C.J.L. Construction, Inc. v. Universal Plumbing

designed or manufactured by Louisville Ladder. The complaint alleged in a conclusory fashion that: all defendants were liable for negligence and breach of implied and express warranties; UP and CJL were liable under a premises liability theory; and UP was liable under a peculiar risk theory. In its answer to plaintiff’s complaint, CJL alleged its codefendants negligently caused or contributed to plaintiff’s injuries. Additionally, the seventh affirmative defense alleged: “That the injuries or damages, if any, sustained by plaintiff were proximately contributed to or caused by other defendants, whether served or not served, and/or by other persons or companies not parties to this action, and it is necessary that the proportionate degree of negligence or fault of each of said other persons or companies, whether made parties to this action or not, be determined and prorationed, and that any judgment that might be rendered against this answering defendant be reduced not only by that degree of contributory negligence and/or assumption of risk and/or product alteration found to exist as to plaintiff, but also as to the total of that degree of negligence and/or fault found to exist as to said other persons or companies.” On May 3, 1991, CJL filed a first amended cross-complaint against UP. The only cause of action pertinent to this appeal was entitled: “Fourth Cause of Action [f] For Witt v. Jackson Offset.” The first amended cross-complaint alleged UP, which was plaintiff’s employer, had negligently caused or contributed to plaintiff’s injuries. CJL sought indemnification and contribution. Specifically, paragraph 17 of the first amended cross-complaint states: “Cross-defendant Universal Plumbing was at all pertinent times doing business in the County of Los Angeles, State of California, and were [sic] the employers of [pjlaintiff . . . .” Paragraph 24 of the fourth cause of action alleged the nature of the actual controversy between CJL as cross-complainant and UP as cross-defendant and plaintiff’s employer, as follows: “There presently exists a controversy between Cross-complainant [] on one hand and Cross-defendants, and each of them, on the other hand, in that Cross-complainant [ ] contend[s] that, if Plaintiff was injured during the course and scope of his employment and is entitled to recover against Cross-complainant[ ], then said negligence of said employers, as aforesaid, acts as full or partial credit or offset inuring to the benefit of Cross-complainant against any possible judgment hereafter obtained against Cross-complainant[ ], by Plaintiff; whereas Cross-defendants dispute and deny the contentions of Cross-complainant[ ].” The prayer for relief in the first amended cross-complaint alleged that CJL was entitled to an offset in the amount of workers’ compensation benefits paid by the workers’ compensation insurer of UP, as plaintiff’s employer, to plaintiff.

III. Procedural History

On April 27, 1992, UP brought a motion for judgment on the pleadings as to plaintiff’s complaint. UP argued the complaint failed to allege: any

relationship between plaintiff and UP; any wrongdoing by UP; any connection between UP and the allegedly defective ladder; and any responsibility on the part of UP for the premises at which the accident occurred. On May 15, 1992, Superior Court Judge Coleman A. Swart granted UP’s motion for judgment on the pleadings as to plaintiff’s complaint with leave to amend. Plaintiff failed to amend his complaint within the time allowed. Therefore, on June 3,1992, Judge Swart entered a dismissal with prejudice of plaintiffs action as against UP.

On August 11, 1992, having secured a dismissal of plaintiff’s complaint, UP turned its attention to the first amended cross-complaint of CJL previously filed on May 3, 1991. On August 11, 1992, UP brought a motion for judgment on the pleadings as to CJL’s first amended cross-complaint. UP argued the amended cross-complaint was “derivative from [pjlaintiffs [cjomplaint” and was without merit in that the court “ha[d] already indicated, when it dismissed the underlying action, that [pjlaintiff could not and would not be able to state a claim against [UP].” UP reasoned that the amended cross-complaint was “dependent entirely upon the underlying action” and therefore CJL “cannot and will not be able to assert any viable claim against [UP].” In addition, UP sought an award of sanctions against CJL pursuant to Code of Civil Procedure section 128.5. CJL opposed the motion arguing it had stated a viable cause of action for an offset pursuant to Witt v. Jackson, supra, 57 Cal.2d at page 73. On September 8, 1992, Superior Court Judge Richard Montes granted the judgment on the pleadings motion brought by UP “for the reasons set forth in the moving papers.” Judge Montes imposed sanctions in the amount of $1,250 against CJL. The court’s written order filed September 16, 1992, states: “[CJL] continued to litigate and pursue its derivative and frivolous Cross-Complaint against [UP], knowing that this Court has already determined that Plaintiff’s action against [UP] lacked merit.” On September 16, 1992, Judge Montes signed the judgment.

