Case Number: EC062587 Hearing Date: February 13, 2015 Dept: NCD
MOTION FOR RECONSIDERATION

TENTATIVE RULING (2/13/15)
#11 (1 of 2)
EC O62587
ARCADIA GARDENS MANAGEMENT CORP v. ZEIN INSURANCE SERVICES, INC.

Plaintiffs’ Motion for Reconsideration of Order Sustaining Zein’s Demurrer Without Leave to Amend

TENTATIVE:
Plaintiffs’ Motion for Reconsideration of Order Sustaining Zein’s Demurrer Without Leave to Amend is GRANTED. The court has permitted the filing of an untimely motion for reconsideration in the interests of justice. The court has reconsidered previous rulings to the extent the demurrer of defendant Zein Insurance Services, Inc. to the original complaint in this matter was sustained without leave to amend. The court finds that the demurrer should have been sustained with one opportunity to amend.
The First Amended Complaint filed by Plaintiffs on January 21, 2015 stands as filed, subject to further demurrer and/or motion to strike, if appropriate. The court notes that defendant Zein has filed a demurrer and motion to strike the pleading, which will be heard as scheduled on April 3, 2015.

FACTUAL AND PROCEDURAL BACKGROUND:
Plaintiffs Arcadia Gardens Management Corporation, Julie Chirikian, and American Alternative Insurance Corporation bring this action alleging that plaintiff Arcadia Gardens and Chirikian are defendants in an elder abuse and negligence action arising out of the death of a resident at an Arcadia Gardens retirement facility.

The complaint alleges that plaintiffs had entered into an oral agreement with defendant Centennial Home Care pursuant to which Centennial would be allowed to provide services to residents at Arcadia Gardens provided that Centennial obtained liability insurance, named plaintiffs as additional insureds, and ensured that coverage was primary to any coverage under other liability insurance issued to plaintiffs.

Plaintiffs allege that Centennial contacted its insurance agent, defendant Zein, which issued Additional Insured Endorsements as requested. After being named as defendants in the related action, plaintiffs contacted Centennial’s insurer, Travelers Casualty Insurance, and tendered defense, but the tender was denied on the ground the policy issued did not include plaintiffs as additional insureds. Plaintiffs allege that Zein did not request that Travelers issue the Additional Insureds Endorsement. Plaintiffs then tendered their defense to plaintiff American Alternative Insurance Corporation, which has been defending the related action. The complaint alleges causes of action for negligent misrepresentation and intentional misrepresentation against Zein, and breach of oral contract against Centennial.

On September 19, 2014, the court, Judge Goldstein presiding, heard a demurrer and motion to strike complaint brought by defendant Zein. The tentative ruling was published to the parties and was to sustain the demurrer without leave to amend as to all plaintiffs.

At the hearing, the court heard argument, and then stated, “The Court will Sustain Demurrer with Leave to Amend as to Defendants, Arcadia Gardens Management Corporation and Julie Chirikian, as to damages.” The court allowed additional briefing as to “Defendant American Alternative Insurance Corporation as to equitable subrogation.” (The designation of plaintiffs as defendants was evidently in error).

The parties submitted additional briefing, and on October 2, 2014, the court issued its Ruling on Submitted Matter, ruling that the Tentative of September 19, 2014 is the order of the court.

On October 3, 2014, the court heard a demurrer to the complaint brought by defendant Centennial to the third cause of action, which was sustained in part with “10 days for American Alternative Insurance Corporation to amend to equitable subrogation.”

There was then some dispute about what amount of time had been permitted to amend, and whether the scope of amendment prohibited plaintiffs from realleging claims against Zein Insurance Services. The court, Judge Doyle presiding, on November 14, 2014 published its tentative ruling. The matter was continued to December 5, 2014, for further briefing on the issue of the scope of leave to amend granted by Judge Goldstein; in effect, whether the court granted leave to amend to American Alternative Insurance Corporation as to defendant Zein Insurance Services.

