trial took place over 10 days beginning in June 2014 and ending in December 2015. On the first day of trial the court considered the issues set out in the joint stipulation. Thereafter it issued a minute order setting out facts it believed were not in dispute and raising additional factual and legal questions. The court also scheduled "closing argument of Phase One Court Trial." The parties argued those issues over the next two trial days. The court made certain rulings and ordered defendant to prepare a proposed order.
Over the remaining trial days, the court continued to ask whether a jury trial would be proper. It advised that before a jury was empaneled, it needed to know exactly what issues plaintiff planned to try. At that point they could determine what issues would be tried to the court and what issues to the jury. Another time it stated, "Here's what I'm trying to figure out, okay, if there are any disputed fact issues," because interpretation of insurance policies is a question of law for the court. The court instructed counsel to reach an agreement about jury instructions and verdict forms and file any in limine motions.
As it began to consider jury instructions the court concluded certain issues were not proper for a jury and proceeded to try them itself.
Each time the court tried an issue it returned to the question of whether there were any issues for the jury. It instructed the parties "to give serious consideration as to, are there any jury issues[.] Unless it would be damages. Damages are typically for a jury but- -" "I would just as soon kind of wrap up as many things as we can in the court phase to see if there is really anything left for a jury." It went on, "I'm not seeing the jury issues here. . . . I think we have an opportunity to look at it more closely to see what, if anything, is left for the jury." It asked the parties what issues the jury could decide. The court then announced the date it would start picking a jury, "[i]f, indeed, there are any jury issues." Later it stated, "What's next? I still don't think there are fact issues for a jury."
At that point, the court told the parties to prepare jury instructions to deal with the remaining issues. If they could not do so, it would tell the court there were no fact issues to be tried to a jury. The court clarified it did not want to take issues from the jury if a jury should decide them. But it needed to understand what those issues were. The parties then submitted jury instructions.
During this time plaintiff continued to argue she was entitled to a jury trial on whether there had been bad faith, the reasonableness amount ATMI had paid in settlement, and damages.
Defendant inquired how the court would proceed if it determined there were no issues for a jury to decide. The court noted it might be comparable to granting a nonsuit on an opening statement, "never a good thing to do." It did not have an answer and needed to think about it.
Later the court stated, "I'm beginning to think now that if we get a jury on this case it would only be for damages. I'm not sure there is anything else left for the jury to decide." On the last day of the trial, after extensive argument, the court finally ruled plaintiff could not recover on either her breach of contract or bad faith causes of action based on the assignment of rights in the Settlement Agreement, and the court awarded judgment to defendant.
Plaintiff asked the court to clarify the "procedural mechanism" by which it had made the final ruling and awarded judgment. The court replied, "That was my next question. I don't [know] either."
Plaintiff then filed a motion to reopen her case, contending it was terminated improperly. She argued a court may not enter an order for nonsuit or directed verdict sua sponte and defendant had not made a motion for either. She further asserted the case was terminated before jury selection, opening statements or presentation of evidence. Under section 581c, subdivision (a), a motion for nonsuit may not be made until after the plaintiff's opening statement or presentation of evidence. A directed verdict does not lie until after all parties have presented their evidence, absent a court order allowing such a motion sooner. (§ 630, subd. (a).) Plaintiff asked that if the court denied her request to reopen, it clarify the basis for terminating the trial. The court denied the motion to reopen as moot because judgment had already been entered.
Subsequently plaintiff filed a motion for new trial under section 657 on several grounds: irregularity in the proceedings; improper orders; abuse of discretion; accident or surprise; newly discovered evidence; inadequacy of damages; insufficiency of the evidence; decision is contrary to law; and legal error to which plaintiff objected. In a lengthy order the court denied the new trial motion.
DISCUSSION
1. Jurisdiction on Appeal
Defendant challenges our jurisdiction to hear this appeal based on plaintiff's notice of appeal. The notice states plaintiff appealed from an "order after judgment under . . . section 904.1(a)(2)." The notice did not state it was an appeal from the judgment. Defendant notes the only order issued after judgment was the order denying plaintiff's motion for new trial.
Arguing there is no right to appeal from denial of a motion for new trial, defendant asks us to dismiss the appeal based on a lack of jurisdiction.
Defendant did not file a motion to dismiss as is required (Cal. Rules of Court, rule 8.54(a)) but simply made the request in its respondent's brief.
