tentative rulings for february 10, 2021 department 501 · 2021. 2. 9. · conliffe (1994) 7 cal.4th...

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Tentative Rulings for February 10, 2021

Department 501

There are no tentative rulings for the following cases. The hearing will go forward on

these matters. If a person is under a court order to appear, he/she must do so.

Otherwise, parties should appear unless they have notified the court that they will

submit the matter without an appearance. (See California Rules of Court, rule 3.1304(c).)

The court has continued the following cases. The deadlines for opposition and reply

papers will remain the same as for the original hearing date.

20CECG01735 California Farm Mgmt., Inc. v. Bazan Vineyard Mgmt., LLC: Motion

to Seal is continued to Thursday, February 25, 2021, in Dept. 501

________________________________________________________________

(Tentative Rulings begin at the next page)

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Tentative Rulings for Department 501 (AM)

Begin at the next page

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(03)

Tentative Ruling

Re: Liberi v. Cubacha

Superior Court Case No. 20CECG02370

Hearing Date: February 10, 2021 (Dept. 501)

Motion: by Defendants American Arbitration Association and

Stephanie Cubacha for Demurrer to Complaint

Tentative Ruling:

To sustain the demurrer of defendants American Arbitration Association and

Stephanie Cubacha to the entire complaint, without leave to amend, for failure to state

facts sufficient to constitute a cause of action. (Code Civ. Proc. § 430.10, subd. (e).)

Defendants shall submit a proposed order dismissing the Complaint against them within

ten days of the date of service of this Order.

Explanation:

First, although plaintiff Liberi has now dismissed all of her claims without prejudice,

the court still intends to rule on the merits of the demurrer because the matter is not

entirely moot. Plaintiff Ostella has not dismissed any of her claims, so the matter remains

at issue with regard to her claims. Also, while Liberi has dismissed her claims, she did so

without prejudice, which raises the possibility that she might refile a Complaint if the court

does not rule on the merits of the demurrer. In fact, since she filed the dismissal on the

same date that the court was set to rule on the merits of the Gittler defendants’ demurrer,

it appears that Liberi may be attempting to avoid having her claims dismissed with

prejudice by filing a preemptive dismissal without prejudice. Thus, the court intends to

exercise its discretion to rule on the merits of the demurrer as to both plaintiffs’ claims,

since Liberi may seek to refile her claims at a later date if the court does not rule on it

now. (Environmental Charter High School v. Centinela Valley High School District (2004)

122 Cal.App.4th 139, 144 [court has discretion to rule on matter despite its apparent

mootness when there may be a recurrence of the controversy between the parties].)

With regard to the merits of the demurrer, the court intends to find that plaintiffs’

claims are barred by the doctrine of arbitral immunity. Arbitrators are judges chosen by

the parties to decide the matters submitted to them, finally. Arbitrators have been

extended the protection of judicial immunity, because they perform the function of

resolving disputes between parties, or of authoritatively adjudicating private rights. (In re

Marriage of Assemi (1994) 7 Cal.4th 896, 909.)

It long has been recognized that, in private arbitration proceedings, an arbitrator

enjoys the benefit of an arbitral privilege of immunity because the role that he or she

exercises is analogous to that of a judge. There is hardly any aspect of arbitration law

and practice more settled, both in domestic and international relations, than the

immunity of arbitrators from court actions for their activities in arriving at their award. This

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rule - immunizing arbitrators in private contractual arbitration proceedings from tort

liability - is well established in California. (Moore v. Conliffe (1994) 7 Cal.4th 634, 650.)

Arbitral immunity shields all functions which are integrally related to the arbitral

process. Arbitrators are exempt from civil liability for failure to exercise care or skill in the

performance of their arbitral functions. (Stasz v. Schwab (2004) 121 Cal.App.4th 420, 431–

432, quoting Thiele v. RML Realty Partners (1993) 14 Cal.App.4th 1526, 1530.) Under federal

law, arbitral immunity protects all acts within the scope of the arbitral process. Arbitrators

in contractually agreed upon arbitration proceedings are absolutely immune from

liability in damages for all acts within the scope of the arbitral process. (Id. at p. 432.)

Federal courts have held that, as with judicial immunity, arbitral immunity applies unless

there is a clear absence of jurisdiction or the arbitrator engages in acts that fall outside

his or her arbitral capacity. Even corrupt or biased acts are subject to immunity. (Id. at

pp. 432–433.)

In addition, private arbitration associations like the AAA are also given immunity

under the arbitral privilege. The AAA enjoys common law immunity because, just as an

arbitrator is immune from liability for bias or the failure to stay arbitration proceedings, so

is the organization that sponsors the arbitration. (Id. at p. 430.) California courts have

extended arbitral immunity to organizations that sponsor arbitrations, like the AAA. As

stated in American Arbitration Assn. v. Superior Court (1992) 8 Cal.App.4th 1131, a refusal

to extend immunity to the sponsoring organization would make the arbitrator's immunity

illusory. Stated otherwise, it would shift liability rather than extinguish it. As a practical

matter, a grant of immunity to the arbitrator must be accompanied by a grant of the

same immunity to the AAA, an entity as indispensable to the arbitrator's job of arbitrating

as are the courts to the judge's job of judging. Extension of arbitral immunity to

encompass boards which sponsor arbitration is a natural and necessary product of the

policies underlying arbitral immunity. Courts have on the whole extended arbitral

immunity to sponsoring organizations. (Id. at p. 433.)

“Under federal law, a sponsoring organization is immune from liability in situations

where the arbitrator is or would be immune and also where the organization has

engaged in tasks such as selecting an arbitrator, scheduling a hearing, giving notice of

a hearing, and billing for services. This is so even if the sponsoring organization has

violated its own internal rules.” (Id. at pp. 433–434, internal citations omitted.)

