Weekly Law Resume - April 19, 2013: It’s All In the Complaint: Triggering Equitable Indemnity Rights Against Public Entities

by Low, Ball & Lynch
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Centex Homes, et al. v. The Superior Court of San Diego County
Court of Appeal, Fourth District (March 25, 2013)

Government Code section 901 provides that a cause of action for equitable indemnity or partial equitable indemnity accrues on the date “a defendant is served with the complaint giving rise to the defendant’s claim for equitable indemnity or partial indemnity against the public entity.” This case addresses whether a complaint must contain the claim that a defendant seeks equitable indemnity from a public entity in order to trigger § 901.

On April 20, 2009, the Element Owners Association (the “Association”) filed a complaint against Centrex alleging building code violations related to the construction of a condominium complex. The Association’s complaint did not include any violations related to the building’s plumbing or sewer systems. Two years later, on April 1, 2011, the Association sent Centrex a “Notice of Commencement of Legal Proceedings” pursuant to Civil Code § 910. In the notice and accompanying “Preliminary Statement of Claim,” filed simultaneously with the notice, the Association identified plumbing and sewer systems allegations including “cast iron waste piping is defective and has leaked.” Centrex’s own investigation in February 2012 revealed crystallization resulting from hydrochloric gasses emitting from the City’s sewer system. In March, 2012, Centrex presented the City of San Diego (the “City”) with a claim pursuant to § 900, et. seq. stating that the April, 2011 Notice of Commencement of Legal Proceedings and the Preliminary Statement of Claims represented the first time the Association alleged any plumbing and sewer system defects. The City denied Centrex’s claim on the grounds that it was not presented within “6 (six) months after the event or occurrence as required by law.”

In August, 2012, Centrex filed a motion for relief from the Government Code claims requirements and leave to file a cross-complaint against the City. Centrex argued that its cause of action for equitable indemnity against the City did not accrue until Centrex was served “with the complaint giving rise to the defendant’s claim,” which it argued was the date of the Notice of Commencement of Legal Proceedings on April 1, 2011. Centrex maintained that the notice is essentially the same as a complaint. Further, Centrex maintained that the one-year claim period, and not the six-month period in Government Code § 911.2 applied to this case. Thus, Centrex argued that its March 2012 claim to the City was within one year and therefore timely. In its opposition, the City conceded that the one-year presentation of claim period under § 911.2 applied; however, it argued that Centrex’s equitable indemnity rights accrued under § 901 at the time the Association filed its original complaint in April, 2009. In reply, Centrex noted that the April, 2009 complaint did not contain any allegations relating to plumbing or cast iron waste pipes to give rise to an equitable indemnity claim against the City. The trial court strictly construed § 901 and held that § 901 accrued when the Association filed its original complaint in April, 2009. In October, 2012, the Association filed a second amended complaint including statutory building standard violations related to plumbing and sewer issues. Centrex filed a writ of mandate requesting the Appellate Court vacate the trial court’s order.

The Appellate Court rejected the City’s argument that regardless of the complaint’s content, the filing of the Association’s initial complaint triggers the accrual of equitable indemnity causes of action under § 901. In coming to its conclusion, the Appellate Court agreed with prior courts in State v. Superior Court (1983) 143 Cal.App.3d 754 (Shortstop) and Greyhound Lines, Inc. v. County of Santa Clara (1986) 187 Cal.App.3d 480, that the plain language of § 901 provides that a cause of action for equitable indemnity against a public entity accrues “upon the service of the complaint that contains the cause of action for which indemnity is sought.” In this case, the April, 2009 complaint did not contain any allegations that could be construed as violations of building standards related to cast iron waste lines, which were the claims Centrex sought equitable indemnity from the City. The Appellate Court noted that the City’s contention that an original complaint always gives rise to equitable indemnity claims, regardless of the complaint’s contents, would result in absurd outcomes. As an example, a defendant brought into a case more than a year after the filing of the original complaint would lose its right to file a cross-complaint against a public entity before the defendant was ever aware of the litigation. Further, the Court found that the City misapplied the Greyhound decision, which rejected a “late-discovery exception” to § 901, and that the legislative history quoted by the City did not seem to support its position that the original complaint triggers the accrual of a defendants equitable indemnity claims under §901. Accordingly, the Appellate Court held that the April, 2009 complaint did not give rise to the equitable indemnity claim against the City.

In remanding the case, the Appellate Court held that Centrex was mistaken that a Notice of Commencement of Legal Proceedings acted essentially as a complaint for § 901 purposes. The Court clarified that equitable indemnity rights under § 901 do not accrue until the “service of the complaint giving rise to the defendant’s claim for equitable indemnity.” Therefore, the Association’s second amended complaint, which included plumbing and sewer systems allegations, filed in October, 2012 triggered the accrual of Centrex’s equitable indemnity claims. On remand, the trial court was instructed to allow Centrex to file a cross-complaint against the City for equitable indemnity.

COMMENT

This decision provides defendants with some clarity and certainty that their equitable indemnity rights against public entities do not automatically accrue upon the initial filing of a plaintiff’s complaint. However, given the often vague and ambiguous pleading found in complaints, defendants should not hesitate to bring a claim under Government Code § 911.2 if the complaint in any way implicates the possibility of cross-complaining against a public entity on equitable indemnity grounds. For public entities, when confronted with cross-complaints for equitable indemnity that seem clearly outside of the six-month or one-year presentation of claim periods, further attention should be given to when the complaint that actually gave rise to the equitable indemnity cause of action was served, before rejecting the claim.

For a copy of the complete decision see:

http://www.courts.ca.gov/opinions/documents/D062995.PDF

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