Opinion
B321319
11-21-2023
LOS ANGELES BY-PRODUCTS CO., Plaintiff, Cross-defendant and Respondent, v. CALMAT CO., Defendant, Cross-complainant and Appellant.
Bird, Marella, Boxer, Wolpert, Nessim, Drooks, Lincenberg &Rhow, Thomas R. Freeman, Ekwan E. Rhow, Marc E. Masters and Joyce J. Choi for Defendant, Cross-complainant and Appellant. Atkinson Andelson Loya Ruud &Romo, Edward C. Ho, Daniel M. Hargis, Mae G. Alberto; The Berglund Group and Keith Millhouse for Plaintiff, Cross-defendant and Respondent.
NOT TO BE PUBLISHED
APPEAL from a judgment of the Superior Court for Los Angeles County No. 19STCV24824, Holly J. Fujie, Judge.
Bird, Marella, Boxer, Wolpert, Nessim, Drooks, Lincenberg &Rhow, Thomas R. Freeman, Ekwan E. Rhow, Marc E. Masters and Joyce J. Choi for Defendant, Cross-complainant and Appellant.
Atkinson Andelson Loya Ruud &Romo, Edward C. Ho, Daniel M. Hargis, Mae G. Alberto; The Berglund Group and Keith Millhouse for Plaintiff, Cross-defendant and Respondent.
LUI, P. J.
Appellant CalMat Co. leased its property to respondent Los Angeles By-Products Co. (LABP) to use as a landfill. The landfill caused environmental contamination. Litigation ensued. In 1978, the parties settled. LABP took responsibility for claims made before the settlement; CalMat assumed responsibility thereafter. During an indemnification dispute in 2014, CalMat affirmed its duty under the 1978 settlement to defend and indemnify LABP in environmental litigation.
In 2019, after previously insisting that it is responsible for indemnifying LABP, CalMat repudiated that duty. It now claims that LABP should have shouldered the burden all along. The trial court rejected CalMat's belated reinterpretation of the 1978 settlement and entered judgment for LABP. On de novo review of demurrer and summary judgment orders, we affirm the judgment. The plain language of the settlement, fortified by the parties' course of conduct, shows their intent was to have CalMat indemnify LABP for environmental claims arising after 1978.
FACTS AND PROCEDURAL HISTORY
The 1962 Lease Agreement
CalMat owned property in North Hollywood called the Hewitt Site (Hewitt). For decades, CalMat extracted gravel from Hewitt, creating a large pit. In 1958, CalMat obtained government approval for a landfill at Hewitt, on condition that it "demonstrate that the disposal of wastes at this site will not cause a pollution or threat of pollution to the waters of the State [and] exercise extreme care in [its] operations." Disposal of chemicals and materials that deleteriously affect groundwater was expressly forbidden.
In 1962, CalMat contracted with LABP to operate a landfill at Hewitt under a lease agreement (Lease). LABP operated the landfill until 1975, when CalMat gave LABP notice to quit for violating Lease covenants requiring adherence to government regulations prohibiting migration of harmful or explosive gases. The Lease ended in 1977.
The Lease required LABP's landfill operation to conform with all laws, ordinances, and regulations. It could be filled with "allowable and acceptable" materials. Local regulation and the resolution authorizing CalMat's landfill allowed disposal of ordinary residential and commercial refuse, organic waste, scrap metal and inert solids. Authorities warned that the landfill must not contaminate groundwater. The Lease required LABP to indemnify CalMat against claims for property damage arising from LABP's landfill operations.
CalMat did not participate in LABP's operations. It is unclear whether LABP gave CalMat documentation of the waste it deposited at Hewitt during the Lease. Once the Lease ended, CalMat denies that it operated a landfill itself. However, a state water quality control board found in 2015 that CalMat was storing wrecked automobiles at Hewitt, which were leaking fluids onto the ground.