Here, plaintiffs’ allegations against the AAA and its employee, Stephanie

Cubacha, are all based on their conduct surrounding the commencement and

administration of the arbitration of the fee dispute with Gittler. While the Complaint is

filled with many irrelevant and confusing allegations and facts, the gravamen of the

action against the AAA and Cubacha is that the AAA sent out documents that included

plaintiffs’ private personal information, including their social security numbers and drivers’

license numbers, without their consent when Gittler commenced arbitration proceedings

regarding their fee dispute with plaintiffs. (Complaint, ¶¶ 3, 57-58, 60, 62, 94, 105, 117 and

118.) Plaintiffs allege that the disclosure resulted in their private information going to third

parties, which violated their right to privacy. (Ibid.) Also, plaintiffs allege that when they

informed the AAA that they had not agreed to arbitrate their dispute with the AAA, the

AAA refused to suspend the arbitration and stated that the only way to stop the

arbitration was by court order. (Id. at ¶ 148.) Plaintiffs allege that this conduct caused

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Ostella harm to her reputation, emotional distress, and amounted to civil extortion. (Id.

at ¶¶ 149-151.)

However, the allegations of the Complaint clearly show that all of plaintiffs’ claims

arise of out AAA’s communications and activities that are directly related to the

arbitration of the fee dispute between plaintiffs and the Gittler defendants. The AAA

allegedly sent out plaintiffs’ private information as part of the procedure for opening the

arbitration proceedings and giving notice of those proceedings. The AAA also allegedly

refused to suspend the arbitration even after plaintiffs notified them that it had been

commenced improperly. Thus, defendants’ conduct was directly related to the

arbitration proceedings, and as such, it was protected under the arbitral privilege.

Nevertheless, Liberi argues that defendants’ conduct was not protected under

the arbitral privilege because the AAA did not have subject matter jurisdiction over the

dispute, and she had never personally been served with notice of the proceedings. She

points out that the doctrine of arbitral immunity does not apply where the arbitrator

clearly had no jurisdiction over the matter. (Stasz v. Schwab, supra, 121 Cal.App.4th at

pp. 432–433.) Since the AAA and Cubacha never had jurisdiction over the dispute or her

as a party, she contends that they are not immune from suit for their actions in sending

out her personal information to third parties.

“Judicial immunity applies, however, unless there is a ‘clear absence’ of

jurisdiction. We see no reason not to adopt the same parameter for arbitral immunity.”

(New England Cleaning Services, Inc. v. American Arbitration Ass'n (1st Cir. 1999) 199 F.3d

542, 545–546, internal citations omitted.) Thus, even where the court later determines that

the arbitral association lacked jurisdiction over the dispute, arbitral immunity still applies

to the arbitration association’s actions in administering the matter unless the lack of

jurisdiction was clear and obvious at the time it took the actions. (Ibid.)

“Adopting [the appellant’s] position would require arbitral organizations, not

courts or arbitrators, to themselves resolve what might well turn out to be significant

threshold legal issues long before any hearing…. We think it abundantly clear that the

resolution of the arbitrability issue was not facially obvious. Forcing the AAA itself to

preliminarily address potentially complex legal issues would not only impose an

unwelcome burden, but would interfere with the organization's neutrality and likely add

further cost and delay to the arbitral process. The course followed by the AAA forced

the arbitrability issue to be decided either by an arbitrator or, at NECS's instance, the

court - the two tribunals logically equipped to handle the issue.” (Id. at p. 546, internal

citations omitted.)

Thus, federal courts have determined that arbitral immunity applies even where

the authority of the arbitrator to resolve the dispute has been challenged. (International

Medical Group v. American Arbitration Association, Inc. (7th Cir. 2002) 312 F.3d 833, 843;

Tamari v. Conrad (7th Cir.1977) 552 F.2d 778, 780.) “In Tamari, the plaintiff argued that

arbitrators are not entitled to immunity if they have no right to arbitrate the dispute in the

first place. We held that arbitral immunity should apply when the arbitrator's authority is

challenged because arbitrators will be dissuaded from serving if they can be caught up

in the dispute and be saddled with the burdens of defending a lawsuit.” (International

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Medical Group, Inc. v. American Arbitration Ass'n, Inc., supra, at p. 843, citing Tamari v.

Conrad, supra, at p. 780-781, internal citations omitted.)

In the present case, plaintiff contends that it is obvious that the AAA lacked

jurisdiction over the matter because the arbitration agreement called for arbitration of

fee disputes between plaintiffs and Gittler pursuant to Business and Professions Code

section 6200, which requires arbitration before the local bar association, not a private

arbitration association like the AAA. However, the language of the arbitration

agreement does not clearly show that the AAA lacked jurisdiction over the dispute, since

it does not specify whether the AAA is allowed to arbitrate fee disputes. It only references

Business & Professions Code section 6200, without stating which entity will administer the

arbitration. It also states that any other disputes between the parties, including disputes

over breach of contract, professional negligence, or breach of fiduciary duty, will be

resolved in arbitration under the rules of either the American Arbitration Association or

JAMS.