Defendant correctly states the general rule that denial of a motion for new trial is not appealable but only may be reviewed in an appeal from the judgment. (Walker v. Los Angeles County Metropolitan Transportation Authority (2005) 35 Cal.4th 15, 19 (Walker); § 904.1, subd. (a)(4).) As in Walker, however, we choose to liberally construe the notice of appeal (Cal. Rules of Court, rule 8.100(a)(2)) to encompass the judgment. (Walker, supra, at p. 22.) The notice was timely with respect to the judgment. (Id. at p. 21.) It is clear from the opening brief plaintiff intended to appeal the judgment. (Id. at p. 22.) Finally, defendant was not prejudiced or misled. (Ibid.) It addressed the substance of plaintiff's arguments in the respondent's brief 2. Procedural Irregularities in Trial
Plaintiff complains she was wrongfully deprived of a jury trial, arguing the court improperly "terminated" the case during a discussion of jury instructions before the beginning of a Phase II trial. As she asserted in her motion for new trial, plaintiff maintains there was no motion pending or other procedural vehicle for the court deciding the case as a matter of law. Plaintiff points out that when the court made its final ruling, it stated it was unclear as to the procedure on which it was relying. We are unclear as well.
In denying the motion for new trial, the court stated the "Phase Two trial was intended to resolve all the court issues before impaneling a jury for a damages phase," explaining the "[c]ourt and counsel proceeded to work on jury instructions and a trial plan." "Progress on jury instructions and a trial plan came to a standstill, however, during legal discussions concerning evidentiary presumptions and parol evidence," which the court determined were not available to plaintiff. At that point, plaintiff could not prove her prima facie case. The court stated the parties then had the opportunity to brief and argue legal issues.
The court ruled there were no procedural irregularities, and the process used was within the court's inherent power to manage complex litigation. We disagree.
It is correct the court has the "'power to fashion a new procedure in a complex litigation case to manage and control'" it. (Department of Forestry & Fire Protection v. Howell (2017) 18 Cal.App.5th 154, 171.) "'"[W]ithin proper limits, judges must be permitted to bring management power to bear upon massive and complex litigation to prevent it from monopolizing the services of the court to the exclusion of other litigants."'" (First State Ins. Co. v. Superior Court (2000) 79 Cal.App.4th 324, 334.)
But that power is not unfettered. "[R]egardless of their source of authority, 'trial judges have no authority to issue courtroom local rules which conflict with any statute' or are 'inconsistent with law.'" (Rutherford v. Owens-Illinois, Inc. (1997) 16 Cal.4th 953, 967; see Hernandez v. Superior Court (2003) 112 Cal.App.4th 285, 296-297 [overturning case-management order requiring unilateral early disclosure of petitioners' experts and their opinions]; First State Ins. Co. v. Superior Court, supra, 79 Cal.App.4th 334, 334 [invalidating case-management order that prohibited filing of summary judgment motions without first complying with additional nonstatutory procedures]; see also Alexander v. Exxon Mobil (2013) 219 Cal.App.4th 1236, 1243-1245 [court had significant concerns about procedure requiring detailed sworn affidavits at pleading stage but did not rule on validity because order not challenged].) The "courts' powers to fashion new procedures is not boundless." (Department of Forestry & Fire Protection v. Howell, supra, 18 Cal.App.5th at p. 172.)
In Cottle v. Superior Court (1992) 3 Cal.App.4th 1367, which first recognized the court's power to manage complex cases with new and innovative procedures, did so in part because the parties "had notice of what was actually required of them as well as extensive opportunity to present evidence and argue the issue." (Id. at p. 1384.)
In the present case, the court did give the parties the opportunity to brief issues and argue their positions over the course of the trial. It also plainly warned about the possibility there could be no issues for the jury to try. But we have found nothing in the record which gave the parties notice the court itself would be deciding the final issues on the last day of trial, without proceeding to a jury trial. Nor had defendant made any motions for judgment or the like that would dispose of the case. Without such a motion plaintiff had no opportunity to present an opposition.
We recognize this was a complex and difficult case. The court did a yeoman's job in attempting to untangle and decide complicated, problematic issues. And many of the procedures it employed were well suited to the case and within the court's broad complex case management powers. However, under the circumstances, the final ruling giving judgment to defendant exceeded those powers. Denying the motion for new trial was "an abuse of discretion that resulted in prejudicial error," requiring reversal. (Jenks v. DLA Piper Rudnick Gray Cary US LLP (2015) 243 Cal.App.4th 1, 8.)
When "a local court [seeks to] advance[ ] the goals of efficiency and conservation of judicial resources by adopting procedures . . . deviat[ing] from those established by statute, [it] thereby impair[s] the countervailing interests of litigants as well as the interest of the public in being afforded access to justice, resolution of a controversy on the merits, and a fair proceeding." (Elkins v. Superior Court (2007) 41 Cal.4th 1337, 1353.)
DISPOSITION
The judgment is reversed and the case remanded with directions to grant plaintiff's motion for a new trial. Plaintiff is entitled to costs on appeal.
THOMPSON, J. WE CONCUR: MOORE, ACTING P. J. ARONSON, J.