The 1978 Settlement Agreement
In 1975, the parties sued each other over methane gas emanating from the landfill. The dispute was settled by agreement with a "takeover date" of December 4, 1978 (the Settlement). After that date, CalMat took over ownership, possession, and control of a system installed by LABP to prevent migration of methane from the landfill. In paragraph 5, CalMat assumed "sole responsibility" for "complying with all governmental requirements pertaining to the [methane] System, landfill operations, and/or the Hewitt Pit, regardless of whether such requirements are imposed on one or both of the parties hereto." The Settlement was drafted by CalMat's attorneys at Latham &Watkins. It is unclear what CalMat knew about LABP's operations at the time the parties entered the Settlement.
The purpose of the Settlement was to "settle all matters between the parties arising out of the legal relationship created between them by the Lease . . . and the actions taken by the parties as a direct or indirect result of such Lease." It releases "all claims of whatsoever nature, whether contingent or vested, known or unknown, which either of them have against the other . . . arising out of the legal relationship created" in the Lease. Central to this appeal is the indemnity clause in paragraph 8 of the Settlement, which is set forth below in the Discussion section.
Discovery of Groundwater Contamination
In the 1980's, government authorities discovered that drinking water from wells in North Hollywood was contaminated with chemicals. The area was designated as a Superfund Site pursuant to the 1980 Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA). After investigating the source of the contamination, the Environmental Protection Agency (EPA) and the State of California sued those deemed responsible to recover the cost of cleanup, including CalMat, LABP, and Honeywell Corporation. CalMat entered consent decrees with the government in 1996 and 2008.
The 2014 Indemnification Litigation
The trial court took judicial notice of the 2014 litigation.
In 2014, LABP sued CalMat for refusing to indemnify it for CERCLA contamination claims, citing paragraph 8 of the
Settlement. CalMat promptly conceded its duty to indemnify. Its vice-president/general counsel wrote, "CalMat hereby accepts the tender made by LABP under the indemnity provision in the 1978 settlement agreement for claims against LABP relating to the Hewitt Pit, specifically as set forth in Section 8 of the 1978 agreement." CalMat "unconditionally accepted" its duty to indemnify LABP and sought to enter "a joint defense agreement that will allow us to work together cooperatively while defending claims we both face regarding the Hewitt Site," citing threatened claims by Honeywell, Lockheed, and government entities.
CalMat filed a proposed cross-complaint alleging that LABP's lawsuit is "moot" because CalMat "unequivocally accepted" its duty to indemnify LABP and "defend third-party claims involving the Hewitt landfill." CalMat wrote that the Settlement "contains an indemnification provision . . . in favor of LABP by [CalMat] that encompasses costs incurred in connection with the Hewitt Site." This wording is echoed in CalMat's motion for summary judgment. CalMat asserted as an undisputed fact that "[t]he 1978 Settlement Agreement contains an indemnification provision in favor of LABP by [CalMat] that encompasses costs incurred in connection with the Hewitt Site."
The Indemnity Administration Agreement
In 2016, the parties entered an Indemnity Administration Agreement (IAA) to resolve the 2014 litigation. The IAA confirms CalMat's indemnification obligations under the Settlement and acknowledges that CalMat "accepted LABP's tender of defense and indemnity." LABP agreed to disclose documents and information relating to its past operation of the landfill. CalMat agreed to defend LABP and provide independent counsel for any claims asserted against LABP relating to Hewitt. The IAA mentions threatened litigation from Honeywell.
The Current Litigation
In 2018, Honeywell threatened to sue LABP for costs related to environmental contamination. LABP tendered Honeywell's claim to CalMat. CalMat responded that it "will continue to operate under the [IAA]." However, CalMat failed to pay LABP's defense costs. Instead, CalMat demanded that LABP indemnify it for all liabilities, penalties, expenses, and costs arising from EPA enforcement actions dating back to 1987.
LABP instituted this lawsuit in 2019, claiming breach of the Settlement and IAA, and seeking declaratory relief. In a cross-complaint, CalMat claimed breaches of the Lease and Settlement. It asserted that LABP must indemnify CalMat for environmental claims under the terms of the Lease, alleging that LABP violated the Lease by accepting industrial waste at the landfill.