Thus, the question of whether the AAA had subject matter jurisdiction over the

dispute was not clear from the face of the arbitration agreement, and the AAA was

entitled to continue with the arbitration proceedings until it received clarification from

either the court or the arbitrator as to whether it had jurisdiction over the matter. As a

result, arbitral immunity applies to its actions in administering the arbitration, including

sending out the notices and other documents that form the basis for plaintiffs’ claims. If

the court were to find otherwise, it would deter the AAA and other arbitration associations

from arbitrating disputes, since they would be placed in the position of having to defend

themselves from lawsuits by dissatisfied litigants any time their authority to hear the

arbitration is challenged. “Forcing the AAA itself to preliminarily address potentially

complex legal issues would not only impose an unwelcome burden, but would interfere

with the organization's neutrality and likely add further cost and delay to the arbitral

process.” (New England Cleaning Services, Inc. v. American Arbitration Ass'n, supra, 199

F.3d at p. 546.)

Similarly, Liberi’s claim that she was not served with notice of the arbitration, and

thus the AAA did not have jurisdiction over her, does not mean that the AAA does not

have arbitral immunity. The allegations of the Complaint indicate that the AAA received

a request to open the arbitration from Gittler as to both Liberi and Ostella under the terms

of the arbitration agreement. The AAA then opened the arbitration proceedings and

attempted to serve notices on plaintiffs. However, apparently some of the notices to

Liberi were sent to the wrong address, which may have resulted in the release of plaintiff’s

personal information.

Yet the AAA’s actions in opening the arbitration and sending out notices

regarding the arbitration to the parties was merely part of its duties as the administrator

of the arbitration proceedings. As such, the AAA’s actions were covered by the arbitral

immunity privilege. While Liberi now claims that she was not properly served with notice

of the arbitration and therefore the AAA lacked personal jurisdiction over her, any

claimed lack of jurisdiction is a disputed issue that the AAA was not required to resolve

before it began the proceedings or sent out notices. Again, the AAA should not have to

deal with complex legal issues such as lack of personal jurisdiction before arbitral

immunity applies. Otherwise, the AAA would be potentially liable for damages every

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time it opened a new arbitration proceeding and sent out notices of the proceedings.

This would have a chilling effect on arbitration proceedings, which is contrary to the

public policy in favor of arbitration. Therefore, the court intends to find that arbitral

immunity applies and bars plaintiffs’ claims against the AAA. (Stasz v. Schwab, supra, 121

Cal.App.4th at pp. 431–433.)

In addition, the AAA and Cubacha’s communications and conduct are also

protected by the litigation privilege, and thus they cannot form the basis of valid claims

for invasion of privacy or civil extortion. (Civil Code § 47, subd. (b).) “Under the current

provisions of section 47(b), the Legislature has accorded an absolute privilege or

immunity to statements made in a number of contexts: in any (1) legislative proceeding,

(2) judicial proceeding, (3) other official proceeding authorized by law, or (4) proceeding

authorized by law and reviewable by writ of mandate.” (Moore v. Conliffe (1994) 7

Cal.4th 634, 640–641, internal footnote omitted.)

“In furtherance of the public policy purposes it is designed to serve, the privilege

prescribed by section 47(2) has been given broad application. Although originally

enacted with reference to defamation, the privilege is now held applicable to any

communication, whether or not it amounts to a publication, and all torts except malicious

prosecution. Further, it applies to any publication required or permitted by law in the

course of a judicial proceeding to achieve the objects of the litigation, even though the

publication is made outside the courtroom and no function of the court or its officers is

involved.” (Silberg v. Anderson (1990) 50 Cal.3d 205, 211–212, internal citations omitted.)

“The usual formulation is that the privilege applies to any communication (1) made

in judicial or quasi-judicial proceedings; (2) by litigants or other participants authorized by

law; (3) to achieve the objects of the litigation; and (4) that have some connection or

logical relation to the action.” (Id. at p. 212, internal citations omitted.)

In Moore v. Conliffe, the California Supreme Court found that the litigation

privilege extended to testimony of witnesses in arbitration proceedings, which are “quasi-

judicial proceedings” for purposes of section 47(b). (Moore v. Conliffe, supra, 7 Cal.4th at

pp. 643-644.) “It is apparent, upon even brief reflection, that the purposes of the litigation

privilege, as described in Silberg, strongly support application of the privilege to a witness

who testifies in the course of a private, contractual arbitration proceeding.” (Id. at p.

643.)

“[T]he fundamental interest in protecting the integrity and finality of dispute

resolution from ‘an unending roundelay of litigation’ unquestionably is as applicable in

the arbitration context as in a court proceeding. Indeed, as we emphasized in our recent

decision in Moncharsh v. Heily & Blase (1992) 3 Cal.4th 1, 10 [10 Cal.Rptr.2d 183, 832 P.2d

899], the importance of ensuring the finality of the arbitrator's decision frequently is a

principal impetus for ‘the parties' choice of an arbitral forum over a judicial one. The

arbitrator's decision should be the end, not the beginning, of the dispute.’ Moreover, as

starkly demonstrated by the facts of the present case, because a party's right to appeal

an arbitration award is extremely limited, there is a risk in the arbitration setting, even

greater than that present in the court setting, that a losing party will seek to circumvent

the applicable limitations on review by filing a subsequent tort action against one or more

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of the participants in the arbitration proceeding on the basis of statements made in that

proceeding.” (Id. at p. 644, internal citations omitted.)

Here, it is apparent from the allegations of the Complaint that the communications

and disclosures of which plaintiffs complain were made during the course of the

arbitration proceeding to resolve the fee dispute between the parties, or that they were

made in anticipation of the arbitration. Plaintiffs allege that the AAA and its employee,

Ms. Cubacha, disclosed their personal, confidential information when they commenced

the arbitration proceedings. The communications were made during the quasi-judicial

arbitration proceeding, by participants in the proceedings, for the purpose of

commencing or proceeding with the arbitration, and were directly related to the

purposes of the arbitration. Thus, the communications were protected under the

litigation privilege, and plaintiffs cannot use them as a basis to state claims for invasion of

privacy, breach of the duty of confidentiality, or civil extortion.

