Tentative Ruling

Judge James F. Rigali
Department 2 SM-Cook
312-C East Cook Street P.O. Box 5369 Santa Maria, CA 93456-5369

CIVIL LAW & MOTION
Rodgers v. Brick Barn Winery, LLC, et al.
Case No: 19CV02938
Hearing Date: Tue Oct 22, 2019 8:30

Nature of Proceedings: Demurrer to Cross-Complaint/CMC

On June 4, 2019, plaintiff William Rodgers (hereafter, plaintiff) filed a complaint against Brick Barn Winery, LLC (hereafter, Brick Barn or cross-complainants) on standard Judicial Council forms for general negligence and premises liability. Plaintiff alleged that on December 1, 2018, at approximately 10 p.m. (after a wine tasting event), he was exiting Brick Barn’s commercial establishment when “suddenly and without warning [he] fell down the exterior stairs to the parking lot,” causing serious injuries. Plaintiff contends Brick Barn, as owner, failed to maintain the premises in reasonably safe condition, failed to provide adequate lighting, otherwise failed to construct/maintain the exterior stairs in line with existing safety standards, and failed to warn of the danger the stairs presented. Brick Barn has answered.

On July 17, 2019 (the same date the answer to the complaint was filed), Brick Barn filed a cross-complaint against cross-defendants Cari Renfrow and Stephen Renfrow (hereafter, Renfrows or cross-defendants) for express indemnity, implied indemnity, and declaratory relief.

As for express indemnity (first cause of action), Brick Barn alleges that on November 25, 2018, it entered into a “Special Event Premises Use Agreement” (Agreement) with cross-defendants, in which cross-defendants expressly agreed to procure and maintain during the December 1, 2018 event “a policy of liability insurance, insuring Brick Barn and Render [i.e., the Renfrows] against any liability arising out of the use, occupancy, or maintenance” Brick Barn’s premises, as evidenced by a “Certificate of Insurance.” Brick Barn alleges that the Renfrows via the Agreement are required to indemnify, defend, and “hold harmless” Brick Barn based on the Renfrows’ use of the premises and for any loss suffered as a result of plaintiff Rodger’s claims.

As for implied indemnity (second cause of action), Brick Barn contends that if it is held liable and suffers an unfavorable judgment on the complaint, “it is entitled to judgment over and against [the Renfrows] . . . .” Nothing else is alleged.

As for declaratory relief (the third cause of action), Brick Barn contends that an “actual controversy exists between the parties hereto relating to their rights duties and liabilities.”

The matter before the court is cross-defendants’ demurrer to all three causes of action in the cross-complaint. They specially demur to the first two causes of action based on uncertainty, and generally demur to all three causes of action. Accompanying the motion is declaration of counsel, detailing the meet and confer efforts, which satisfies the statute. (Code Civ. Proc., § 430.41.) Brick Barn has filed an opposition, and the Renfrows have filed a reply.

The court will identify the relevant legal principles, apply them to determine the merits of the demurrer, and summarize its conclusions.

Legal Standards

A person vicariously or secondarily liable for a tort is usually entitled to indemnity from the person primarily responsible. Indemnity may rest on a contract, express or implied, on a law, or on equitable principles of shifting the burden of the liability. A cause of action for indemnity can be pleaded by cross-complaint in the main action. (5 Witkin, California Procedure (5th ed. 2008, 2019 Supp.), Pleading, § 925(1), at p. 339.)

If the cause of action is based on an express contract of indemnity, the allegations should include (a) the execution of the contract, the essential terms, facts showing the loss sustained or liability incurred by the indemnitee (i.e., Brick Barn) within the terms of the contract, the performance of conditions precedent, (b) the failure to the indemnitor (Renfrows) to indemnify, and (c) the amount of damage to the indemnitee. (5 Witkin, supra, § 925(2), at p. 339.)

Where the cause of action is not based on express contract, the cross-complainant seeking indemnity may allege (a) facts showing either a contract relation between the parties impliedly giving rise to the indemnity, a law giving rise to the indemnity, or the primary liability of the indemnitor and the secondary liability of the indemnitee; (b) loss of damage to the indemnitee; and (c) failure of the indemnitor to pay or compensate the indemnitee. (Id. at § 925(3), at p. 340.) Implied indemnity is now commonly referred to as equitable indemnity. (Prince v. Pacific Gas & Electric Co. (2009) 45 Cal.4th 1151, 1163.) The key ingredient for implied/equitable indemnity is equity. Where that element is missing, the complaint fails to state a cause of action. There are historically two forms of equitable indemnity: 1) indemnity implied from a contract not specially mentioning indemnity (implied contractual indemnity); and 2) indemnity arising from the equities or particular circumstances (traditional equitably indemnity – premised on a joint and several legal obligation to another for damages). (Id. at p. 1157-1158.) Of course, both forms of equitable indemnity are “subject to comparative equitable apportionment of loss.” (Id. at p. 1159.) Finally, without an allegation that indemnitee has actually paid a judgment or settlement, there is no claim for equitable indemnity of any stipe. (Western Steamship Lines, Inc. v. San Pedro Peninsula Hospital (1994) 8 Cal.4th 100, 110 [a fundamental prerequisite to an action for partial or total equitable indemnity is an actual monetary loss through payment of a judgment or settlement]; City of San Diego v. U.S. Gypsum Co. (1994) 30 Cal.App.4th 575, 587.)