LABP's Demurrers
LABP demurred to CalMat's cross-complaint. It argued that the claims are barred by CalMat's failure to assert them in the 2014 litigation. CalMat's claim for breach of the Lease is barred by a release in the Settlement. LABP also moved to strike portions of the cross-complaint that allege violations of the Lease.
CalMat opposed the demurrers and motion to strike. It argued that its claims did not have to be asserted in the 2014 litigation; if they were compulsory counterclaims, the failure to make them in 2014 was due to inadvertence, mistake, or neglect. CalMat argued that the release in the Settlement does not apply. LABP is equitably estopped or barred by unclean hands from relying on the release because LABP concealed its unlawful disposal of forbidden waste at Hewitt. The Settlement terms require LABP to indemnify CalMat.
The court sustained the demurrers without leave to amend. It found that CalMat's claim for breach of the Lease is barred by the Settlement. Further, by seeking to enforce the Settlement in prior litigation and in the current lawsuit, CalMat waived any claim that LABP is barred by equitable estoppel or unclean hands from relying on the release clause in the Settlement. The court ruled that under the "clear" terms of the Settlement, LABP is not required to indemnify CalMat. This court denied LABP's writ petitions challenging the demurrer ruling. (CalMat Co. v. Superior Court (Jan. 28, 2021, B307722; CalMat Co. v. Superior Court (Feb. 25, 2021, B310153.)
Summary Judgment Motions
The parties filed cross motions for summary judgment. LABP claimed it is entitled to judgment as a matter of law: CalMat must indemnify LABP under the clear and unambiguous language in the Settlement; CalMat is judicially and equitably estopped from denying its duty to indemnify; and CalMat breached the IAA. LABP's president declared that he searched company records and provided CalMat with every document he found related to the Hewitt landfill, as required by the IAA; no documents were withheld.
CalMat asserted that it is entitled to summary judgment because the Settlement does not require it to indemnify LABP against environmental remediation claims. Paragraph 8 of the Settlement is ambiguous: Though CalMat's risk of exposure falls within the literal language of paragraph 8 encompassing "all claims" made after 1978, CERCLA claims are not expressly referenced. No reasonable lessor in CalMat's position would blindly indemnify LABP against CERCLA claims arising from LABP's conduct. Further, LABP breached its contractual obligations under the IAA.
In support of its argument, CalMat offered the declaration of trial lawyer Robert Infelise, who opined that the parties could not reasonably have contemplated liability for CERCLA (enacted in 1980) when they entered the Settlement in 1978. Infelise criticized paragraph 8 for failing to define terms like "laws" and "waste." As lessee, LABP had "a monopoly on information" about the waste deposited in the landfill and whether it violated local laws. Infelise could not conceive why, under the circumstances, a landlord would agree to indemnify the lessee. To enter such an agreement was "as reckless as handing someone a blank check." CalMat proposed adding language to paragraph 8, to require LABP to indemnify CalMat or exclude CERCLA claims from the scope of CalMat's duty to indemnify.
The Court's Judgment
The court granted LABP's motion and denied CalMat's motion. It ruled that section 8(f) of the Settlement requires that CalMat indemnify LABP. CalMat's prior acceptance of its duty to indemnify LABP in the 2014 litigation underscored the court's finding. The court ruled that CalMat breached the Settlement and IAA by failing to defend and indemnify LABP. The court entered judgment for LABP.
DISCUSSION
Ruling on Summary Judgment
1. Appeal and Review
The judgment is appealable. (Code Civ. Proc., § 904.1., subd. (a)(1).) Summary judgment is appropriate when no triable issues of material fact exist and the moving party is entitled to judgment as a matter of law. (Code Civ. Proc., § 437c, subd. (c).) We independently examine the record to determine if triable issues of fact exist. (Saelzler v. Advanced Group 400 (2001) 25 Cal.4th 763, 767.) Evidence presented in opposition to summary judgment is liberally construed. (Regents of the University of California v. Superior Court (2018) 4 Cal.5th 607, 618.)
