Raynolds v. Volkswagenwerk Aktiengeselschaft

Statement of the Case

In 1956 John Raynolds and Carl Voss were partners franchised to sell and service Volkswagen vehicles manufactured by defendant. On or about May 7, 1956, one Nicholas Bagileo, who was a passenger in a Volkswagen automobile which Raynolds and Voss had sold to Bagileo’s employer, was seriously injured when the automobile was struck in the rear by another automobile. Bagileo brought suit against Raynolds, Voss and defendant.^[2] During the course of the trial in the Bagileo action, Raynolds and Voss entéred into an agreement whereby, in consideration of the payment of $15,000, Bagileo covenanted not to levy execution against them in the event he obtained a judgment against them. This agreement also provided that Raynolds and Voss would remain in the trial of the case until its conclusion. Thereafter, in November 1961, the jury in the Bagileo case returned a verdict in favor of all defendants.

On October 31, 1963, Voss having died, Esther A. Voss, the executrix of his will, and Raynolds (hereinafter referred to as plaintiffs) filed this action seeking to recover the $15,000 paid to Bagileo plus $15,624.23 for attorneys’ fees, interest and other costs of the defense of the Bagileo action.^[3] On March 30, 1966, over two years from the time of the original filing of the complaint, plaintiffs obtained an order allowing service of process on defendant by personal delivery to the Secretary of State or to an assistant or deputy Secretary of State. Actual service of process was made either on March 31, 1966 or April 4, 1966.^[4] On June 22, 1966, defendant noticed a motion for dismissal of the complaint for failure to prosecute pursuant to the provisions of section 583. On the same date defendant filed a demurrer on the ground that the complaint did not state a cause of action against defendant. An order dismissing the

The Order of Dismissal

Plaintiffs contend that the trial court abused its discretion in dismissing the case for lack of prosecution pursuant to the provisions of section 583. We conclude that the order was proper.

It is established that under section 583 dismissal of an action is within the discretion of the trial court when, as in the instant case, more than two but less than five years have, elapsed between the time the complaint was filed and the time the plaintiff brought it to trial.^[5] The proper exercise of discretion under this section has quite recently been defined and delineated by the courts of this state. In Black Bros. Co. v. Superior Court, 265 Cal.App.2d 501 , 506-507, 510 [ 71 Cal.Rptr. 344 ] (hearing den.), the court analyzed the applicable. California cases and concluded that in the absence of a valid excuse, for the plaintiff’s failure to bring the action to trial, the trial court abused its discretion in denying the defendant’s motion to dismiss the action. In Market-Front Co. v. Superior Court, 271 Cal.App.2d 505 [ 76 Cal.Rptr. 526 ], the court, reiterating the rule of Black, states: “Even though a motion to dismiss for lack of prosecution is made within the discretionary (two to five years), period, it must be granted unless opposed by an adequate showing of diligence or excuse for delay. Absent such showing, counsel cannot remain idle and hope for a grant of leniency which is beyond the court’s power.” (P. 507; see also Breckenridge v. Mason, 256 Cal.App.2d 121 , 127 [ 64 Cal.Rptr. 201 ].)

Applying this rule to the present case we initially observe that because the action was not brought to trial by plaintiffs for over two years, the trial court was required to dismiss on motion of defendant in the absence of a showing of diligence or excuse. However, at the hearing on the motion before the trial court plaintiffs maintained that they were excused from the requirements of section 583 because defendant was “absent” during the two-year period in question.

Plaintiffs’ reliance on the exception to section 583 is misplaced. They concede that defendant was doing business in the state during the disputed time period and also admit that defendant Avas amenable to substituted service and accepted such service of process Avhen it was made on the Secretary of State. It is Avell established that if a foreign corporation is actually doing business in California it is amenable to service in California, and that such service is effected in the manner provided by sections 6500 to 6504 inclusive, of the Corporations Code (§ 411, subd. 2; H. Liebes & Co.v. Erica Shoes, Inc., 237 Cal.App.2d 25 , 27-28 [ 46 Cal.Rptr. 470 ] ; Harry Gill Co. v. Superior Court, 238 Cal.App.2d 666 , 667 [ 48 Cal.Rptr. 93 ]); and that such amenability to service is not dependent upon registration to do business pursuant to California law. (Loope v. Greyhound Lines Inc., 114 Cal.App.2d 611 , 614 [ 250 P.2d 651 ] ; Steiner v. 20th Century-Fox Film Corporation, 232 F.2d 190 , 198; Taylor v. Navigazione Libera Triestina, 95 F.2d 907 , 910; Kesler v. Schetky Equipment Corp., 200 F.Supp. 678 , 679.) No authority is cited or found Avh ich supports plaintiffs’ basic proposition that the failure of a corporation to obtain a certificate of qualification pursuant to

