Opinion
NOT TO BE PUBLISHED
APPEAL from a judgment of the Superior Court of Los Angeles County No. BC34144, Maureen Duffy-Lewis, Judge.
Doll Amir & Eley, Gregory L. Doll and Ronald M. St. Marie for Cross-defendants and Appellants.
Shustak Frost & Partners, Erwin J. Shustak, Thomas C. Frost and Robert L. Hill for Cross-complainant and Respondent.
EPSTEIN, P.J.
This is an appeal from a judgment on an express contractual indemnity clause between former partners in a franchise venture. Appellants argue that respondent did not utilize the correct procedure and that, as a result, they were deprived of their right to jury trial on respondent’s claims for damages for breach of the indemnity agreement. They also argue, alternatively, that the award of fees and costs was not proper as an award of contractual fees and costs under Civil Code section 1717.
We conclude the trial court erred in awarding damages to respondent because there was no adjudication that appellants breached their duty to indemnify and defend, nor was there an adjudication of damages.
FACTUAL AND PROCEDURAL SUMMARY
This action arose out of an investment by Jackie Robinson, Flintie Williams, Michael Loyd, Roland Moos, Reggie Theus, and Gary Lindstrom in Pizza Hut franchises. Each of these individuals was a shareholder in RLLW, Inc., and they are collectively referred to as the continuing shareholders. Appellants are the individual shareholders except for Lindstrom, and the two corporate entities. Lindstrom is respondent. In order to finance the purchase of the franchises, RLW, Inc., a related corporation, borrowed money from A.I. Credit Consumer Discount Company (A.I. Credit) to which it gave a promissory note for repayment. The note was secured by individual guaranties signed by the individual appellants and respondent.
In 1999 there was a disagreement, resulting in litigation between respondent and appellants. A settlement was reached by which respondent agreed to sell his interest to the other shareholders. RLW and the individual appellants were to use their best efforts to remove respondent as a guarantor of the A.I. Credit promissory note. An express indemnity clause was made part of the agreement: “If RLW and the Continuing Shareholders are unable to obtain the removal of [respondent] as guarantor of the A.I. Note, RLLW, RLW and the Continuing Shareholders, jointly and severally, shall indemnify, defend and hold [respondent] harmless from and against any liabilities, claims, demands, judgments, fees and expenses (including reasonable attorneys’ fees and litigation expenses) that may be asserted against him, or that he may otherwise incur, as a result of such guaranty.” In any action arising out of or relating to the agreement, the prevailing party was to be reimbursed for all reasonable attorney fees and costs.
A Phillip Flaherty also was sued by respondent, but is not a party to this appeal.
The RLLW franchises failed, and appellants sued A.I. Credit and others in Los Angeles Superior Court for fraud and other causes of action. (RLLW, Inc. v. Movsesian, and related action (Super. Ct. L.A. County, 2006, No. BC341440).) In response, A.I. Credit cross-complained against appellants and respondent based on the personal guaranties they had given on the A.I. Credit note. Respondent then filed a cross-complaint against appellants. His pleading is the first amended cross-complaint. The first cause of action claims that appellants breached the settlement agreement by failing to indemnify and defend respondent from the A.I. Credit complaint. The second, for indemnification, alleges that respondent is entitled to indemnification on A.I. Credit’s complaint under the settlement agreement, including “his attorneys’ fees in defending against the claim and in enforcing the Settlement Agreement.” The third, for reimbursement, alleges appellants are obligated to reimburse respondent for any payment he might make to satisfy the A.I. Credit claim.
Respondent moved for summary adjudication of the issues on the second cause of action for indemnification. He sought adjudication that appellants owed him a duty to defend and indemnify him against A. I. Credit’s claim. He did not seek an adjudication that appellants had breached these duties. Respondent’s separate statement does not specify the amount of damages he sustained as a result of appellants’ breach of their obligation to provide him a defense and indemnity. Counsel for respondent submitted a declaration in support of the summary adjudication motion detailing $19,902.79 in fees incurred by his client in defending against, and seeking indemnification for, the A.I. Credit claim.
Appellants filed a statement of non-opposition to respondent’s motion. Respondent’s reply asked for an adjudication that appellants had a duty to defend and indemnify him, and for judgment for his attorney fees and costs to date, amounting to $31,173.28 plus interest. The request for additional fees was supported by a supplemental declaration by counsel for respondent with invoices for legal work performed.