2. Rules of Contract Interpretation
"Indemnity is a contract by which one engages to save another from a legal consequence of the conduct of one of the parties, or of some other person." (Civ. Code, § 2772.) "The interpretation of a contract is a judicial function." (Wolf v. Walt Disney Pictures &Television (2008) 162 Cal.App.4th 1107, 1125 (Wolf).) Courts give effect to the parties' intent at the time of contracting. (Civ. Code, § 1636.) "Ordinarily, the objective intent of the contracting parties is a legal question determined solely by reference to the contract's terms," which govern interpretation. (Wolf, at p. 1126, citing Civ. Code, §§ 1638, 1639.) Terms "may be explained or supplemented by course of dealing or usage of trade or by course of performance." (Code Civ. Proc, § 1856, subd. (c).)
Extrinsic evidence may show that ambiguous language is "susceptible to more than one reasonable interpretation" (Wolf, supra, 162 Cal.App.4th at p. 1126), but cannot be used to vary or contradict the contract. (Ibid.) Resolution of an ambiguity is a question of law" 'if no parol evidence is admitted or if the parol evidence is not in conflict.'" (Wolf v. Superior Court (2004) 114 Cal.App.4th 1343, 1351.) Expert opinion "is inappropriate" to interpret the meaning of the contract. (Cooper Companies v. Transcontinental Ins. Co. (1995) 31 Cal.App.4th 1094, 1100.)
3. The Indemnification Clause
Paragraph 8 of the Settlement covers indemnification.
LABP agreed to indemnify CalMat for (a) a 1977 claim made by a Mr. Rubin; (b) "all claims made for any physical or other injury to persons or property within the Hewitt Pit, which injury occurs prior to the takeover date"; and (c) "all claims made arising from the migration of landfill gases, and/or the results thereof, from the Hewitt Pit" if they occur within 24 months.
CalMat agreed to indemnify LABP for (d) "all claims made for any physical or other injury to persons or property within the Hewitt Pit, which injury occurs on or after the takeover date"; (e) all claims arising from the migration of landfill gases that are asserted more than 24 months after the takeover date; and (f) "except as otherwise set forth in this Settlement Agreement, all claims made arising directly or indirectly, without limitation, from the condition, occupation, or use of the Hewitt Pit whose first assertion in writing occurs on or after the takeover date."
4. CalMat Must Indemnify LABP
Paragraph 8(f) unambiguously favors LABP. CalMat's duty to indemnify LABP applies to claims arising after the 1978 takeover date, and Honeywell asserted its claim in 2018. CalMat does not dispute that the claim arose "directly or indirectly, without limitation, from the condition, occupation, or use" of Hewitt. CalMat agrees that Honeywell's "remediation claims are based on LABP's conduct in operating the landfill."
Underscoring the broad scope of CalMat's duty, paragraph 8 specifies that indemnification applies"' "regardless whether the claim asserted against the indemnitee is without merit, is asserted in bad faith, or arises in whole or in part as a result of the negligence, active or passive, of the indemnitee." '" (Italics added.) Moreover, the duty exists "whether or not such claim is the type of claim which is within the contemplation of the parties at this time," i.e., in December 1978.
CalMat argued below that though its risk of exposure falls within the literal language of paragraph 8(f) encompassing "all claims" after 1978, CERCLA claims are not expressly referenced. CalMat's recent rereading of the Settlement does not withstand scrutiny. Its own words and performance belie any notion that paragraph 8(f) does not apply to CERCLA claims.
CalMat's admissions and conduct after signing the Settlement and the enactment of CERCLA show the parties intended for CalMat to indemnify LABP for remediation claims. "The conduct of the parties after execution of the contract and before any controversy has arisen as to its effect affords the most reliable evidence of the parties' intentions." (Kennecott Corp. v. Union Oil Co. (1987) 196 Cal.App.3d 1179, 1189.)
The evidence shows that in 2014, CalMat acknowledged its duty to indemnify LABP for environmental claims by accepting "the tender made by LABP under the indemnity provision in the 1978 settlement agreement for claims against LABP relating to the Hewitt Pit, specifically as set forth in Section 8 of the 1978 agreement." CalMat "unequivocally" accepted its duty under the Settlement's "indemnification provision in favor of LABP by [CalMat] that encompasses costs incurred in connection with LABP's occupation" of Hewitt.