While plaintiffs contend that the AAA never had proper personal jurisdiction over

them or subject matter jurisdiction over the dispute, they nevertheless admit that the AAA

was in the process of commencing the arbitration proceedings at the time it sent out the

documents with plaintiffs’ personal information. Thus, plaintiffs’ claims are all barred by

the litigation privilege, and they cannot state any claims based on the communications

alleged in the complaint. As a result, the court intends to sustain the demurrer to all five

causes of action alleged in the Complaint.

Furthermore, the court intends to sustain the demurrer without leave to amend, as

it does not appear that plaintiffs can allege any other facts that would cure the defect

in their Complaint. Since the communications about which they complain are all

privileged, there is nothing that they can allege that would allow them to state a valid

cause of action against the AAA or Cubacha. Therefore, the court intends to deny leave

to amend.

Pursuant to California Rules of Court, rule 3.1312(a), and Code of Civil Procedure

section 1019.5, subdivision (a), no further written order is necessary. The minute order

adopting this tentative ruling will serve as the order of the court and service by the clerk

will constitute notice of the order.

Tentative Ruling

Issued By: DTT on 2/4/2021 .

(Judge’s initials) (Date)

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(32)

Tentative Ruling

Re: LeDuc, et al. v. Infinity Select Insurance Co., et al.



Motion: by Plaintiffs for Leave to File Second Amended Complaint

Tentative Ruling:

To grant. Plaintiffs shall file and serve the proposed Second Amended

Complaint within 3 days of the clerk’s service of this order.

To continue the Infinity defendants’ current motion for summary judgment

from April 6, 2021 to July 8, 2021 at 3:30 p.m. in Dept. 501. If the Infinity defendants desire

to move for summary adjudication, or summary judgment concerning the new plaintiff,

they may file a Supplemental Notice of Motion, Memorandum of Points and Authorities,

Separate Statement, and any new evidence, relating to Mr. Guerra’s claims only, to be

heard on July 8, 2021, with their current motion for summary judgment/adjudication,

which was originally filed July 14, 2020. Alternatively, the Infinity defendants may withdraw

the current motion and redraft it entirely to relate to the anticipated Second Amended

Complaint. Any new motion will be heard on July 8, 2021, at 3:30 p.m. in Dept. 501.

Service of any new motion or supplemental papers must comply with Code of Civil

Procedure section 437c, subdivision (a)(2).

Explanation:

Plaintiffs seek to add Mr. Guerra as an individual plaintiff to certain claims

asserted against defendants. While Mr. Guerra’s Chapter 7 Bankruptcy Trustee was

named plaintiff in the original Complaint, Mr. Guerra, as an individual, was not. Allegedly,

Mr. Guerra was unaware he had any potential claims against defendants until his

meeting with plaintiffs’ counsel on September 16, 2020. Plaintiffs contend that the

amended pleading is necessary in order to preserve and prosecute Mr. Guerra’s

individual claims against defendants.

“The court may, in furtherance of justice, and on such terms as may be proper,

allow a party to amend any pleading.” (Code Civ. Proc. § 473; see also, § 576.) There is

generally a strong policy in favor of allowing a plaintiff to amend the complaint. (Glaser

v. Meyers (1982) 137 Cal.App.3d 770, 776-777.) Judicial policy favors resolution of all

disputed matters between the parties in the same lawsuit. Thus, the court's discretion will

usually be exercised liberally to allow amendment of the pleadings. (Nestle v. Santa

Monica (1972) 6 Cal.3d 920, 939; Mabie v. Hyatt (1998) 61 Cal.App.4th 581, 596.)

Defendants do not explicitly raise timeliness in their oppositions, nor do they use

the word “prejudice.” Instead, they only attack the merits of the proposed pleading.

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A trial court will not ordinarily consider the validity of a proposed amended

pleading because grounds for demurrer or motion to strike are premature. (Kittredge

Sports Co. v. Superior Court (1989) 213 Cal.App.3d 1045, 1048.) The court declines

defendants’ invitation to parse the merits of the proposed amended complaint at this

point. Motions to amend are not the preferred vehicle to challenge proposed pleadings.

Pursuant to California Rules of Court, rule 3.1312(a) and Code of Civil

Procedure section 1019.5, subdivision (a), no further written order is necessary. The minute

order adopting this tentative ruling will serve as the order of the court and service by the

clerk will constitute notice of the order.

Tentative Ruling Issued By: DTT__________on_____2/4/2021____.


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(27)

Tentative Ruling

Re: Belemjian v. Central California Ear, Nose & Throat



Motion: by Defendants Benjamin Teitelbaum, M.D., and Central

California Ear, Nose & Throat for summary judgment

Tentative Ruling:

To grant the continuance request. (Code of Civ. Proc., § 437c, subd. (h).) The new

hearing date would be Tuesday, March 23, 2021, at 3:30 p.m. in Department 501.

Opposition and reply due dates shall run from the new hearing date.

Explanation:

“If it appears from the affidavits submitted in opposition to a motion for summary

judgment or summary adjudication, or both, that facts essential to justify opposition may

exist but cannot, for reasons stated, be presented, the court shall deny the motion, order

a continuance to permit affidavits to be obtained or discovery to be had, or make any

other order as may be just.” (Code of Civ. Proc., § 437c, subd. (h).)

Summary judgment is a drastic measure which deprives the losing party of trial on

the merits. (Bahl v. Bank of America (2001) 89 Cal.App.4th 389, 395.) To mitigate summary

judgment's harshness, the statute's drafters included a provision making continuances—

which are normally a matter within the broad discretion of trial courts—virtually

mandated “upon a good faith showing by affidavit that a continuance is needed to

obtain facts essential to justify opposition to the motion.” (Ibid.)