On February 2, 2007, the trial court granted respondent’s motion, but erroneously characterized it as the judgment on his cross-complaint. The court did not sign the proposed order and proposed notice of entry of judgment lodged by respondent. The court did not explain why it was granting summary judgment when respondent sought only summary adjudication of the second of three causes of action. Although the minute order was served on counsel for appellants, they did not seek a new trial, reconsideration, or clarification as to why judgment was granted when only summary adjudication of two issues was sought by respondent.
The trial court issued a minute order on July 13, 2007, stating that “[a]ny request for attorney’s fees, costs from cross-defendants or any potential damages must be made by noticed motion.” This ruling is consistent with an interpretation of the February minute order as limited to adjudication of appellants’ duty to indemnify and defend respondent. In August 2007, respondent moved for fees and costs totaling $54,808.37, based on appellants’ failure to assume his defense in the underlying cross-complaint against him, and claiming they had paid only $12,084 toward the amount due under the minute order. Counsel for respondent explained that his efforts to reduce the February minute order to a judgment, and to hold appellants in contempt of the order, had been unsuccessful “because the February 2007 Order is a one-page minute entry order that does not include the total amount owed,.. .” (Italics added.)
Appellants opposed the motion, treating it as one for fees under Civil Code section 1717. In reply, respondent informed the court that A.I. Credit had settled the case other than respondent’s cross-complaint. He had requested dismissal of the first and third causes of action in the cross-complaint. He argued the motion for fees was “merely an extension” of the motion for summary adjudication necessitated solely by appellants’ refusal to comply with the court’s February 2007 order that he had a right to a defense and indemnification.
The court issued a minute order stating: “Court determined that [respondent] is to be indemnified; therefore, any fees incurred prior to that time should be reimbursed. Any fees since incurred are also proper as these are fees incurred by Lindstrom in defense of the action. The Court finds an additional $5,000 for fees incurred to date. [¶] Motion GRANTED in the total amount of $59,808.37.” Judgment was entered in that amount. This timely appeal followed.
DISCUSSION
“‘We review de novo the trial court’s decision to grant summary adjudication and are not bound by the trial court’s stated reasons or rationales.’ [Citation.] Summary adjudication shall be granted when there is no triable issue as to any material fact and the moving party is entitled to judgment as a matter of law. (Code Civ. Proc., § 437c, subd. (c).)” (California Highway Patrol v. Superior Court (2006) 135 Cal.App.4th 488, 496.)
Here, respondent sought summary adjudication of appellants’ duty to indemnify and defend him against A.I. Credit’s claims. He did not seek adjudication of the issues of breach of those duties or the damages resulting from a breach. In filing their non-opposition to the motion, appellants could reasonably conclude that they were conceding only that they were obligated to indemnify and defend. Respondent exploited the trial court’s order granting adjudication of duty by dismissing the remaining causes of action and convincing the trial court to award damages despite the fact that breach of duty and damages had not been adjudicated.
“Where a remedy as drastic as summary judgment is involved, due process requires a party be fully advised of the issues to be addressed and be given adequate notice of what facts it must rebut in order to prevail.” (San Diego Watercrafts, Inc. v. Wells Fargo Bank (2002) 102 Cal.App.4th 308, 316.) Appellants had no opportunity to litigate the issues of breach and damages by either summary judgment or trial. (See Collins Development Co. v. D. J. Plastering, Inc. (2000) 81 Cal.App.4th 771, 777-778 [defendant sued for contractual indemnity is entitled to jury trial of all parts of the plaintiff’s claim against it].)
Respondent cites County of San Joaquin v. Stockton Swim Club (1974) 42 Cal.App.3d 968 and Watson v. Department of Transportation (1968) 68 Cal.App.4th 885 for the basic proposition that “[w]hen a party fails to comply with an obligation to indemnify and defend another, the aggrieved party is entitled to recover the fees and costs incurred to retain their own counsel to defend themselves....” He claims “if an indemnitor is properly notified of an action brought against the indemnitee by a third-party and does not defend the action, the indemnitee may recover the costs and attorney’s fees necessary in presenting his or her own defense.” As we have discussed, the problem here is that appellant was denied an opportunity to litigate breach of the duty to indemnify and defend and the amount of damages, if any, incurred by respondent as a result.
Watson v. Department of Transportation, supra, 68 Cal.App.4th 885, was an action for implied, rather than contractual indemnity, and is thus distinguishable from our case.
The judgment in favor of respondent is reversed. In light of this conclusion, we need not, and do not, address other issues raised by the parties.
DISPOSITION
The judgment is reversed. Appellants are to have their costs on appeal.
We concur: WILLHITE, J., SUZUKAWA, J.