A. Standard of review

The standard of review on appeal from the granting of a judgment on the pleadings is the same as that on appeal from the sustaining of a demurrer. (Gill v. Curtis Publishing Co. (1952) 38 Cal.2d 273 , 275 [ 239 P.2d 630 ]; Lumbermens Mut. Cas. Co. v. Vaughn (1988) 199 Cal.App.3d 171 , 178 [ 244 Cal.Rptr. 567 ].) The properly pleaded material allegations in the declaratory relief cause of action in the amended cross-complaint must be accepted as true. (Kimmel v. Goland (1990) 51 Cal.3d 202 , 205 [ 271 Cal.Rptr. 191 , 793

contended one of the city employees had been concurrently negligent. The Supreme Court adopted the rule “that the third party is entitled to have the judgment against [her or] him reduced by the amount of compensation paid to the injured employee if [she or] he can prove that the concurrent negligence of the employer contributed to the injuries suffered by the employee. [Citations.]” (Id. at p. 71.) Stated differently, the court held, “[Wjhether an action is brought by the employer or the employee, the third party tortfeasor should be able to invoke the concurrent negligence of the employer to defeat its right of reimbursement, since, in either event, the action is brought for the benefit of the employer to the extent that compensation benefits have been paid to the employee. [Citation.]” (Id. at p. 72.) The court reasoned the negligent employer (or its workers’ compensation insurer) should not profit from the employer’s wrongdoing and therefore would not be entitled to reimbursement out of the employee’s recovery. (Id. at pp. 72-73.) Further, the court held, “Since ... the injured employee may not be allowed double recovery, [her or] his damages must be reduced by the amount of [workers’] compensation . . . received.” (Id. at p. 73.)

The Witt rule, which was decided in the context of contributory negligence principles, was accommodated to a comparative negligence system in Associated Construction & Engineering Co. v. Workers’ Comp. Appeals Bd. (1978) 22 Cal.3d 829 , 840-847 [ 150 Cal.Rptr. 888 , 587 P.2d 684 ] The Supreme Court discussed the rationale of the Witt decision as follows: “The central animus of our decision in Witt was to obtain an equitable distribution of liability between the negligent employer and the third party tortfeasor. [Citations.] Under the rule of Witt, the negligent employer pays workers’ compensation benefits to the employee and is denied reimbursement; the third party obtains a reduction in [its] tort liability which corresponds to those benefits; and the employee’s net recovery remains unchanged. The effect of Witt is thus to allow the third party defendant to ‘shift part of the responsibility for the judgment rendered against it to the employer’s carrier.’ [Citation.] [¶] . . . [¶] Witt thus established the principle that, to the extent allowed by the employer’s statutory liability, the employer and third party should share liability as would ordinary concurrent tortfeasors. To the extent the reimbursement provisions of the Labor Code allowed an employer to avoid this duty of contribution, we reasoned, they allowed [it] to ‘profit from [its] own wrong.’ ” (Id. at pp. 841-842; cited with approval in DaFonte v. Up-Right, Inc. (1992) 2 Cal.4th 593 , 604, fn. 6 [ 7 Cal.Rptr.2d 238 , 828 P.2d 140 ].) The court modified the Witt doctrine to reflect comparative negligence principles and concluded as follows: “[A]n employer may be allowed credit or reimbursement under the Labor Code, based on an employee’s recovery from a third party, but only to the extent the employer’s liability in workers’ compensation exceeds its share of responsibility for the

employee’s full tort damages.” (Associated Construction & Engineering Co. v. Workers’ Comp. Appeals Bd., supra, 22 Cal.3d at p. 847, fn. omitted.)

In DaFonte v. Up-Right, Inc., supra, 2 Cal.4th at page 596, our Supreme Court held that Proposition 51 (as codified in Civil Code section 1431.2) eliminated a third party defendant’s joint and several liability to an injured employee for noneconomic damages attributable to the fault of the employer. Therefore, the third party defendant remains jointly and severally liable only for economic damages attributable to the employer’s fault which exceed the workers’ compensation benefits paid to the employee. In the present case, CJL has asserted its right to a Witt v. Jackson offset in its answer as an affirmative defense and as a separate cause of action for declaratory relief in the first amended cross-complaint.