Plaintiffs’ request defendants’ motion for summary judgment be continued for one

month because an expert anticipated to opine on the standard of care unexpectedly

underwent surgery in January and was thus unable to submit a declaration by the

deadline. Since the anticipated subject matter of the opinion is the standard of care, it

is essential to plaintiffs’ opposition to the motion for summary judgment. Furthermore, this

information is set forth in plaintiffs’ counsel’s supporting declaration. Accordingly,

plaintiffs’ request for a continuance is granted. (Code Civ. Proc. § 437c, subd. (h).)





Tentative Ruling

Issued By: DTT on 2/5/2021 .


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(03)

Tentative Rulings

Re: Garcia v. Bank of Stockton



Motions: by Plaintiffs John and Janie Garcia for Summary Judgment or,

in the Alternative, Summary Adjudication of their Complaint

by Defendant/Cross-Complainant Bank of Stockton for

Summary Judgment or, in the Alternative, Summary

Adjudication of its Cross-Claim for Declaratory Relief

Tentative Rulings:

To deny plaintiffs’ motion in all respects. (Code Civ. Proc. § 437c.) To grant Bank

of Stockton’s motion for summary adjudication of its sole cause of action for declaratory

relief. (Ibid.)

Explanation:

Plaintiffs’ Motion: Plaintiffs John and Janie Garcia seek adjudication of their breach

of contract and declaratory relief causes of action. They contend that defendant Bank

of Stockton (the Bank) breached the defense and indemnity clause in a settlement

agreement when it refused to provide a full defense and indemnity to plaintiffs after they

were sued by Morris and Sharon Garcia as well as Douglas Maddox. However, plaintiffs

have failed to prove that the Bank breached its promise to defend and indemnify them

as to all of the suits brought against them. Also, the indemnity clause expressly states that

the Bank’s obligation to defend and indemnify plaintiffs expired after the Maddox

charging order action was resolved, either through a final judgment or a settlement.

Since the Maddox action was resolved by a final judgment on January 4, 2017, the Bank’s

obligation to defend and indemnify plaintiffs terminated on that date, and it had no

further obligation to provide a defense or indemnity to plaintiffs after that time.

“Under California law, an ‘[i]ndemnity 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.) ‘An indemnity against claims, or demands, or liability,

expressly, or in other equivalent terms, embraces the costs of defense against such

claims, demands, or liability incurred in good faith, and in the exercise of a reasonable

discretion ....’ (Civ. Code, § 2778, subd. 3.) An indemnitor in an indemnity contract

generally undertakes to protect the indemnitee against loss or damage through liability

to a third person.” (Myers Building Industries, Ltd. v. Interface Technology, Inc. (1993) 13

Cal.App.4th 949, 968, internal citation omitted.)

“An indemnity agreement is to be interpreted according to the language and

contents of the contract as well as the intention of the parties as indicated by the

contract. The extent of the duty to indemnify is determined from the contract. The

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indemnity provisions of a contract are to be construed under the same rules governing

other contracts with a view to determining the actual intent of the parties.” (Id. at pp.

968-969, internal citations omitted.)

“A contractual promise to ‘defend’ another against specified claims clearly

connotes an obligation of active responsibility, from the outset, for the promisee's defense

against such claims. The duty promised is to render, or fund, the service of providing a

defense on the promisee's behalf - a duty that necessarily arises as soon as such claims

are made against the promisee, and may continue until they have been resolved. This is

the common understanding of the word “defend” as it is used in legal parlance.”

(Crawford v. Weather Shield Mfg., Inc. (2008) 44 Cal.4th 541, 553–554.)

“By virtue of these statutory provisions, the case law has long confirmed that, unless

the parties' agreement expressly provides otherwise, a contractual indemnitor has the

obligation, upon proper tender by the indemnitee, to accept and assume the

indemnitee's active defense against claims encompassed by the indemnity provision.

Where the indemnitor has breached this obligation, an indemnitee who was thereby

forced, against its wishes, to defend itself is entitled to reimbursement of the costs of doing

so.” (Id. at p. 555.)

Here, according to the undisputed facts, the Bank and plaintiffs entered into a

settlement of their case in June of 2014. (Plaintiffs’ UMF Nos. 19-28.) The settlement

agreement included a clause in which the Bank agreed to provide a defense and

indemnity to plaintiffs for certain claims that might be brought against them by Morris,

Sharon or Maddox. Specifically, the agreement stated:

The Bank shall indemnify, defend and hold harmless the VDS Entities and the

Garcia Parties for any claims for damages made or asserted by Morris Garcia,

Sharon Garcia or Matilda Maddox as executrix of the estate of Douglas Maddox

based on distributions made to the Bank pursuant to this Agreement prior to a

resolution of the Bank's claims regarding the validity of the Maddox Charging

Order; provided, however, that the Bank’s agreement to indemnify, defend or hold

harmless the VDS Entities and the Garcia Parties shall expire upon the earlier of (a)

the expiration of any opportunity to seek appellate review of any judgment, order,

or decree issued in the Action adjudging the Bank's economic interest in the VDS

Entities to be free and clear of the Maddox Charging Order; or, (b) the Bank's

satisfaction or settlement of the amounts secured by the Maddox Charging Order,

if any. (Exhibit A to Bank’s Compendium of Evidence, emphases added.)

