Schwab v. Southern California Gas Co.

8 Cal. Rptr. 3d 627, 114 Cal. App. 4th 1308, 2004 Daily Journal DAR 631, 2004 Cal. Daily Op. Serv. 513, 2004 Cal. App. LEXIS 53
CourtCalifornia Court of Appeal
DecidedJanuary 20, 2004
DocketE030845
StatusPublished
Cited by32 cases

This text of 8 Cal. Rptr. 3d 627 (Schwab v. Southern California Gas Co.) is published on Counsel Stack Legal Research, covering California Court of Appeal primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Schwab v. Southern California Gas Co., 8 Cal. Rptr. 3d 627, 114 Cal. App. 4th 1308, 2004 Daily Journal DAR 631, 2004 Cal. Daily Op. Serv. 513, 2004 Cal. App. LEXIS 53 (Cal. Ct. App. 2004).

Opinion

Opinion

KING, J.

INTRODUCTION

Defendant, B & Sons Construction, Inc. (B & Sons), appeals from the trial court’s order denying its motion to set aside defaults and judgments entered in favor of Michael and Sherry Schwab (plaintiffs), and defendants/cross-complainants, Southern California Gas Company (the Gas Company), Southern California Edison Company (SCE), and the City of San Jacinto (the City). (Code Civ. Proc., § 473.) 1 We affirm the defaults and judgments entered in favor of plaintiffs and the Gas Company. We reverse the defaults and judgments entered in favor of SCE and the City.

Plaintiffs’ complaint sought money damages for personal injuries against B & Sons, the Gas Company, SCE and the City. By their cross-complaints, the Gas Company, SCE, and the City sought equitable indemnity and contribution from B & Sons. None of the pleadings stated any amount of money damages. B & Sons was properly served with the complaint and cross-complaints, but failed to answer any of them.

B & Sons contends that the four defaults and judgments entered against it are void, because it was not served with statements of damages within a *1314 reasonable time before any of the defaults were entered. As we explain, this contention fails regarding plaintiffs and the Gas Company, because they complied with the statutory procedures for obtaining the defaults and judgments by properly serving statements of damages on B & Sons within a reasonable time before the defaults were entered. (§§ 425.10 et seq. & 585 et seq.) These defaults and judgments are therefore valid.

In contrast, SCE and the City failed to comply with the statutory procedures. They did not properly serve B & Sons with any notice of the amount of money damages they were seeking, within a reasonable time before B & Sons’ defaults were entered on their respective cross-complaints. For this reason, the defaults and judgments in favor of SCE and the City are invalid and must be reversed.

SUMMARY OF FACTS AND PROCEDURAL HISTORY

In 1996, Michael Schwab was severely burned in an explosion and fire. In 1997, Michael Schwab and his wife, Sherry Schwab, sued B & Sons, the Gas Company, SCE, the City, and other defendants for personal injuries. Shortly thereafter, the Gas Company, SCE, and the City cross-complained against B & Sons for indemnity and contribution.

B & Sons filed for bankruptcy in 1993, and its corporate status was suspended by the California Franchise Tax Board in 1994. B & Sons never responded to the complaint or cross-complaints. B & Sons’ primary and excess liability insurance carriers denied coverage and never intervened in the action.

In 2000, plaintiffs settled their claims against the Gas Company, SCE, the City, and other parties. Thereafter, plaintiffs and cross-complainants applied for default judgments against B & Sons. At an August 17, 2001, default prove-up hearing, the trial court noted that SCE and the City had not personally served B & Sons with statements of damages before defaults were entered in their favor. Representatives of B & Sons’ insurers were in the courtroom, taking notes.

The August 17 hearing was continued to August 31. On August 22, SCE and the City personally served statements of damages on B & Sons. At the August 31 hearing, B & Sons appeared in the action for the first time through Attorney Bruce W. Lorber. Mr. Lorber argued that some of the defaults entered against it were void, because statements of damages had not been personally served. He requested time to brief this issue. He further stated that he had answers in his briefcase and was prepared to file them, should the court grant him leave. The trial court denied these requests.

At the same August 31 hearing, the trial court vacated the previous defaults in favor of SCE and the City, but reentered them nunc pro tunc effective *1315 August 19, three days before August 22, the date SCE and the City personally served B & Sons with statements of damages. The trial court entered default judgments in favor of the plaintiffs, the Gas Company, SCE, and the City on August 31 and September 21. On September 25, 2001, B & Sons filed a motion to set aside the defaults and judgments, under section 473. This motion was heard and denied on October 30. On December 17, B & Sons filed a notice of appeal from the October 30, order.

FACTS AND PROCEDURAL HISTORY

A. The 1996 Explosion and Fire

In 1996, Michael Schwab suffered severe bums after a natural gas explosion and fire erupted in a building where he was working. Natural gas had seeped into the building from a hole in a steel gas line located under the alleyway behind the building. The hole in the steel gas line was at the “exact point” where it crossed under an old, abandoned steel water main.

In 1990, B & Sons, under contract with the City, installed a plastic water main under the alleyway behind the building. During the installation process, B & Sons caused the steel gas line and the old, abandoned steel water main to come into virtual contact with each other. Between 1990 and 1996, episodes of electrical arcing occurred between the two utility lines, causing the hole in the steel gas line and seepage of natural gas into the building.

The electrical arcing episodes occurred during “ground faults” that emanated from SCE’s electrical substation, located about a block away from the building. During a “ground fault,” electrical current is discharged into the surrounding soil. Electrical arcing occurs when two metal utility lines are in contact or near contact with each other.

B. B & Sons’ Bankruptcy and Subsequent Franchise Tax Board Suspension

Several years before the 1996 explosion, on March 28, 1991, B & Sons filed for chapter 11 bankruptcy. On March 1, 1993, the chapter 11 bankruptcy was converted into a chapter 7 bankruptcy. Effective May 2, 1994, B & Sons was suspended by the California Franchise Tax Board, and remained suspended at all times relevant to this appeal. On February 23, 1995, the trastee in bankruptcy filed a final report confirming that the estate had no substantial assets.

C. B & Sons’ Insurance Policies

B & Sons was insured under a $1 million primary general liability policy issued by National Union Fire Company (National Union) and a $5 million *1316 excess liability policy issued by First States Insurance Company (First States). The City was an additional insured on both policies, pursuant to its contract with B & Sons.

D. The Complaint and Cross-complaints

In early 1997, plaintiffs filed and served a complaint for personal injuries, naming B & Sons, the Gas Company, SCE, and the City as defendants. 2

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8 Cal. Rptr. 3d 627, 114 Cal. App. 4th 1308, 2004 Daily Journal DAR 631, 2004 Cal. Daily Op. Serv. 513, 2004 Cal. App. LEXIS 53, Counsel Stack Legal Research, https://law.counselstack.com/opinion/schwab-v-southern-california-gas-co-calctapp-2004.