We conclude UP, as the employer, may not be compelled to participate in plaintiff’s lawsuit as a cross-defendant based upon the facts alleged in the amended cross-complaint, as a matter of law. Our Supreme Court has never decided this issue directly. However, on two occasions the Supreme Court has described the third party’s right to a Witt v. Jackson offset as a defense. In Associated Construction & Engineering Co. v. Workers’ Comp. Appeals Bd., supra, 22 Cal.3d at page 842, the court described the application of comparative negligence principles to a Witt v. Jackson offset as follows: “When the issue of an employer’s concurrent negligence arises in a judicial forum, application of comparative negligence principles is relatively straightforward. The third party tortfeasor should be allowed to plead the employer’s negligence as a partial defense, in the manner of Witt. Once this issue is injected into the trial, the trier of fact should determine the employer’s degree of fault according to the principles of American Motorcycle. The court should then deduct the employer’s percentage share of the employee’s total recovery from the third party’s liability—up to the amount of the workers’ compensation benefits assessed against the employer. [Fn. omitted.] Correspondingly, the employer should be denied any claim for reimbursement—or any lien under section 3856, subdivision (b)—to the extent that his [or her] contribution would then fall short of his [or her] percentage share of responsibility for the employee’s total recovery.” (Italics added.) Additionally, in DaFonte v. Up-Right, Inc., supra, 2 Cal.4th at page 604, footnote 6, our Supreme Court held: “[E]ven when the employer does not intervene to recoup benefits, the third party may assert the employer’s negligence as a partial defense, ... It is therefore clear that whether the employer is present or absent, its fault is to be allocated as part of the total fault contributing to the employee’s injury.” (Italics added.) Our Supreme Court has never held that a third party may compel the participation of an employer in a declaratory relief cross-complaint brought by a third party

Cal.App.3d 1049 , 1053-1055 [ 179 Cal.Rptr. 855 ], There, the employer of an injured employee brought a petition for writ of mandate challenging the overruling of its demurrer to the cross-complaint of a third party defendant alleging the right to a Wilt offset. The employer “objected] to being brought into a suit between the employee and third party defendant” in that it had not sought reimbursement for workers’ compensation benefits paid or to be paid to the employee. (Id. at p. 1051.) The Court of Appeal stated: “The question raised in this proceeding is whether a third party defendant who seeks to reduce its obligation to the plaintiff may compel the employer’s participation as a cross-defendant in the lawsuit brought by the injured worker.” (Id. at p. 1053.) The court noted there were two possible procedural vehicles by which the right to a Witt reduction could be raised. The possible means of raising the issue were: “(1) the third party defendant raises as a defense that it is responsible only for the excess above compensation benefits paid by an allegedly negligent employer, or (2) the third party defendant cross-complains against the employer to require [it] to defend against the claim of negligence.” (Ibid.) The court concluded “that an employer who has provided workers’ compensation benefits may be brought into a third party tort action by cross-complaint in order to facilitate the third party defendant’s proof of the employer’s negligence where a finding of such negligence would lead to a reduction in plaintiff’s award by the amount of compensation benefits paid . . . .” (Id. at p. 1055.)

The issue raised in this case involves the use of the declaratory relief procedure to determine the amount of the Witt v. Jackson offset. Neither the City of Sacramento nor the Del Monte Corp. court considered the substantial decisional and statutory authority concerning unavailability of declaratory relief under certain circumstances. Code of Civil Procedure section 1060 provides parties with broad rights to secure a declaration of rights and obligations. In pertinent part, Code of Civil Procedure section 1060 provides: “Any person interested . . . who desires a declaration of his [or her] rights or duties with respect to another, . . . may, in cases of actual controversy relating to the legal rights and duties of the respective parties, . . . file a cross-complaint in a pending action in the superior, municipal'or justice court for a declaration of [her or] his rights and duties. ... He [or she] may ask for a declaration of rights or duties, either alone or with other relief; and the court may make a binding declaration of such rights or duties, . . .” However, Code of Civil Procedure section 1061 provides an exception to the broad language in Code of Civil Procedure section 1060 as follows, “The court may refuse to exercise the power granted by this chapter in any

case where its declaration or determination is not necessary or proper at the time under all the circumstances.” The California Supreme Court has held: “The discretion to be exercised pursuant to section 1061 is not unlimited. It is a legal or judicial discretion subject to appellate review, and declaratory relief must be granted when the facts justifying that course are sufficiently alleged. [Citation.] Refusal is limited to cases where a declaration of rights and obligations would be unnecessary or improper at the time under all the circumstances. The determination rests on the facts in each case.” (Kessloff v. Pearson (1951) 37 Cal.2d 609 , 613 [ 233 P.2d 899 ].)