Thus, the agreement to defend and indemnify only applied to claims brought by

Morris, Sharon or Maddox that were based on distributions made by plaintiffs to the Bank

pursuant to the settlement. Also, the Bank’s obligation to provide a defense or indemnity

expired as soon as the Bank either obtained a final judgment on Maddox’s charging

order claim with no further right to appeal, or the Bank settled or paid off the amounts

secured by the Maddox charging order.

After the parties entered into the settlement agreement, Morris and Sharon sued

plaintiffs on May 5, 2015, and again in September of 2015. (Plaintiffs’ UMF Nos. 29 and

35.) The first action alleged that John and Janie mismanaged the VDS Ranch and denied

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Morris and Sharon their right to participate in decisions with regard to VDS. (Bank’s

Opposition to Plaintiffs’ UMF No. 29.) The second action alleged that John and Janie

committed financial elder abuse against Morris and Sharon by diverting funds from VDS.

(Bank’s Opposition UMF No. 35.) Morris and Sharon also filed another lawsuit in Madera

County against VDS in an effort to set aside the sale of VDS to a third party, and to

reinstate VDS. (Plaintiffs’ UMF No. 41.) In addition, Maddox filed an amended cross-

complaint in the underlying action, seeking to attack the distribution of the VDS proceeds

to the Bank. (Plaintiffs’ UMF No. 32.)

Plaintiffs tendered their defense to the Bank with regard to the each of the three

lawsuits as well as the Maddox cross-complaint, but the Bank declined to provide a full

defense and indemnity as to some of the suits. Instead, the Bank offered a limited

indemnity of plaintiffs’ costs up to $20,000 on the first suit. (The Bank’s UMF No. 31.) The

plaintiffs rejected this offer and insisted on full payment of their defense costs. (Ibid.) With

regard to the second action for elder abuse, the Bank rejected the plaintiffs’ tender in its

entirety. (The Bank’s Opposition UMF No. 35.) The Bank accepted tender of the defense

as to the Maddox cross-complaint, but stated that it wanted its attorney to handle the

defense of that cross-complaint. (Plaintiffs’ UMF Nos. 33 and 34.) Plaintiffs refused this

offer, contending that it did not comply with the Bank’s obligation to provide a complete

defense and indemnity on the claims. (Plaintiffs’ UMF No. 34.)

Plaintiffs contend that the Bank breached its contractual obligations under the

defense and indemnity clause in the settlement agreement because the Bank did not

provide a complete defense and pay all costs associated with the various claims against

them. However, it does not appear that the Bank breached the indemnity clause with

regard to all of the actions filed by Morris and Sharon Garcia. For example, the first action

that Morris and Sharon filed against plaintiffs on May 5, 2015, was based primarily on the

allegation that John and Janie mismanaged the VDS Ranch and denied Morris and

Sharon their rights as members of the LLC. (See Ex. 13 to Plaintiffs’ Request for Judicial

Notice, Complaint filed in Garcia v. Garcia, case no. 15CECG01410.) While the

Complaint does allege that John breached his fiduciary duty to Morris and Sharon when

he allowed the property to be sold, and that John and Janie converted the sales

proceeds for their own use, there are no allegations that the distribution of the sales

proceeds to the Bank was improper or a breach of John’s duties owed to Morris and

Sharon. The First Amended Complaint added claims against the Bank for receiving the

distributions from the sale of VDS, but those claims are only against the Bank and not John

or Janie. (See Fourth and Ninth Causes of Action.)

Therefore, the gravamen of the first action against plaintiffs is not that plaintiffs

improperly distributed the sales funds from VDS to the Bank, but rather that they

mismanaged VDS and converted the funds for their own use. Such allegations do not

fall within the terms of the indemnity agreement, which only required the Bank to

indemnify plaintiffs from claims against them arising out of the distribution of the sales

proceeds of VDS to the Bank under the terms of the settlement. The only claims that

related to the distribution of the VDS sales funds to the Bank are against the Bank, not

against plaintiffs. As a result, it does not appear that plaintiffs are entitled to summary

adjudication of the breach of contract or declaratory relief causes of action with regard

to the May 5, 2015, action filed by Morris and Sharon, as the Bank had no obligation to

provide indemnity or a defense with regard to that action.

15

On the other hand, the Bank did have an obligation to provide a defense and

indemnity as to the Maddox amended cross-complaint that was filed in case no.

12CECG03902, since that amended cross-complaint alleged that John and Janie

violated the Maddox charging order when they paid the VDS sales proceeds to the Bank.

(Ex. 14 to Plaintiffs’ Request for Judicial Notice, Maddox’s First Amended Cross-Complaint,

¶¶ 21-25.) The Bank offered to provide a defense as to Maddox’s amended cross-

complaint, but stated that it wanted its own attorney to handle the defense. (Plaintiffs’

UMF Nos. 33 and 34.) Plaintiffs rejected this offer. (Plaintiffs’ UMF No. 34.) Thus, there is at

least a triable issue of material fact as to whether the Bank complied with its indemnity

duties as to the Maddox cross-complaint, and plaintiffs are not entitled to summary

adjudication of the breach of contract or declaratory relief cause of action with regard

to the Maddox cross-complaint.

However, it does not appear that the Bank had a duty to provide a defense and

indemnity as to Morris and Sharon’s elder abuse case, which alleged that John and Janie

allowed the foreclosure sale of the VDS Ranch, failed to seek Morris and Sharon’s consent

to the sale, and failed to pay any part of the sales proceeds to Morris and Sharon.

(Complaint in case no. 15CECG02784, ¶¶ 37-49.) There is no allegation that John and

Janie improperly paid the VDS funds to the Bank under the settlement of the underlying

case. Thus, it does not appear that the Bank breached the indemnity clause when it

refused to provide a defense or indemnify plaintiffs with regard to the elder abuse case.

