Opinion
NOT TO BE PUBLISHED
APPEAL from an order of the Superior Court of Los Angeles County No. NC037467, Tracy T. Grant, Judge.
Horvitz & Levy, Peter Abrahams, Adam M. Flake; Hewitt & Truszkowski, Stephen L. Hewitt and Robert C. Powers for Defendant and Appellant.
Grace, Cosgrove & Schirm and Lisa Kralik Hansen; Hooper, Lundy & Bookman and John A. Mills for Plaintiff and Respondent.
WEISBERG, J.
Benedict Canyon Productions, Inc. (CPE) appeals from a grant of summary judgment requiring it to indemnify Bowers Companies, Inc. (BAS) for $1,042,000. BAS paid that amount in settlement and attorney fees in a lawsuit by employees whom BAS fired after consulting with CPE. Because there is a material question of fact regarding whether BAS was actively negligent, we reverse.
FACTS AND PROCEDURE
In late 2003, Brian Cates and Ray Iskander purchased Bowers Companies, Inc., which owned and operated Bowers Ambulance Service, from owners Kenneth Arnold and Kent Bowers. The four men executed the Stock Purchase Agreement as individuals on December 31, 2003. The same day, Arnold and Bowers each signed an Employment Agreement with Bowers Company, Inc. under its new ownership (BAS), with Cates signing as president. The Employment Agreements provided that Arnold and Bowers would be employees of BAS beginning on January 1, 2004, each receiving a salary of $105,000 for the first year and $130,000 for each year thereafter, plus benefits. The Employment Agreements expired in five years, unless earlier terminated, and also provided that BAS could terminate the Agreements at any time for nonfrivolous or material cause. The sale price in the Stock Purchase Agreement was $240,000 (with Bowers and Arnold each to receive $120,000). The Employment Agreements provided that Bowers and Arnold each would be paid a total of $625,000 over a five-year period.
On January 1, 2004, BAS entered into a “Client Services Agreement” (Services Agreement) with CPE. CPE agreed to provide employment-related services to BAS, such as payroll administration and human resources management, for “Shared Employees,” including Arnold and Bowers. CPE had the authority to terminate Shared Employees, and BAS had sole and exclusive control over the Shared Employees’ day-to-day duties.
The Services Agreement contained clauses in which BAS and CPE agreed to indemnify each other for any losses (including attorney fees) arising from acts, errors or omissions. CPE also agreed to obtain employment liability insurance for BAS. Through an insurance broker, Shomer Insurance Agency (Shomer), CPE obtained a policy with National Union Fire Insurance Company (National Union).
In the summer of 2004, BAS consulted with CPE regarding Bowers’s and Arnold’s job performance. CPE, which had copies of the Employment Agreements, advised BAS that if it terminated the two men, its exposure in any lawsuit was limited to $100,000 (the deductible under the National Union policy). BAS decided to terminate Bowers and Arnold, and in early August, a CPE representative fired the men.
On August 23, 2004, Arnold and Bowers filed a wrongful termination lawsuit against BAS, Cates, and Iskander. The complaint alleged that when Arnold and Bowers signed the Stock Purchase Agreement and Employment Agreements, Cates and Iskander promised them they were guaranteed five years of employment, with their pay considered part of the purchase price.
BAS immediately gave the complaint to CPE. CPE sent the complaint to its insurance broker, Shomer. National Union eventually refused to defend, in part because it did not receive the complaint from Shomer within the policy period. In March 2005, BAS, Cates, and Iskander settled with Arnold and Bowers on the eve of trial for $550,000.
BAS then brought this lawsuit against CPE, Shomer, and National Union, including (among other claims) a breach of contract claim against CPE, seeking indemnity for the $550,000 it paid in settlement, as well as the $492,000 in attorney fees it incurred before settling. National Union settled with BAS for $100,000, and Shomer settled for $55,000. BAS filed a motion for summary adjudication on its breach of contract claim against CPE, agreeing to dismiss its other claims if the trial court granted the motion.
The trial court granted summary adjudication, awarding BAS $1,042,000 under the indemnity clause in the Services Agreement. The court then ordered summary judgment upon the dismissal without prejudice of BAS’s remaining causes of action. The court also awarded BAS $440,486.43 in prevailing party fees and costs. CPE filed a timely notice of appeal.