As for declaratory relief, Code of Civil Procedure section 1060 empowers courts to make declarations, inter alia, concerning the rights or duties of a cross-complainant with respect to a cross-defendant. Courts “refuse to [grant declaratory relief] in any case where its declaration or determination is not necessary or proper at the time under all the circumstances.” (Code Civ. Proc., § 1061; Meyer v. Sprint Spectrum L.P. (2009) 45 Cal.4th 634, 647). “Declaratory relief operates prospectively, serving to set controversies at rest before obligations are repudiated, rights are invaded, or wrongs are committed.” (Doan v. State Farm General Ins. Co. (2011) 195 Cal.App.4th 1082, 1096; Kirkwood v. California State Automobile Assn. Inter–Ins. Bureau (2011) 193 Cal.App.4th 49, 59.) Code of Civil Procedure section 1060 requires that “an actual controversy” exist as to the rights and duties of the parties. An “actual controversy” for purposes of this provision is “one which admits of definitive and conclusive relief by judgment within the field of judicial administration, as distinguished from an advisory opinion upon a particular or hypothetical state of facts.” (Selby Realty Co. v. City of San Buenaventura (1973) 10 Cal.3d 110, 117.) An “actual controversy” encompasses a “probable future controversy” when the probable future controversy becomes “ripe,” that is when it has “reached, but has not passed, the point that the facts have sufficiently congealed to permit an intelligent and useful decision to be made.” (Environmental Defense Project of Sierra County v. County of Sierra (2008) 158 Cal.App.4th 877, 885.) “A court is only justified in refusing a declaration because of the availability of another remedy when it concludes that more effective relief could and should be obtained by another procedure, and for that reason a declaration will not serve a useful purpose.” (Kirkwood, supra, 193 Cal.App.4th at pp. 59–60.)

2. Merits

The court sustains the demurrer to the first cause of action for express indemnity under the standards enunciated above. Brick Barn claims there is an express indemnity contract on November 25, 2018 between the parties as a basis for the cause of action, but then attaches to the cross-complaint an unsigned Agreement as Exhibit A. There is no contention there was an oral contract for express indemnity.

The court is unpersuaded by Brick Barn’s conclusory argument in reply that its cross-complaint survives demurrer because the court must liberally construe the pleading in its favor. While this court is required generally to construe liberally the complaint to draw factual inferences favorable to plaintiff when assessing a demurrer (see, e.g., Perez v. Golden Empire Transit Dist. (2012) 209 Cal.App.4th 1228, 1238), Brick Barn’s argument founders on the specific rule of construction that applies in this context: under the doctrine of truthful pleading, courts “‘will not close their eyes to situations where a complaint contains allegations of facts inconsistent with attached documents, or allegations contrary to fact which are judicially noticed.’ ” (Hoffman v. Smithwoods RV Park, LLC (2009) 179 Cal.App.4th 390, 400; see Brakke v. Economic Concepts, Inc. (2013) 213 Cal.App.4th 761, 767 [“[w]hile the ‘allegations [of a complaint] must be accepted as true for purposes of demurer,’ the ‘facts appearing in exhibits attached to the complaint will also be accepted as true and, if contrary to the allegations in the pleading, will be given precedence’ ”].) Exhibit A expressly contradicts the allegations in paragraph 5 of the cross-complaint (i.e., the parties “entered into” an express written agreement). It thus prevails.

Cross-complainant will have to convince the court at the hearing that it can overcome this pleading contradiction in a future pleading before leave to amend will be granted as to the first cause of action.[1]

The court sustains the demurrer to the second cause of action for “implied indemnity” (read that as equitable indemnity under modern terminology). There is no “equitable” basis for indemnity articulated in the cross complaint. As for traditional indemnity, there are no allegations that show cross-defendants are jointly and severally liable with Brick Barn for the tort alleged by plaintiff. (Leko v. Conerstone Building Inspection Service (2001) 86 Cal.App.4th 1109, 115 [“[j]oint and Several liability is a prerequisite for [this form of] equitable indemnity”]; BFGC Architects Planners, Inc. v. Forcum/Mackey Construction, Inc. (2004) 119 Cal.App.4th 848,852 [while joint and several liability is expansive under equitable indemnity, one factor is necessary – with limited exception, there must be some basis for tort liability against the proposed indemnitor].) Cross-complainant contends in paragraph 10 of the cross-complaint that “to the extent it has a liability or responsibility to plaintiff for damages alleged in the Complaint, it will be the responsibility of Cari and Stephen Renfro . . . .” This conclusory allegation does not support a claim predicated on joint and several liability following the allegations made in the complaint. (Heritage Oaks Partners v. First American Title Ins. Co. (2007) 155 Cal.App.4th 339, 348 [“Thus, to state a cause of action for equitable indemnity, Heritage Oaks had to allege that it was jointly and severally liable with First American to the Peppertree Owners[,]” and demurrer was properly sustained as a result]; see generally American Motorcycle Assn. v. Superior Court (1978) 20 Cal.3d 578, 586-588 [joint and several liability arises when the negligent acts of two tortfeasors are both the proximate cause of an individual injury].)