Also, even if plaintiffs were entitled to indemnity and a defense with regard to the

elder abuse case, the Bank’s obligation would only extend up to the date on which it

obtained a final judgment against Maddox on the charging order claim. Under the

express terms of the indemnity agreement, the Bank was only obligated to provide a

defense and indemnity to plaintiffs until the Maddox charging order claim was resolved,

either through a final judgment or a settlement. (Ex. A to Bank’s Compendium of

Evidence.) The Bank obtained a judgment against Maddox, finding that his charging

order was void and unenforceable on November 30, 2016. (Plaintiffs’ UMF No. 39.) The

Bank and Maddox then reached an agreement in which Maddox waived his right to

appeal the judgment in exchange for a waiver of costs on January 4, 2017. (Ibid.)

Thus, the Bank obtained a judgment against Maddox on the charging order claim

which became final and unappealable on January 4, 2017. Consequently, the Bank no

longer had any obligation to defend or indemnify plaintiffs against any claims by Morris,

Sharon or Maddox after January 4, 2017, and any costs incurred after that time are

unrecoverable by them. Consequently, even to the extent that plaintiffs are entitled to

recover their defense costs for the claims of Morris, Sharon and Maddox that were filed

after the settlement agreement, plaintiffs can only recover their costs up to January 4,

2017, and the Bank has no duty to pay costs incurred after that date.

Plaintiffs argue that, once they tendered their defense to the Bank, its obligation

to provide a defense and indemnity continues until the conclusion of the cases against

them, regardless of the language to the contrary in the settlement agreement. They cite

to Centex Homes v. R-Help Construction Co., Inc. (2019) 32 Cal.App.5th 1230 in support of

their position. The Court of Appeal stated that, “where the plaintiff’s complaint alleges

facts embraced by the indemnity agreement, the indemnitor has a duty to defend

16

throughout the underlying tort action unless it can conclusively show by undisputed facts

that plaintiff’s action is not covered by the agreement.” (Id. at p. 1237.)

In the present case, plaintiffs argue that this language means that, once plaintiffs

tendered their defense to the Bank on the various cases brought against them by Morris,

Sharon and Maddox, the Bank owed them a duty to provide a defense and indemnity

throughout the remainder of the cases until there was a conclusive determination that

the indemnity clause did not apply to the actions. However, as discussed above, at least

some of the cases did not contain any allegations that clearly showed that the indemnity

clause applied, as they were not based on the payment of VDS funds to the Bank

pursuant to the settlement agreement. Thus, no duty to provide a defense or indemnity

was ever triggered as to those cases.

Also, Centex did not involve an indemnity agreement that contained express

language stating that the duty to provide indemnity would expire after a specific event

or series of events. Here, on the other hand, there was specific language in the

indemnitee agreement that provided that the Bank’s duty to provide a defense or

indemnitee would expire if the Bank obtained a final resolution of the Maddox charging

order claim, either through a final judgment or a satisfaction and settlement of the

amount secured by the charging order. Thus, the holding of Centex is inapplicable to

the facts of the present case, and Centex does not support plaintiffs’ position that they

are entitled to defense costs even after January 4, 2017.

Plaintiffs also contend that they are entitled to full indemnity of their entire defense

costs under Civil Code section 2778. Section 2778 sets forth rules that apply to the

interpretation of indemnity agreements. “In the interpretation of a contract of indemnity,

the following rules are to be applied, unless a contrary intention appears…” (Italics

added.) Here, there is a contrary intention expressed very clearly in the indemnity clause,

which states that the Bank’s duty to provide a defense or indemnity expires once the

Maddox charging order claim has been finally resolved, either by a judgment or a

settlement. Thus, plaintiffs have failed to show that they are entitled to their full defense

costs for the duration of the cases against them. At most, they are entitled to their costs

up to January 4, 2017, when the Bank obtained a final judgment against Maddox on the

charging order claim.

Nevertheless, plaintiffs argue that it was not their intent to have the Bank’s duty to

defend and indemnify them as to claims by Morris and Sharon that were brought based

on the distribution to the Bank, and that it would not make any sense to tie the Bank’s

duty to defend against Morris and Sharon’s claims to the separate charging order claim

brought by Maddox. Yet plaintiffs rely on inadmissible parol evidence to support their

contention that they never intended to tie the Bank’s duty to defend and indemnify them

from Morris and Sharon’s claims to the resolution of the claim brought by Maddox.

“The parol evidence rule generally prohibits the introduction of any extrinsic

evidence, whether oral or written, to vary, alter or add to the terms of an integrated

written instrument. An integrated agreement is a writing or writings constituting a final

expression of one or more terms of an agreement.” (Hayter Trucking, Inc. v. Shell Western

E&P, Inc. (1993) 18 Cal.App.4th 1, 13, internal citations omitted.)

17

“In California, the rule is embodied in Code of Civil Procedure section 1856, which

states in relevant part: [¶] ‘(a) Terms set forth in a writing intended by the parties as a

final expression of their agreement with respect to such terms as are included therein

may not be contradicted by evidence of any prior agreement or of a contemporaneous

oral agreement.’” (Id. at p. 13.)

Here, the settlement agreement contained an integration clause, stating that,

“[t]his Agreement, with the appended Exhibit, constitutes the entire agreement between

the Parties hereto with respect to the subject matter of this Agreement, and there are no

other agreements, understandings, restrictions, warranties, or representations, written or

oral, among the Parties, concerning the subject matter hereof, other than those expressly

set forth herein. This Agreement may be amended or modified only by an instrument in

writing signed by all of the Parties hereto.” (Settlement Agreement, ¶ 12.)