Appellate courts have identified various situations where trial judges have not abused their discretion in determining that declaratory relief is unavailable as a remedy for a litigant. For example, declaratory relief may be an improper remedy where evidence in the trial of the main action would be substantially the same as that presented in connection with a cross-complaint. (International Assn, of Fire Fighters v. City of Palo Alto (1963) 60 Cal.2d 295 , 301-302 [ 32 Cal.Rptr. 842 , 384 P.2d 170 ]; Weissman v. Lakewood Water & Power Co. (1959) 173 Cal.App.2d 652 , 656 [ 343 P.2d 776 ].) On appeal, courts have held that if a plaintiff or cross-complainant has other means of seeking a determination of their rights, then a trial judge may sustain a general demurrer to a declaratory relief claim. In California Ins. Guarantee Assn. v. Superior Court (1991) 231 Cal.App.3d 1617 , 1624 [ 238 Cal.Rptr. 346 ], our colleagues in Division Three of this appellate district held, “ ‘The availability of another form of relief that is adequate will usually justify refusal to grant declaratory relief.’ ” For example, when a cause of action has accrued, the California Supreme Court has held: “When, as here, the cause of action has already accrued and the only question for determination is the ultimate liability of one party on account of consequential relief to which another is shown to be entitled, it has been held that the nature of the action is not a cause for declaratory relief but is defined by the subject matter of the accrued cause of action. [Citations.]” {Standard Brands of California v. Bryce (1934) 1 Cal.2d 718 , 721 [ 37 P.2d 446 ] [declaratory relief could properly be refused when all of the issues related to damage to real property caused by an excavation]; accord, Brownfield v. Daniel Freeman Marina Hospital (1989) 208 Cal.App.3d 405 , 414 [ 256 Cal.Rptr. 240 ] [rape victim denied information may not sue for declaratory relief because she can pursue damage claim]; Baldwin v. Marina City Properties, Inc. (1978) 79 Cal.App.3d 393 , 407-408 [ 145 Cal.Rptr. 406 ] [because the plaintiff had an accrued cause of action for impairment of collateral and there was no on-going relationship between the parties, demurrers to declaratory relief cause of action properly sustained]; General of America Ins. Co. v. Lilly (1968) 258 Cal.App.2d 465 , 470-472 [ 65 Cal.Rptr. 750 ] [separate declaratory relief action improper when it sought to adjudicate issues already

existing in a personal injury action arising out of an automobile accident].) Further, when a matter can be raised as an affirmative defense, courts have held that a trial judge may prevent the filing of a declaratory relief action by the defendant. (Allstate Ins. Co. v. Fisher (1973) 31 Cal.App.3d 391 , 393-396 [ 107 Cal.Rptr. 251 ] [when issues of “permissive use and agency” were denied in an answer to a personal injury complaint, it was inappropriate in separate declaratory relief action to litigate those questions]; Pacific Electric Ry. Co. v. Dewey (1949) 95 Cal.App.2d 69 , 71-72 [ 212 P.2d 255 ] [when the validity of a release was raised in a personal injury action, it would have been an abuse of discretion to permit the filing of a separate declaratory relief action]; Sunset Scavenger Corp. v. Oddou (1936) 11 Cal.App.2d 92 , 96-98 [ 53 P.2d 188 ] [since the validity of a release could be alleged as an affirmative defense in a negligence action, trial court would have erred had it attempted to resolve that issue in a separate declaratory relief action]; Welfare Investment Co. v. Stowell (1933) 132 Cal.App. 275 , 276-278 [ 22 P.2d 529 ] [trial judge “properly” struck cross-complaint when all of the issues raised by that pleading were likewise alleged as affirmative defenses].)

We respectfully disagree with the conclusions set forth in City of Sacramento and Del Monte Corp. and the dicta in other Court of Appeal decisions insofar as they support the conclusion that in this case CJL could utilize the first amended cross-complaint to litigate the amount of the Witt v. Jackson offset. To begin with, at the time the first amended cross-complaint was filed, neither UP nor its compensation carrier had filed a complaint in intervention in an effort to assert their lien rights. No facts were alleged in the first amended cross-complaint which indicated any effort would be made to file a complaint in intervention. Further, all of the third party defendants, including CJL, could pursuant to DaFonte v. Up-Right, Inc., supra, 2 Cal.4th at page 604, footnote 6, and Associated Construction & Engineering Co. v. Workers’ Comp. Appeals Bd., supra, 22 Cal.3d at page 842, raise the issue by way of an affirmative defense as CJL has in its answer. As noted previously, when an issue can be raised by means of an affirmative defense, a trial judge may therefore dismiss a declaratory relief claim raising the same questions in the cross-complaint. (Welfare Investment Co. v. Stowell, supra, 132 Cal.App. at pp. 276-278.) Also, the purposes of the Workers’ Compensation Law would be contravened by permitting a third party to require the employer to undergo the expense of undertaking participation in a civil suit without its consent. As noted previously, a purpose of the law under these circumstances is to “ ‘insulate the employer from tort liability for . . . employees’ injuries.’ ” (Privette v. Superior Court, supra, 5 Cal.4th at p. 697.) Given the purposes of the workers’ compensation law, when combined with the fact that declaratory relief by means of a cross-complaint may be

V. Disposition

The judgment of dismissal is affirmed. The order granting Universal Plumbing’s motion for judgment on the pleadings is affirmed. The order imposing sanctions against CJ.L. Construction, Inc., is reversed. Each side is to bear its own costs on appeal.

Grignon, J., and Godoy Perez, J., concurred.