DISCUSSION
A. Standard of Review
We review de novo the trial court’s order granting summary judgment, making “‘an independent assessment of the correctness of the trial court’s ruling, applying the same legal standards as the trial court in determining whether there are any genuine issues of material fact or whether the moving party is entitled to judgment as a matter of law’. . . . [¶] . . . [¶] If, in deciding this appeal, we find there is no issue of material fact, we affirm the summary judgment if it is correct on any legal ground applicable to this case, whether that ground was the legal theory adopted by the trial court or not. [Citation.] If, on the other hand, we find that one or more triable issues of material fact exist, then we must reverse the judgment.” (Roger H. Proulx & Co. v. Crest Liners, Inc. (2002) 98 Cal.App.4th 182, 194-195.) As the indemnitee seeking to establish the liability of an indemnitor under an express indemnity clause, BAS has the burden of production on a motion for summary adjudication. (Peter Culley & Associates v. Superior Court (1992) 10 Cal.App.4th 1484, 1498; Roger H. Proulx & Co. v. Crest Liners, Inc., supra, 98 Cal.App.4th at p. 203.)
B. The Indemnity Agreement
“‘Indemnity may be defined as the obligation resting on one party to make good a loss or damage another party has incurred.’” (McCrary Construction Co. v. Metal Deck Specialists, Inc. (2005) 133 Cal.App.4th 1528, 1536.) When the parties expressly contract with respect to the duty to indemnify, we determine the extent of indemnity from the contract language. (Ibid.)“‘“The fundamental goal of contractual interpretation is to give effect to the mutual intention of the parties. [Citation.] If contractual language is clear and explicit, it governs. . . .’” Indemnity agreements are no different and ‘are to be interpreted under the same rules governing other contracts with a view to determining the actual intent of the parties.’” (JPI Westcoast Construction, L.P. v. RJS & Associates, Inc. (2007) 156 Cal.App.4th 1448, 1457-1458.)
The indemnity provisions in the Services Agreement between CPE and BAS provide that each party “shall release, defend, indemnify and hold harmless” the other and “officers, directors, shareholders, affiliates, subsidiaries, employees and agents . . . from and against any losses, liabilities, claims, obligations and/or expenses including, without limitations, court costs and reasonable attorneys fees (collectively ‘Damages’) that may be incurred by, or asserted against, any of [BAS or CPE] arising from, relating to, or in connection with, in whole or in part, (I) the alleged acts, errors or omissions of [BAS or CPE] (or its agents), or the Shared Employees; (II) any alleged breach of this Agreement by [BAS or CPE]; and (III) except as otherwise provided in this Agreement any claims asserted by, or liability to, third parties, arising from, relating to, or in connection with, in whole or in part, [BAS or CPE]’s business.”
Because the clause does not address the issue of an indemnitee’s negligence, it is a “general” indemnity clause, and “‘will not be interpreted to provide indemnity if an indemnitee has been actively negligent[,]’” “unless the circumstances of the case and language of the contract evince a different intent by the parties.” (McCrary Construction Co. v. Metal Deck Specialists, Inc., supra, 133 Cal.App.4th at pp. 1537-1538, citing Rossmoor Sanitation, Inc. v. Pylon, Inc. (1975) 13 Cal.3d 622, 628, 632-633.) As the California Supreme Court recently stated, “if one seeks contractual indemnity protection for his own active negligence, the language providing such protection must be particularly clear and explicit.” (Crawford v. Weather Shield Mfg., Inc. (2008) 44 Cal.4th 541, 562.) No such explicit language appears in the indemnity clause in the Services Agreement.
C. CPE’s Claim of Active Negligence
CPE contends that the trial court erred in granting summary judgment because there is a triable issue of fact whether BAS was actively negligent. CPE claims BAS was actively negligent by fraudulently misrepresenting to Bowers and Arnold (before they signed the Stock Purchase Agreement and the Employment Agreements) that their salaries were guaranteed for five years and constituted part of the purchase price for the ambulance company. CPE also claims BAS was actively negligent in failing to tell CPE about these representations when BAS later sought CPE’s advice about firing Bowers and Arnold. As a result, CPE argues, the trial court erred in granting summary judgment allowing BAS to recover under the indemnity clause in the Services Agreement for the damages and attorney fees BAS paid in defending against Bowers’s and Arnold’s wrongful termination lawsuit.
To support its claim of active negligence, CPE introduced deposition testimony by Bowers that at the time of the sale of the company to Cates and Iskander, the parties discussed that the payments in the Employment Agreements were consideration for the sale of BAS. CPE also introduced Cates’s deposition testimony that he believed that Bowers and Arnold would not sign any agreement itemizing their services, and that including specific job descriptions in the Stock Purchase Agreement would have been a “deal breaker.” Finally, CPE introduced Cates’s testimony that the parties had discussed a total consideration of $1,000,000 for the sale of the company. The trial court excluded all the deposition testimony under the parol evidence rule. CPE now argues that these statements were improperly excluded. We review for an abuse of discretion evidentiary rulings made in connection with a summary judgment motion. (Mitchell v. United National Ins. Co. (2005) 127 Cal.App.4th 457, 467.)