Thus, the parties were not allowed to amend or modify the terms of the agreement

without entering into a separate agreement in writing. Any evidence that attempts to

change the terms of the agreement, or to add provisions that are inconsistent with the

written agreement’s terms, is inadmissible parol evidence, and the court intends to

disregard it. Consequently, plaintiffs’ evidence that seeks to introduce testimony about

their intent that is outside of the express written terms of the settlement agreement is not

admissible and cannot change the terms of the agreement. For example, plaintiffs’

declarations stating that they did not intend to agree to have the Bank’s duty to defend

and indemnify them against the claims of Morris and Sharon expire when the Bank

resolved the Maddox charging order claim are inadmissible parol evidence, and the

court intends to sustain the objections to them.1

Nor does it appear that the indemnity clause is ambiguous or capable of multiple

interpretations, so the court will not allow plaintiffs to introduce parol evidence to

interpret its terms. The agreement is clear and unambiguous on its face, and it is also an

integrated agreement. Therefore, the court will not consider any evidence regarding

the intent of the parties that is outside the four corners of the written settlement

agreement. Instead, it intends to find that the Bank’s duty to provide a defense and

indemnity expired when the Bank obtained a final judgment against Maddox on January

4, 2017.

Therefore, the court intends to deny plaintiffs’ motion for summary adjudication of

the breach of contract cause of action, as plaintiffs have not proven that the Bank

breached its obligations to provide a defense and indemnity as to all of the claims

tendered by plaintiffs. Also, even if the Bank did breach its obligations as to some of the

claims plaintiffs tendered, plaintiffs have failed to provide evidence showing how they

calculated the damages they incurred as to each of their claims. They only state that

they incurred $172,579.23 for the period between the settlement agreement and the

resolution of the dispute with Maddox, without explaining which defense costs were

incurred for defending each separate case. (Gilmore decl. ¶ 32.) Since it does not

appear that plaintiffs are entitled to damages as to each separate claim that they

1 The court intends to overrule defendant Bank’s objections 1 and 2 to John Garcia’s declaration,

and sustain objections 4 and 5. The court also intends to sustain the Bank’s objections 1-5 to David

Gilmore’s declaration.

18

tendered to the Bank, they would need to provide evidence regarding the defense costs

incurred as to each claim in order for the court to be able to determine the amount of

damages they are entitled to recover. As a result, the court cannot grant summary

adjudication of plaintiffs’ breach of contract claim.

Likewise, the court intends to deny summary adjudication of plaintiffs’ declaratory

relief cause of action. While plaintiffs contend that they are entitled to a declaration

from the court that the Bank was obligated to defend and indemnify them with regard

to the claims that they tendered, there are triable issues of material fact with regard to

whether the Bank was actually required to provide a defense or indemnity as to several

of plaintiffs’ claims. The cases filed by Morris and Sharon in 2015 do not appear to allege

any claims against plaintiffs based on improper distribution of funds to the Bank from the

sale of VDS, so they do not fall within the scope of the settlement agreement’s indemnity

clause.

Also, while the Maddox amended cross-complaint alleged that the funds were

improperly distributed to the Bank in violation of the charging order, the Bank did offer to

provide a defense as to that claim. There are triable issues of fact as to whether that

offer was sufficient to comply with the terms of the indemnity clause.

In addition, any obligation by the Bank to provide a defense or indemnity expired

once the Bank obtained a final judgment against Maddox on the charging order claim

in January of 2017. As a result, plaintiffs have failed to show that, as a matter of law, they

are entitled to a declaration that the Bank was required to provide them with a defense

or indemnity as to all of the claims that they tendered for the duration of the cases, and

the court intends to deny the motion for summary adjudication of the declaratory relief

claim.

The Bank’s Motion: The Bank seeks to adjudicate the declaratory relief claim,

which alleges that the Bank’s obligation under to defend and indemnify the plaintiffs

expired on January 4, 2017, when it obtained a final judgment against Maddox on his

charging order claim and he waived his right to appeal the judgment. As discussed

above with regard to plaintiffs’ motion, the evidence does show that the parties clearly

agreed “that the Bank’s agreement to indemnify, defend or hold harmless the VDS

Entities and the Garcia Parties shall expire upon the earlier of (a) the expiration of any

opportunity to seek appellate review of any judgment, order, or decree issued in the

Action adjudging the Bank's economic interest in the VDS Entities to be free and clear of

the Maddox Charging Order; or, (b) the Bank's satisfaction or settlement of the amounts

secured by the Maddox Charging Order, if any. (Ex.t A to the Bank’s Compendium of

Evidence, italics added.)

Thus, the Bank was only required to provide a defense and indemnity to plaintiffs

up until the date when the Bank either obtained a final judgment against Maddox on

the charging order claim, or when the Bank paid or settled the amount secured by the

charging order. The Bank obtained a judgment on Maddox’s charging order claim in

November of 2016, and Maddox waived his right to appeal the order on January 4, 2017.

(The Bank’s UMF Nos. 4, 5.) Plaintiffs have not disputed any of the Bank’s facts, and the

additional facts they cite in support of their opposition are largely inadmissible or

19

irrelevant, as they attempt to use parol evidence to raise triable issues of material fact as

to the intent of the parities when they entered into the settlement agreement.

Consequently, the Bank is entitled to summary adjudication of its declaratory relief

claim, and the court intends to grant a declaration stating that the Bank had no

obligation to provide a defense or indemnity to plaintiffs for any claims raised by Morris

or Sharon after January 4, 2017.





Tentative Rulings Issued By: DTT on 2/8/2021 .


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Tentative Rulings for Department 501 (PM)

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