Nor are there any allegations that might establish equitable indemnity based on an implied contractual indemnity theory. (Bay Development, Ltd. v. Superior Court (1990) 50 Cal.3d 1012, 1029.) Historically, this type of indemnity was available when two parties in a contractual relationship were both responsible for injuring a third party; recovery rested on the theory that “a contract under which the indemnitor undertook to do work or perform services necessarily implied an obligation to do the work involved in a proper manner and to discharge foreseeable damages resulting from improper performance absent any participation by the indemnitee in the wrongful act precluding recovery.” (Prince, supra, 45 Cal.4th at p. 1159, citations omitted.) Here, as noted, there are no allegations in the cross-complain of the existence of a contract that does not otherwise contain a written indemnification clause to which the parties or court may infer. (Bay Development, supra, at p. 1033.) There is no indication an implied or oral contract exists, and (as previously indicated) there is no claim in the cross-complaint that cross-defendants are responsible for the harm caused to plaintiff in any way.

A final defect also supports the general demurrer to the second cause of action. Brick Barn has failed to allege any actual monetary loss through payment of a judgment of settlement. “It is well settled that a cause of action for implied indemnity does not accrue or come into existence until the indemnitee has suffered actual loss through payment. [Citations.]” (E.L. White, Inc. v. City of Huntington Beach (1978) 21 Cal.3d 497, 506; see Major Clients Agency v. Diemer (1998) 67 Cal.App.4th 1116, 1127 [affirming trial court’s order sustaining the demurrer to the equitable indemnity cause of action without leave to amend for similar defect].)

The last defect proves fatal, because at this point cross-complainant cannot show it suffered an actual monetary loss because of judgment or settlement, as required under existing authority in order to advance this cause of action. Accordingly, the court sustains the demurrer to the second cause of action without leave to amend.

Finally, the court sustains the demurrer to the third cause of action for declaratory relief, but with leave to amend. As noted, the claim for implied/equitable indemnity (in whatever form it takes) is only cognizable when there is an actual money loss. That being said, case law also provides that when a cross-complaint for equitable indemnity is made against a previously unnamed third party, as is the case here; and even though this procedure does not alter the fundamental prerequisite of an actual monetary loss for equitable indemnity, as is also the case here; the cross-complaint nevertheless “properly takes the form of an action for declaratory relief” under Code of Civil Procedure section 1060. (Christian v. County of Los Angeles (1986) 176 Cal.App.3d 466, 471.) Put another way, until there is an actual money loss, the cross-complaint for equitable indemnity takes the form of an action for declaratory relief. That being said, cross-complainant must cure the defects attendant to the implied/equitable indemnity theory in order to proceed with the declaratory relief cause of action.

The court is not persuaded by cross-defendants’ argument to the contrary; they overlook Christian v. Superior Court, supra, and progeny. There is a future controversy (a necessary component of any declaratory relief cause of action) – in this case an equitable indemnity claim pending an actual monetary loss (assuming, of course, cross-complainants can adequately allege a basis for equitable indemnity as part of the declaratory relief cause of action, as discussed above).

3. Summary

The court sustains the demurrer to the first cause of action for express indemnity; leave to amend will granted only if cross-complainant is able to convince the court at the hearing that it can allege an express contractual basis for indemnification despite the unsigned contract attached to the cross-complaint as Exhibit A. The court sustains the demurer without leave to amend as to the second cause of action for implied (equitable) indemnity because a claim for equitable indemnity (in whatever from it takes) cannot be advanced until there is an actual money loss, and that cannot be shown. The court sustains the demurrer with leave to amend as to the third cause of action for declaratory relief under the authority of Christian v. Superior Court, supra, 176 Cal.App.3d 466, with directions to cross-complainant to provide an adequate basis for an implied/equitable indemnity theory.

Cross-complainant has 30 days from today’s hearing to submit an amended pleading. Cross-defendant is directed to provide a notice ruling unless waived.

The parties are directed to appear at the hearing. A CMC is also scheduled.

[1] The court observes parenthetically that if cross-complainants are able to show an executed Agreement between the parties (and it mirrors the unsigned Agreement as contained in Exhibit A), subpart (g) of the Agreement contains an arbitration clause. It requires “any unresolved controversy or claim arising out of or relating to this Agreement [except for provisional remedies or temporary equitable relief], shall be submitted to arbitration by one arbitrator mutually agreed upon by the parties, and if no agreement can be reached within thirty (30) days after names of potential arbitrators have been proposed, then by a single arbitrator selected by the America Arbitration Association. . . . .” This scenario perhaps falls under the category of “be careful of what you ask for” – you just might get it! (California Attorneys, etc. v. Schwarzenegger (2009) 174 Cal.App.4th 424, 440, concurring opn., Scotland, P.J.)