1. The parol evidence rule does not apply to CPE’s evidence
The parol evidence rule, codified in Civil Code section 1625 and Code of Civil Procedure section 1856, prohibits the introduction of extrinsic evidence (oral or written) to “‘vary, alter or add to the terms of a written integrated agreement.’” (Casa Herrera, Inc. v. Beydoun (2004) 32 Cal.4th 336, 343.) “[T]he rule necessarily bars consideration of extrinsic evidence of prior or contemporaneous negotiations or agreements at variance with the written agreement.” (Id. at p. 344.) The Stock Purchase Agreement and the Employment Agreements all contain integration clauses providing that no representations or agreements were made beyond those contained in the agreement.
The interpretation of those Agreements, however, was not the issue before the trial court. BAS filed suit asserting its right to indemnity under the Service Agreement it signed with CPE. CPE defended by asserting that BAS was not entitled to indemnity because BAS was actively negligent, and as part of the evidence to prove active negligence, CPE presented Bowers’s and Iskander’s deposition testimony regarding the negotiations surrounding the Stock Purchase and Employment Agreements. CPE’s theory was that BAS was actively negligent, first when Cates and Iskander made misrepresentations about the nature of Bowers’s and Arnold’s employment while negotiating the Stock Purchase and Employment Agreements with Bowers and Arnold and, second, when BAS failed to disclose the misrepresentations to CPE when it consulted with CPE about firing Bowers and Arnold.
CPE therefore did not introduce this evidence to contradict the terms in the integrated Stock Purchase or Employment Agreements, or to “‘create or alter the obligations’” under the agreements, either of which would justify excluding the evidence under the parol evidence rule. (Casa Herrera, Inc. v. Beydoun, supra, 32 Cal.4th at p. 344.) Instead, CPE introduced the evidence to show that when BAS consulted with CPE about firing Bowers and Arnold, BAS was actively negligent when it failed to give CPE highly relevant information about BAS’s history of dealings with the two employees, information CPE needed to judge the likelihood that the men would file a lawsuit if they were terminated. The parol evidence rule, therefore, did not apply, and the trial court abused its discretion in excluding the evidence under that rule.
The evidence that the trial court excluded under the parol evidence rule was submitted by CPE in support of its proposed Undisputed Material Facts 28, 29, and 30.
2. The secondary evidence rule does not exclude CPE’s evidence
The trial court excluded, under the secondary evidence rule, the same portion of Cates’s deposition that it excluded under the parol evidence rule. CPE submitted the deposition testimony in support of its proposed Undisputed Fact 30: “Written job descriptions were removed from the Employment Agreements consistent with the intent of the parties to the BAS Sales Agreement because Mr. Cates knew they were a deal breaker.”
The trial court excluded the statements under the “best evidence rule.” Evidence Code section 1520 et seq. codified the secondary evidence rule, effective January 1, 1999, and replaced the “best evidence rule,” former Evidence Code sections 1500-1511. (People v. Samuels (2005) 36 Cal.4th 96, 129.)
In the challenged portions of his deposition, Cates testified that during the negotiations over the purchase of the ambulance company, the parties agreed to proceed with a version of the Stock Purchase Agreement which did not contain a “‘Services’ delineation,” that the parties were trying to execute the agreement by the end of the year, and that the discussion about taking it out occurred on the 29th or 30th of December. Because Bowers and Arnold demanded that the agreement be executed by December 31 or not at all, the parties agreed to “do this outside” and after the agreement. Cates testified that “we were led to believe” that it was a “deal breaker,” that is, he believed that Bowers and Arnold would not sign any contract that contained a specific itemization of services.
Evidence Code section 1523, subdivision (a) provides: “Except as otherwise provided by statute, oral testimony is not admissible to prove the content of a writing.” The deposition testimony would be excludable under section 1523, subdivision (a) if CPE introduced it to prove the content of either the Stock Purchase Agreement or the Employment Agreement. But CPE was not attempting to prove the meaning of the written agreements. Instead, CPE sought to prove that during the negotiations, the parties had discussed whether to include specific job descriptions. CPE planned to use the evidence in support of its claim that BAS was actively negligent, first when BAS negotiated the Employment Agreements and, second, when BAS did not inform CPE of the discussion about job descriptions when BAS consulted CPE about firing Bowers and Arnold. The deposition testimony was relevant to demonstrate that there were triable issues of fact regarding whether BAS was negligent. (See California Nat. Bank v. Havis (2004) 120 Cal.App.4th 1122, 1136, fn.12.) Because the deposition testimony was not submitted to prove the content of the written agreements, the trial court abused its discretion in excluding it as secondary evidence.