CalMat's court filings conceded its duty to defend and indemnify LABP under the Settlement. CalMat's admissions in the 2014 litigation were not "an offer to compromise." (Evid. Code, § 1152.) A party's statements, "when not connected with an offer of compromise, may be proved as an admission against interest" where the intent is to admit liability. (Moving Picture Etc. Union v. Glasgow Theaters, Inc (1970) 6 Cal.App.3d 395, 402.) CalMat intended to have LABP's case dismissed as moot because CalMat admitted liability.
CalMat signed the IAA requiring it to pay for separate counsel to defend LABP from remediation claims related to Hewitt and, in fact, paid LABP's legal fees. In 2018, CalMat reaffirmed that it would follow the IAA. The critical point is that CalMat actually performed its contractual duty to defend and indemnify LABP.
"It is a time-honored principle that the conduct of the parties is given great weight in the interpretation of a contract. 'Where an agreement involves repeated occasions for performance by either party with knowledge of the nature of the performance and opportunity for objection to it by the other, any course of performance accepted or acquiesced in without objection is given great weight in the interpretation of the agreement.'" (Travelers Property Casualty Co. of America v. Workers' Comp. Appeals Bd. (2019) 40 Cal.App.5th 728, 739.)
CalMat seeks, impermissibly, to contradict the terms of the Settlement. (Wolf, supra, 162 Cal.App.4th at p. 1126.) It cites Attorney Infelise, opining that a landlord who agrees to indemnify a former tenant without limitation-without knowing what the former tenant did while using the property-would be "flying blind" and "as reckless as writing the former tenant a blank check." CalMat deduces that the Settlement is absurd, with" 'economically and commercially unreasonable' results." But even "substantial economic hardship and expense . . . is not an adequate legal basis" to rewrite a contract. (Ellison v. City of San Buenaventura (1975) 48 Cal.App.3d 952, 962; Third Story Music, Inc. v. Waits (1995) 41 Cal.App.4th 798, 809 [parties saw fit to enter a contract that operated "harshly or inequitably" or was "improvident"].)
CalMat contends that courts can take curative measures to rectify commercially unreasonable risks in an ongoing lease that were unanticipated at the time of contacting, citing Brown v. Green (1994) 8 Cal.4th 812, 826 [contract did not show how parties intended to allocate risk of compliance with government orders arising from property conditions (asbestos) unrelated to the lessee's use] and Glenn R. Sewell Sheet Metal, Inc. v. Loverde (1969) 70 Cal.2d 666 [unexpected cost of connecting to a sewer]. Unlike the cited cases, CalMat was aware of its environmental remediation exposure risks when it entered the IAA in 2016, long after the Lease ended. By then, CalMat and LABP had been identified as targets for CERCLA action.
Despite the potential blank check for its former tenant's activities, CalMat embraced its duty to indemnify LABP instead of using the 2014 indemnification litigation to contest its duty to indemnify LABP. Even if CERCLA liability was unanticipated when the Settlement was signed, CERCLA was the subject of the 2014 litigation, in which CalMat insisted that it was required to indemnify LABP under the Settlement.
CalMat insists that the IAA reserves its right to contest its duty to indemnify LABP. It does not. The subject of the IAA was LABP's right to have CalMat pay for separate counsel. Acknowledging LABP's claim of a conflict of interest, it states that the parties are entering the IAA "to address the manner in which CalMat will be administering a defense to LABP under the defense and indemnity provisions contained in the 1978 Settlement Agreement." (Italics added.)
The IAA treats CalMat's duty to indemnify as a given, resolving a dispute over LABP's right to separate counsel while CalMat performs its duty under the Settlement to "administer[ ] a defense to LABP," though "without admitting or conceding that LABP is entitled to such separate counsel." A clause in the IAA stating that it is not "an admission of liability" thus pertains to Calmat's duty to pay for separate counsel. It does not erase CalMat's judicial admissions that the Settlement's indemnification provision runs in favor of LABP. The IAA confirms CalMat's duty to administer a defense to LABP under the Settlement.