On December 5, 2014, the court published its tentative ruling, which was that in evaluating Judge Goldstein’s ruling it appears fairly clearly that the court intended to sustain the demurrer to the first two causes of action brought by plaintiff without leave to amend. However, the court permitted plaintiffs permission to file an untimely motion for reconsideration of that ruling. It also appears from the papers that the court ordered plaintiffs to file a First Amended Complaint, parts of which could be stricken if reconsideration was not granted. [See Transcript, Ex. G].

ANALYSIS:
Under CCP section 1008(a):
“When an application for an order has been made to a judge, or to a court, and refused in whole or in part, or granted…any party affected by the order may, within 10 days after service upon the party of written notice of entry of the order and based upon new or different facts, circumstances, or law, make application to the same judge or court that made the order, to reconsider the matter and modify, amend, or revoke the prior order.”

This subdivision further provides:
“For a failure to comply with this subdivision any order made on a subsequent application may be revoked or set aside on ex parte motion.”

Under CCP section 1008, subdivision (e):
“This section specifies the court’s jurisdiction with regard to applications for reconsideration of its orders and renewals of previous motions, and applies to all applications to reconsider any order of a judge or court, or for the renewal of a previous motion, whether the order deciding the previous matter or motion is interim or final. No application to reconsider any order or for the renewal of a previous motion may be considered by any judge or court unless made according to this section.”

The trial court’s determination of a motion for reconsideration is reviewed for abuse of discretion. See Wiz Technology, Inc. v. Coopers & Lybrand (2003, 2nd Dist.) 106 Cal.App.4th 1, 16.

Here, the court has permitted leave to file an untimely motion to reconsider the ruling. The argument is that the circumstances here are that there was no clear prior ruling, in the sense that the court raised on its own the issue of whether the insurer could assert claims based on fraud or misrepresentation in a subrogation action, then permitted the parties to file supplemental briefing on the issue, but the final ruling did not indicate that the court had received and considered that supplemental briefing.

The minute order of September 19, 2014, stated the tentative ruling issued by the court, Judge Goldstein presiding, in connection with the demurrer to claims by plaintiff American Alternative Insurance Corp.:
“The Defendant then argues that there are insufficient facts to plead the causes of action by Plaintiff American Alternative Insurance Corp. A review of the pleadings reveal that the Defendant made the alleged false representations to the Plaintiffs, Arcadia Gardens or Julie Chirikian. The Plaintiff, American Alternative Insurance Corp., is their insurer and has provided coverage in the action brought on behalf of Jean Peters against Gardens or Julie Chirikian.

These allegations indicate that American Alternative Insurance Corp., has a claim for subrogation to recover any amounts that it paid out on behalf of its insureds. However, it does not have any negligent misrepresentation or intentional misrepresentation claim against the Defendant because it did not rely on any misrepresentations.

Therefore, the Court sustains the demurrers to the first and second causes of action brought by Plaintiff, American Alternative Insurance Corp. It does not appear reasonably possible for the Plaintiff to plead a claim for negligent or intentional misrepresentation. Accordingly the court does not grant leave to amend.”
[See also Ex. A, online tentative]

The transcript of the hearing shows that the court maintained this position, stating, “I am giving you leave to amend for Arcadia to state that in its own name, but I am not giving leave to amend on the first two causes of action to American, but I will give you leave to amend to show damages.” [Ex. B. 8:23-27]. Counsel for plaintiffs requested to submit further briefing concerning whether a subrogation action could be brought by the insurer to assert misrepresentation claims, and the court permitted such leave. The court again expressed that it would grant leave to amend only as to Arcadia Gardens and Julie Chirikian to allege damages:
“It looks like a case where there’s no damage to the individuals. I will give you leave to amend. Ten days leave to amend—well, you want two weeks. So let’s—I will wait and put this under submission waiting your further research that you want to do, and I will, when I send out the order of whether the tentative is the order of the court or not, I will give you time to amend.”
[Ex. B. 10:4-11].

