Case Number: KC058662    Hearing Date: April 25, 2014    Dept: J

Re: De Sisto Construction, Inc. v. Margaret Tam, etc., et al. (KC058662)

MOTION FOR DETERMINATION OF GOOD FAITH SETTLEMENT

Moving Party: Cross-Defendant/Cross-Complainant De Sisto Construction, Inc.

Respondent: Cross-Defendant Gateway Plastering, Inc.

POS: Moving and Opposing OK per the court’s 4/17/14 ex parte order

This is a construction defect case involving a multi-unit apartment complex in Diamond Bar. The Final Status Conference is currently set for 4/30/14, with a trial date of 5/5/14.

In De Sisto Construction, Inc. v. Margaret Tam, etc., et al., Case No. KC058662 (“De Sisto Action”), the complaint alleges that Plaintiff De Sisto Construction, Inc. (“De Sisto”) performed construction work at the Diamond Bar Village Apartments pursuant to a written agreement with defendant Tam-Diamond Bar Associates (“Tam-Diamond Bar”), but that Defendants breached the agreement by failing to pay Plaintiff $163,116.00 for work performed. Defendants contend that Plaintiff failed to perform the construction in a reasonable, competent and workmanlike manner.

In the related action of Gateway Plastering, Inc. v. De Sisto Construction, Inc., et al., Case No. KC059325 (“Gateway Action”), the Complaint alleges that Gateway entered into a subcontract with De Sisto and Tam-Diamond Bar to perform construction improvements at the Diamond Bar Village Apartments, but that the Defendants breached the agreement by failing to play Gateway $368,531.00 for work performed.

De Sisto now moves for an order determining that their settlement with Tam-Diamond Bar and Margaret Tam, both in her individual capacity and as Trustee of the Margaret M. Trust and the Emily Tam Trust (collectively “Tam”) was entered in good faith pursuant to CCP § 877.6.

When a party is seeking a good-faith settlement determination, “any party to an action in which it is alleged that two or more parties are joint tortfeasors or co-obligors on a contract debt shall be entitled to a hearing on the issue of the good faith of a settlement entered into by the plaintiff or other claimant and one or more alleged tortfeasors or co-obligors, upon giving notice in the manner provided in subdivision (b) of Section 1005.” (CCP § 877.6(a)(1).) “In the alternative, a settling party may give notice of settlement to all parties and to the court, together with an application for determination of good faith settlement and a proposed order. The application shall indicate the settling parties, and the basis, terms, and amount of the settlement. The notice, application, and proposed order shall be given by certified mail, return receipt requested. Proof of service shall be filed with the court. Within 25 days of the mailing of the notice, application, and proposed order, or within 20 days of personal service, a nonsettling party may file a notice of motion to contest the good faith of the settlement. If none of the nonsettling parties files a motion within 25 days of mailing of the notice, application, and proposed order, or within 20 days of personal service, the court may approve the settlement. The notice by a nonsettling party shall be given in the manner provided in subdivision (b) of Section 1005.” (CCP § 877.6(a)(2).) The moving defendant has satisfied this procedural requirement.

Pursuant to CCP 877.6, in an action in which two or more parties are alleged to be joint-tortfeasors, they are entitled to a hearing concerning the good faith issue of a settlement. Tech-Bilt, Inc. v. Woodard-Clyde & Assoc. (1985) 38 Cal.3d 488 set out the goals of settlement: the equitable sharing of costs among parties at fault, and the encouragement of settlement. The determination of settlement should include consideration as to whether the settlement was within the “reasonable range” of the settling tortfeasors proportional share of comparative liability, and the recognition that settlors should pay less in settlement than if they were found liable at trial. (Id. at 499.)

A determination by the court that the settlement was made in good faith shall bar any other joint tortfeasor or co-obligor from any further claims against the settling tortfeasor or co-obligor for equitable comparative contribution, or partial or comparative indemnity, based on comparative negligence or comparative fault. (CCP § 877.6(c).)