Ruling on Demurrer to the Cross-Complaint
Appeal lies from the final judgment after demurrers are sustained without leave to amend. (Code Civ. Proc., §§ 904.1, subd. (a)(1), 906 [court may review intermediate rulings]; Vibert v. Berger (1966) 64 Cal.2d 65, 67 [demurrer reviewed after judgment].)
"A demurrer tests the sufficiency of a complaint as a matter of law." (Durell v. Sharp Healthcare (2010) 183 Cal.App.4th 1350, 1358.) Review is de novo, accepting the truth of a pleading's material facts. (Aryeh v. Canon Business Solutions, Inc. (2013) 55 Cal.4th 1185, 1191; Moore v. Regents of University of California (1990) 51 Cal.3d 120, 125.)" 'If facts appearing in the exhibits contradict those alleged, the facts in the exhibits take precedence.'" (Kim v. Westmoore Partners, Inc. (2011) 201 Cal.App.4th 267, 282; Vanacore &Associates, Inc. v. Rosenfeld (2016) 246 Cal.App.4th 438, 446.)
1. Breach of the 1962 Lease
In its first cause of action, CalMat alleges that LABP "has breached the 1962 Lease by failing to indemnify CalMat against, and by failing to hold CalMat harmless from, CalMat's Past and Ongoing Legal and Professional Fees and Costs, and CalMat's Past Payments to the Federal and State Governments." The trial court sustained demurrers to this claim.
LABP did not assert the statute of limitation for breach of contract, though the Lease ended nearly half a century ago.
It is true that the Lease required LABP to indemnify CalMat; however, the duties imposed by the Lease were released when the parties entered the 1978 Settlement. The Settlement acknowledges litigation arising from LABP's activity during the Lease. The "purpose" of the Settlement is "to settle all matters between the parties arising out of the legal relationship created between them" by the Lease. The Settlement's indemnity provision thus supersedes the indemnity clause in the Lease.
The Settlement releases "all claims of whatsoever nature, whether contingent or vested, known or unknown, which either of them have against the other . . . arising out of the legal relationship created by them by the above-referenced Lease, as amended, and the actions taken by them as a direct or indirect result thereof." The parties recognized that Civil Code section 1542 protects against the release of unknown claims, but "[b]eing aware of that provision, the parties hereto nonetheless desire to release each other from all unknown or unsuspected claims."
CalMat argues that the Settlement release clause is unenforceable, reasoning that it was misled, in 1978, by LABP's bad faith failure to disclose its misconduct in allowing deposit of toxic chemicals in the landfill. CalMat asserts that a releasor is not bound by a release it signed while unaware of the releasee's misconduct. It further argues that doctrines of equitable estoppel and unclean hands bar enforcement of the Settlement release clause because of LABP's fraudulent conduct.
CalMat's purpose in avoiding the Settlement's release is to revive the indemnification clause in the Lease, which runs in its favor. The difficulty is that CalMat itself urged enforcement of the indemnification clause in the Settlement, not the one in the Lease. CalMat learned of groundwater contamination after the Settlement. Yet despite the expanded scope of its potential liability, CalMat did not deny its duty to indemnify under the Settlement or contend that LABP misled or defrauded CalMat into entering the Settlement. On the contrary, CalMat reaffirmed the Settlement's indemnity clause.
During the 2014 indemnification litigation, CalMat cited paragraph 8 of the Settlement in conceding its duty to indemnify and accepting the tender made by LABP for claims relating to Hewitt. CalMat "unconditionally" and "unequivocally" accepted its duty to indemnify LABP and "defend third-party claims involving the Hewitt landfill." CalMat's motion for summary judgment asserted the "undisputed fact" that "[t]he 1978 Settlement Agreement contains an indemnification provision in favor of LABP by [CalMat] that encompasses costs incurred in connection with the Hewitt Site."
The IAA resolved the 2014 litigation and confirms the parties' indemnification obligations under the Settlement. CalMat agreed to defend LABP and provide independent defense counsel for any claims asserted against LABP relating to Hewitt, including a claim by Honeywell. Even now, in this litigation, CalMat seeks to enforce paragraph 8 of the Settlement.