The supplemental briefing was submitted and on October 2, 2014, the court issued its “Ruling on Submitted Matter,” stating, “The tentative ruling of September 19, 2014 is the Order of the Court.”

This is not the strongest case for showing new or different circumstances at this juncture in the dispute. However, in an abundance of caution, the court will reconsider the holding denying leave to amend, and permit at least one opportunity to amend. This is prudent in light of the fact that the court was previously addressing the original complaint, and it is held that in the case of an original complaint
“Unless an original complaint shows on its face that it is incapable of amendment, denial of leave to amend constitutes an abuse of discretion irrespective of whether leave to amend is requested.”
King v. Mortimer (1948) 83 Cal.App.2d 153.

Indeed, when a trial court sustains a demurrer without leave to amend, CCP section 472c(a) provides that “the question as to whether or not such court abused its discretion in making such an order is open on appeal even though no request to amend such pleading was made.”

Plaintiffs have already filed their FAC, pursuant to the direction of the court, evidently modifying the complaint to more clearly state the contractual terms which permit the subrogation pursuit of these claims under the case law plaintiffs rely upon. The Court will permit the amendment, and consider the issue on its merits, to avoid the risk that a meritorious claim is being dismissed without full consideration.

DEMURRER

TENTATIVE RULING (2/13/15)
#11 (2 OF 2)
EC O62587
ARCADIA GARDENS MANAGEMENT CORP v. ZEIN INSURANCE SERVICES, INC.

Plaintiffs’ Demurrer to Centennial Home Care, Inc.’s Cross-Complaint

TENTATIVE:
Plaintiffs’ UNOPPOSED demurrer to Centennial Home Care, Inc.’s Cross-Complaint is SUSTAINED for the reasons stated in the moving papers.

Unopposed request for judicial notice is GRANTED.

THE COURT WILL HEAR ARGUMENT CONCERNING WHETHER LEAVE TO AMEND WILL BE PERMITTED.

FACTUAL AND PROCEDURAL BACKGROUND:
Plaintiffs Arcadia Gardens Management Corporation, Julie Chirikian, and American Alternative Insurance Corporation bring this action alleging that plaintiff Arcadia Gardens and Chirikian are defendants in an elder abuse and negligence action arising out of the death of a resident at an Arcadia Gardens retirement facility. The cases have since been related.

The complaint alleges that plaintiffs had entered into an oral agreement with defendant Centennial Home Care pursuant to which Centennial would be allowed to provide services to residents at Arcadia Gardens provided that Centennial obtained liability insurance, named plaintiffs as additional insureds, and ensured that coverage was primary to any coverage under other liability insurance issued to plaintiffs.

Plaintiffs allege that Centennial contacted its insurance agent, defendant Zein, which issued Additional Insured Endorsements as requested. After being named as defendants in the related action, plaintiffs contacted Centennial’s insurer, Travelers Casualty Insurance, and tendered defense, but the tender was denied on the ground the policy issued did not include plaintiffs as additional insureds. Plaintiffs allege that Zein did not request that Travelers issue the Additional Insureds Endorsement. Plaintiffs then tendered their defense to American Alternative Insurance Corporation, which has been defending the related action. The complaint alleges causes of action for negligent misrepresentation and intentional misrepresentation against Zein, and breach of oral contract against Centennial.

Centennial has brought a cross-complaint for indemnity and partial indemnity against plaintiffs and Zein alleging that all of plaintiffs’ alleged damages which they seek to recover from Centennial were caused by Arcadia Gardens, Chirikian and Bederyan, and/or by the active and primary negligence and other acts or omissions of Zein.

ANALYSIS:
(The demurrer challenges the original cross-complaint brought by Centennial, and there is no opposition, and none has been served, so we anticipate that a First Amended Cross-Complaint will be filed prior to the hearing, in which case the demurrer should be deemed moot.)

In the event a FACC is not timely filed, the following brief analysis is provided).