A determination of good faith requires that the court calculate a rough approximation of plaintiffs’ total recovery and the settlor’s proportionate liability, the amount paid in settlement, the allocation of settlement proceeds among plaintiffs, and a recognition that a settlor should pay less in settlement than he would if he were found liable after a trial. (Tech-Bilt, Inc. v. Woodward-Clyde & Assoc.’s, supra, 38 Cal.3d at p. 499.) Other relevant considerations include the financial conditions and insurance policy limits of settling defendants, as well as the existence of collusion, fraud, or tortious conduct aimed to injure the interests of nonsettling defendants. (Ibid.)

Evaluation of the parties’ allocation of settlement proceeds is committed to the sound discretion of the trial court in the good faith settlement approval process. (Erraca’s v. Superior Court (1993) 19 Cal. App. 4th 1475, 1489.)

The application herein is supported by the Declaration of Christopher E. Delaplane, counsel for De Sisto Construction, Inc. Counsel submits the following evidence in support of the application:

This is a construction defect case concerning an apartment complex located in Diamond Bar, California. The building is owned by Tam. The general contractor on the remodeling project was De Sisto. Tam claims there are construction defects at the apartment complex. Other than providing general supervisory services over the project, De Sisto’s actual construction work was very limited. Tam claims defects in the entry doors which were installed by De Sisto, representing only 7% of the total repair quote. The remaining 93% relates to the defects attributable to Gateway’s alleged defective work.

The settlement between the moving party and Tam provides as follows: De Sisto will pay $168,000 to Tam to resolve the construction defect claim; Tam is to pay De Sisto $28,000 to resolve its affirmative claims in its complaint; Michael Cruz Construction (“MCC”) is to pay De Sisto $2,000 to resolve De Sisto’s Complaint; mutual releases and Civil Code §1452 waivers; De Sisto is to assign its claims against Gateway to Tam; and Tam is to defend, indemnify and hold De Sisto harmless as against the affirmative claims made against De Sisto by Gateway.

De Sisto asserts that Gateway’s contention that De Sisto is subject to strict liability to Tam for the entire $1,927,492 in damages claimed by Tam is not supported by evidence or legal authority. Further, De Sisto contends that Gateway does not dispute that Tam’s claims against De Sisto consist only of defects in the entry doors which were installed by De Sisto, representing only 7% of the total repair quote. Further, MCC’s insurance carrier went out of business after a proposed settlement had been reached between MCC, De sisto, and Tam, forcing MCC to withdraw its offer and only contribute $2,000 to the settlement, apparently a significant expense for the struggling company. (Motion at 10:10-15; Decl. of Delaplane.) Moreover, the Motion is supported by competent evidence, and the entire 14 page Settlement Agreement and Mutual Release is lodged as Ex. A.

In opposition, Gateway claims that the settling parties have failed to meet their burden of showing the settlement complies with Section 877.6 and the criteria required by Tech-Bilt which were put into place to protect the rights of non-settling parties. Gateway contends that a review of the listed settlement amounts shows some of them do not pass the Tech-Bilt test, such as although the moving papers claim that the work of De Sisto was very limited, it was the general contractor and is subject to strict liability to the Tams, as owners. Under strict liability, De Sisto is potentially responsible for all the damages claimed by the Tams which are alleged by Tams’ experts to be $1,927,492.34. However, Gateway cites no authority for this proposition.

Gateway does acknowledge that the contemplated settlement of $168,000.00 from De Sisto to Tams is less than 10% of the total damages claimed by Tam, and that the net payment to Tam is $140,000, making the settlement approximately 7% of the overall claimed damages of the Tams. This is consistent with the representation of De Sisto.

Based on the foregoing, it appears to the court that the moving parties have made a sufficient showing of the Tech-Bilt factors to demonstrate that the settlement was made in good faith. Thus, the application is granted. Counsel for De Sisto is to submit a proposed order.