In the light of the foregoing, and upon analogy, we conclude with respect to the instant ease that if defendant was at all times amenable to service of process, as plaintiffs concede, it could not be absent from the state so as to bring into operation the exception to the rule of section 583. If plaintiffs could obtain service of process by service on the Secretary of State in 1966, they clearly could have done so before the expiration of the two-year period following the filing of the complaint. Plaintiffs have failed to show diligence or excuse. Accordingly, the trial court properly exercised its discretion in granting the motion to dismiss for failure to prosecute and that discretion will not be disturbed on appeal. (See Abner Corp., Inc. v. Lushing, 212 Cal.App.2d 597 , 605 [ 28 Cal.Rptr. 207 ].)

Plaintiffs argue that the “clean hands” doctrine should bar defendant from asking the court to dismiss the action, basing this argument on the fact that defendant did not qualify under Corporations Code section 6403 although conducting substantial business in the state. This section provides that a foreign corporation shall not transact intrastate busi

The Demurrer

Plaintiffs’ claim for damages as alleged in their amended complaint is essentially based on the theory that defendant should indemnify plaintiffs for the $15,000 paid to Bagileo and for approximately the same amount in attorney’s fees and other costs of the defense of the Bagileo action. The demurrer to this complaint, which was sustained without leave to amend, was based on the ground that it did not state a cause of actidn.

Plaintiffs contend that a cause of action is stated because a retailer has a right of indemnity from a manufacturer in an action by a third party against the retailer, based on an alleged defect in the manufactured article, when the retailer, following a refusal of the manufacturer to defend the action, defends and settles the ease even though the charge of the alleged defect is subsequently proved to be groundless.^[8] In their opening brief and in their argument below plaintiffs’ claim, is largely based on the. claim of indemnity. In their closing brief plaintiffs suggest that there is a great distinction between the duty to defend and the duty to indemnify and urge that the breach of the duty to defend is itself a basis of recovery irrespective of the judgment which is eventually rendered. The thrust of this argument appears to be that defense costs should be paid by the manufacturer because the latter is in a superior economic position. It appears to us that this point is raised for the first time in the reply brief and therefore need not be considered by us in the absence of a good reason for the failure to raise it before. (See Travelers Indem. Co. v. Colonial Ins. Co., 242 Cal.App.2d 227 , 242-243 [ 51 Cal.Rptr. 724 ].) However, we shall consider the point on the basis that it may be argued that this point was implicit in the argument made by plaintiffs in their opening brief in view of the discussion therein of the rule announced in Safeway

The rule espoused by Safeway and Pacific Tel. & Tel. is to the effect that “when there is a refusal of the indemnitor to defend actions against the indemnitee by third parties, the indemnitee may take charge of the defense of such actions itself and make settlements of them in good faith.” (Safeway Stores, Inc. v. Massachusetts Bonding & Ins. Co., supra, 202 Cal.App.2d 99 , 117 [ 20 Cal.Rptr. 820 ] ; see Civ. Code, § 2778, subd. 4.) These cases, however, involved express agreements to indemnify in situations where the indemnitees had settled in good faith. In the instant ease plaintiffs concede that there was no express indemnity agreement between the parties. The other ease relied upon by plaintiffs, and cited for the first time in their closing brief, is Gray v. Zurich Insurance Co., 65 Cal.2d 263 [ 54 Cal.Rptr. 104 ], That case involved the interpretation of an insurance policy and holds that when an insurance company wrongfully refuses to defend when it is obligated to do so under the policy, the refusal to defend is a basis for recovery whether or not a judgment is rendered against the insured. (Pp. 278-280.)

Of course we recognize that implied indemnity founded either on contractual or equitable considerations is a well-established principle of California law. (Cahill Bros., Inc. v. Clementina Co., 208 Cal.App.2d 367 , 376 [ 25 Cal.Rptr. 301 ] and cases there analyzed; Aerojet General Corp. v. D. Zelinsky & Sons, 249 Cal.App.2d 604 , 607 [ 57 Cal.Rptr. 701 ] ; San Francisco Examiner Division v. Sweat, 248 Cal.App.2d 493 , 497 [ 56 Cal.Rptr. 711 ] ; see Molinari, Tort Indemnity in California, 8 Santa Clara Law, 159, 160.) However, it is equally clear that the right of implied indemnification exists only in cases “where each of two persons is made responsible by law to an injured party . . . .” (Cahill Bros., Inc. v. Clementina Co., supra, 208 Cal.App.2d 367 , 376 [ 25 Cal.Rptr. 301 ].) Here neither party was made responsible by law to the injured individual. To the contrary, it is conceded that the Bagileo judgment was in favor of all parties to the instant action.^[9]