Under the circumstances, CalMat's belated attempt to disavow the Settlement's indemnification clause falls flat.
CalMat knew of LABP's alleged misconduct for years yet continued to affirm paragraph 8 of the Settlement, losing the right to assert that its release of its rights under the Lease was fraudulently induced. "The right to avoid for fraud . . . is lost if the injured party, after acquiring knowledge of the fraud, manifests an intention to affirm the contract." (Bowmer v. H.C. Louis, Inc. (1966) 243 Cal.App.2d 501, 503.) CalMat's affirmance of the Settlement's indemnification clause for decades constitutes a waiver of equitable defenses to contract enforcement.
CalMat's cross-complaint states, "CalMat is not claiming that it was fraudulently induced to enter into the 1978 Settlement." CalMat does not want to disturb the Settlement but seeks to discard release language in the Settlement that voids the indemnification clause in the Lease.
2. Breach of the 1978 Settlement
Calmat's second cause of action is for breach of the Settlement. It alleges that "LABP has breached the 1978 Settlement by failing to indemnify CalMat against, and by failing to hold CalMat harmless from, CalMat's Past and Ongoing Legal and Professional Fees and Costs, and CalMat's Past Payments to the Federal and State Governments." The trial court ruled on demurrer that LABP has no duty to indemnify CalMat under the Settlement terms.
CalMat relies on paragraph 8(b) of the Settlement, which states that LABP shall indemnify CalMat for "all claims made for any physical or other injury to persons or property within the Hewitt Pit, which injury occurs prior to the [December 1978] takeover date." CalMat offered an interpretation of paragraph 8(b) to the trial court on demurrer, which it abandons for a novel interpretation on appeal.
CalMat argued below that LABP caused "willful injury to the property of CalMat" and paragraph 8(b) requires LABP to indemnify it "for the injury to the Hewitt Site that LABP caused by disposing unlawful waste" before the takeover date. On appeal, CalMat argues that the injury was to property belonging to the people of California, i.e., the state's groundwater.
Arguments raised for the first time on appeal may be deemed forfeited, even on demurrer. (Thompson v. Ioane (2017) 11 Cal.App.5th 1180, 1192.) By the same token, new legal theories may be raised on appeal. (Dudley v. Department of Transportation (2001) 90 Cal.App.4th 255, 259.) In any event, CalMat's new theory of injury to the state's groundwater-as opposed to injury to CalMat's property-is unavailing.
First, the claim of injury to state property is inconsistent with Calmat's pleading. CalMat's cross-complaint alleges that paragraph 8(b) "relat[es] to property damage within the Hewitt Site" and LABP cannot be exempted "from responsibility for its own willful injury to the property of CalMat."
Second, Calmat never asserted, in 40 years, that paragraph 8(b) requires LABP to indemnify it. "Th[e] rule of practical construction is predicated on the common sense concept that 'actions speak louder than words.' Words are frequently but an imperfect medium to convey thought and intention. When the parties to a contract perform under it and demonstrate by their conduct that they knew what they were talking about the courts should enforce that intent." (Crestview Cemetery Assn. v. Dieden (1960) 54 Cal.2d 744, 754.) "Thus, even if it be assumed that the words standing alone might mean one thing to the members of this court, where the parties have demonstrated by their actions and performance that to them the contract meant something quite different, the meaning and intent of the parties should be enforced." (Ibid.; Corwin v. Los Angeles Newspaper Service Bureau, Inc. (1978) 22 Cal.3d 302, 314.)
CalMat previously maintained that paragraph 8 requires it to indemnify LABP for injuries to groundwater and continuously defended and indemnified LABP, without ever suggesting that the Settlement requires the contrary. In short, CalMat saw fit to interpret the Settlement against itself. We decline CalMat's invitation to rewrite paragraph 8(b) to require LABP to indemnify CalMat against CERCLA claims.
DISPOSITION
The judgment is affirmed. Respondent is entitled to recover its costs on appeal from appellant.
We concur: ASHMANN-GERST, J., HOFFSTADT, J.