First Cause of Action—Indemnity and Second Cause of Action—Partial Indemnity
Indemnity means “the obligation resting on one party to make good a loss or damage another party has incurred.” Rossmoor Sanitation, Inc. v. Pylon, Inc. (1975) 13 Cal. 3d 622, 628. An indemnity obligation arises from two general sources, express contractual language, or it may be implied based on equitable considerations. E.L. White, Inc. v. City of Huntington Beach (1978) 21 Cal. 3d 497, 507. Unlike contractual indemnity, which looks to the parties’ intent, equitable and implied indemnity focuses on principles of fairness and justice and is designed to apportion loss among tortfeasors in proportion to their relative culpability.

The claims here appear to be classic claims for equitable indemnity based on apportionment of fault, which claim requires pleading that:
1) Each cross-defendant is liable to the third party claimant in whole or in part for the injuries, if any, suffered by the claimant; and
2) Each cross-defendant should be required to pay a share of the claimant’s judgment which is in proportion to the comparative negligence of that defendant in causing the claimant’s injuries.
Li v. Yellow Cab Co. (1979) 13 Cal.3d 804; Judicial Council Form cross-complaint 982.1(14), para. 7.

Plaintiffs argue that the cross-complaint is an improper attempt to recast Centennial’s claims for equitable indemnity against plaintiffs in the related personal injury action, but that this action does not allege any tort engaged in by Centennial, only that it breached a contract to obtain insurance in favor of plaintiffs. The pleading is a bit confusing in this regard, alleging that “if it is true that Ms. Peters was injured or damages as alleged in the complaint…then the incident and all of the injuries and damages complained of by plaintiffs in their complaint were caused directly and proximately by Cross-Defendants, Arcadia Gardens, Chirikian and Bederyan.” [Para. 13].

It is generally recognized that indemnity rights are imposed only between parties liable in tort:
“Although the body of law defining and applying principles of equitable indemnity has not fully gelled but is still evolving, one thing is clear: The doctrine applies only among defendants who are jointly and severally liable to the plaintiff. (GEM Developers v. Hallcraft Homes of San Diego, Inc. (1989) 213 Cal. App. 3d 419, 430 [261 Cal. Rptr. 626].) As plaintiff maintains, joint and several liability in the context of equitable indemnity is fairly expansive. We agree it is not limited to “the old common term ‘joint tortfeasor’ … .” It can apply to acts that are concurrent or successive, joint or several, as long as they create a detriment caused by several actors. (Yamaha Motor Corp. v. Paseman (1990) 219 Cal. App. 3d 958, 964 [268 Cal. Rptr. 514].)

One factor is necessary, however. With limited exception, there must be some basis for tort liability against the proposed indemnitor. (Munoz v. Davis (1983) 141 Cal. App. 3d 420, 425 [190 Cal. Rptr. 400].)”
BFG Architects Planners, Inc. v. Forcum/Mackey Construction, Inc. (2004) 119 Cal.App.4th 848, 852.

The court of appeal in BFG observed
“A person may not ordinarily recover in tort for the breach of duties that merely restate contractual obligations. Instead, ‘ “[c]ourts will generally enforce the breach of a contractual promise through contract law, except when the actions that constitute the breach violate a social policy that merits the imposition of tort remedies.” ’ [Citations.]” (Aas v. Superior Court (2000) 24 Cal.4th 627, 643 [101 Cal. Rptr. 2d 718, 12 P.3d 1125], superseded by statute on another ground as set out in Rosen v. State Farm General Ins. Co. (2003) 30 Cal.4th 1070, 1079–1080 [135 Cal. Rptr. 2d 361, 70 P.3d 351].)

The only allegations of defendants’ misconduct are based on their alleged breach of contract…”
BFG, at 853.

Here, the allegations against Centennial are similarly that it breached a contract to obtain insurance in favor of plaintiffs Arcadia Gardens and Chirikian. There is no tort liability sought to be pursued in this action against this party. The misrepresentation claims are sought to be alleged only against defendant Zein. The demurrer should therefore be sustained.