Shane v. Superior Court

160 Cal. App. 3d 1237, 207 Cal. Rptr. 210, 1984 Cal. App. LEXIS 2629
CourtCalifornia Court of Appeal
DecidedOctober 19, 1984
DocketB004504
StatusPublished
Cited by17 cases

This text of 160 Cal. App. 3d 1237 (Shane v. Superior Court) 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
Shane v. Superior Court, 160 Cal. App. 3d 1237, 207 Cal. Rptr. 210, 1984 Cal. App. LEXIS 2629 (Cal. Ct. App. 1984).

Opinion

Opinion

JOHNSON, J.

Code of Civil Procedure section 877.6 1 provides a procedure whereby a party to an action in which it is alleged that two or more parties are joint tortfeasors may obtain a summary determination of the good faith vel non of a settlement by one or more such alleged tortfeasors, The question dispositive of the instant proceeding is whether in making such a determination the court may issue a declaration that its determination bars a claim asserted in another independent action which is not before the court for adjudication. We hold such an order exceeds the court’s jurisdiction and authority, as conferred by section 877.6 and otherwise. In so deciding, we *1240 address and seek to elucidate existing procedural confusion regarding the proper method for effectuating the statute’s mandate that a determination of a good faith settlement “bars” certain claims for indemnity and contribution against the settling tortfeasor.

I. Facts and Proceedings Below

Petitioner David Shane (Shane) is a party to two complicated civil actions pending in different branches of the Los Angeles County Superior Court. The first action, filed December 30, 1982, and entitled Paul V. Spencer et al. v. Kenneth Kaplan et al., is pending in the court’s central district and will be referred to herein as “the Los Angeles action.” The second case, filed August 11, 1983, and entitled Lillian Barrett v. David L. Shane et al., is proceeding in the superior court’s northwest district (the Van Nuys action). Real party in interest Kenneth Kaplan (Kaplan) is a defendant in the Los Angeles action, in which he has asserted a cross-complaint against Shane and others for various relief including indemnity. In the Van Nuys action Shane is the primary defendant and has asserted against Kaplan and another a cross-complaint which Kaplan claims seeks equitable indemnity from him but which Shane characterizes as being for damages for intentional or negligent misrepresentation by Kaplan. As disclosed by the pleadings before us, the genesis and substance of these actions is as follows.

In 1981 Shane was attorney for Lillian Barrett (Barrett) and also was trustee of a trust he had created to hold and manage the proceeds of a multimillion-dollar land sale Barrett had recently made (the Trust). Barrett was the sole beneficiary of the Trust. Kaplan and one Larry Harvey (Harvey) owned the stock of Louisiana Fried Chicken, Inc., a closed corporation engaged in the fast food business (the corporation). Shane’s son and a partner arranged to buy the corporation’s stock. The terms of sale included two $250,000 promissory notes, payable to Kaplan and Harvey respectively. Each note was secured by a $250,000 letter of credit issued by the Trust’s depository bank and secured by Trust funds. The letters of credit were subject to demand upon default on the notes.

Shane was instrumental in arranging and structuring the transaction. In the course thereof, Kaplan and Harvey allegedly made fraudulent representations to Shane and the buyers concerning the corporation’s financial condition. Less than a year after the stock purchase closed in 1982, the corporation went into bankruptcy and the buyers ceased paying on the notes. Kaplan gave notice of intention to draw upon the letters of credit. In response the buyers, together with Shane in his capacity as trustee of the Trust, commenced the Los Angeles action against Kaplan and Harvey, seeking to rescind the stock sale and the letters of credit on grounds of inten *1241 tional or negligent misrepresentation and to enjoin payment of Trust funds under the letters of credit. As an alternative to rescission the complaint sought damages suffered by the buyers and the Trust by reason of the alleged misrepresentations; in addition, “consequential damages” were prayed for to accompany the rescission.

The Los Angeles action was filed at the very end of 1982. Before the hearing on the request for preliminary injunction—which was unsuccessful except to provide 15 days to cure the arrears on the notes—Barrett discharged Shane as her attorney and trustee. Barrett and her Trust then paid the arrears on the notes and made further payments thereon, through the first half of 1983. On August 11, 1983, she commenced the Van Nuys action, against Shane and his law partners. The complaint in that action, which consists of 78 pages and 193 paragraphs, charges Shane and his partners with a variety of derelictions, including breaches of attorneys’ and trustee’s duties in connection with the corporate transaction and other alleged transactions involving Trust assets.

On August 29, 1983, Barrett and her new trustee entered into a written “Settlement Agreement” with Kaplan (the settlement). Barrett and her Trust agreed to pay Kaplan $75,000, which was less than the amount still owing on his note, and to dismiss the Los Angeles action against him (as well as a cross-complaint against him in a pending federal court action involving the corporation). For his part Kaplan released Barrett and the Trust from any further claim under the letters of credit.

Thereafter Kaplan filed a cross-complaint in the Los Angeles action against Shane and the corporation’s buyers. Among other things this cross-complaint sought to have Shane indemnify Kaplan for his settlement and defense of the Los Angeles action. Shane and his law firm also filed a cross-complaint, in the Van Nuys action, asserting distinct causes of action against Kaplan and Barrett’s accountant. Insofar as directed against Kaplan the cross-complaint alleged Kaplan had misrepresented to Shane and his firm certain aspects of the corporation’s financial condition (essentially the same misrepresentations as alleged in the Los Angeles action) and that in reliance thereon Shane and his firm had counseled Barrett to involve her assets in the purchase and operation of the corporation. The cross-complaint sought to recover from Kaplan, as damages suffered on account of these intentional or negligent misrepresentations, Shane’s and his firm’s legal fees and costs incurred in defending the Van Nuys action, as well as any sums therein awarded to Barrett. Punitive damages also were prayed.

In January 1984, Kaplan filed in the Los Angeles action a “Notice of Motion and Motion for Order Determining Good Faith Settlement.” The *1242 moving papers included a copy of the settlement and copies of the complaint and cross-complaint in the Van Nuys action, of which the court was requested to take judicial notice. The notice of motion sought “an order pursuant to California Code of Civil Procedure § 877.6 determining the fact that the settlement . . . was made in good faith and, therefore, acts as a conclusive bar to certain actions for indemnification or contribution, including but not limited to all claims made by cross-defendant David L. Shane in his cross-complaint in [the Van Nuys action] . . . .” (Italics added.) The moving papers were served upon the parties to the Los Angeles action, including Shane, as well as his attorneys of record in the Van Nuys action.

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Cite This Page — Counsel Stack

Bluebook (online)
160 Cal. App. 3d 1237, 207 Cal. Rptr. 210, 1984 Cal. App. LEXIS 2629, Counsel Stack Legal Research, https://law.counselstack.com/opinion/shane-v-superior-court-calctapp-1984.