3. Cates’s statement is not hearsay or opinion
The trial court also excluded a small portion of Cates’s deposition testimony: “Q: And you found it was a deal breaker, they wouldn’t sign any contract that contained itemization of services, right? [¶] A: That’s what we were led to believe.” The court ruled that the testimony was: “hearsay, opinion, [and] the cited testimony does not support the fact as phrased by CPE.”
Hearsay is “evidence of a statement that was made other than by a witness while testifying at the hearing and that is offered to prove the truth of the matter stated.” (Evid. Code, § 1200, subd. (a).) Cates’s testimony does refer to a “statement” in which Bowers and Arnold expressed their unwillingness to sign a contract which itemized services. But CPE offered Cates’s testimony not to prove that Bowers and Arnold would not sign such a contract, but to prove that Cates believed that they would not. Cates’s belief is relevant to CPE’s claim that BAS was negligent when BAS did not inform CPE, during the consultations about terminating Bowers and Arnold, about the background negotiations surrounding the signing of the Employment Agreements.
We also disagree that the statement is opinion testimony. Rather than an opinion, the testimony describes Cates’s belief at the time the parties signed the Stock Purchase and Employment Agreements. The testimony supports CPE’s Undisputed Fact 30, and it was an abuse of discretion to exclude it.
4. BAS was a party to the Employment Agreements with Bowers and Arnold and to the Services Contract with CPE
The trial court also concluded that CPE had failed to produce evidence that BAS’s loss resulted in part from its own active negligence, because BAS, “the party seeking indemnity under the [Services Agreement], was not a party to the sale of the company from Mr. Bowers and Mr. Arnold to Mr. Cates and Mr. Iskander.” We agree as far as the Stock Purchase Agreement is concerned. The Stock Purchase Agreement was signed by Cates and Iskander as “Buyers” and Bowers and Arnold as “Sellers.” Before the execution of the Stock Purchase Agreement, Cates and Iskander did not yet own BAS and were not its agents. BAS was therefore not a party to the Stock Purchase Agreement.
The same is not true, however, for the Employment Agreements. Those Agreements, while executed on the same day as the Stock Purchase Agreement, were signed by BAS, with Cates signing not as an individual but as president and chief operating officer of BAS. CPE’s allegations of negligence depend in part on Iskander’s, Cates’s and Bowers’s deposition testimony about the negotiations surrounding the signature, by BAS, of the Employment Agreements. Because BAS signed the Employment Agreements as a corporation, BAS was a party to those agreements with Bowers and Arnold, and would be liable for any active negligence connected to the negotiation and signing of the Employment Agreements.
More significantly, BAS was a party to the Services Agreement with CPE, which contains the indemnity clause at issue and which makes Bowers and Arnold “Shared Employees” for BAS and CPE. The Services Agreement provided that both parties were entering into an “employment relationship” with the Shared Employees. BAS warranted that it had disclosed to CPE, with regard to anyone it employed before signing the Agreement, “any agreement between Client and any Employee including, without limitation, any employment agreement, collective bargaining agreement, or deferred compensation agreement.” The Employment Agreements made Bowers and Arnold BAS employees before the signing of the agreement with CPE. The terms of the Services Agreement required BAS to disclose any work-related agreement with the men. CPE was entitled to argue that BAS was actively negligent when it consulted with CPE without disclosing its negotiations with Bowers and Arnold.
D. There is a genuine issue of material fact whether CPE failed to timely tender the claim to Shomer
BAS urges us to affirm the grant of summary judgment on the ground that CPE failed to tender the complaint filed by Bowers and Arnold to National Union during the policy period. We must affirm if any of the grounds urged by BAS, here or in the trial court, entitle it to summary judgment, even if the theory is different from that adopted by the court. (Western Mutual Ins. Co. v. Yamamoto (1994) 29 Cal.App.4th 1474, 1481.)
It is undisputed that immediately after it was served with Bowers’s and Arnold’s complaint in late August 2004, BAS contacted CPE and provided CPE with a copy of the complaint. The parties also do not dispute that CPE said it would handle getting the complaint to National Union by submitting it to Shomer, the insurance agency. There remains, however, a factual dispute over what happened next. Shomer stated that CPE did not submit the complaint to it until January 2005, outside the policy period. CPE contends it tendered the claim to Shomer in September 2004, within the policy period, and introduced as evidence a facsimile cover sheet dated September 7, 2004 from CPE to Shomer, purported to have accompanied the complaint. Because there is a genuine question of material fact regarding when CPE tendered the complaint to Shomer, we do not affirm the summary judgment on that alternate ground, and we must reverse the judgment.
DISPOSITION
We reverse the trial court’s order granting summary judgment. CPE is entitled to its costs on appeal.
We concur: MALLANO, P.J. ROTHSCHILD, J.