Chang v. County of Los Angeles , 204 Cal. Rptr. 3d 293 ( 2016 )


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  • Filed 7/1/16
    CERTIFIED FOR PUBLICATION
    IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
    SECOND APPELLATE DISTRICT
    DIVISION FIVE
    DAVID CHANG et al.,                              B261194
    Plaintiffs and Respondents,              (Los Angeles County
    Super. Ct. No. BC479858)
    v.
    COUNTY OF LOS ANGELES,
    Defendant and Appellant.
    APPEAL from a judgment of the Superior Court of Los Angeles County, Kevin
    Clement Brazile, Judge. Reversed.
    Hurrell Cantrall, Thomas C. Hurrell, Melinda Cantrall, for Defendant and
    Appellant.
    Green & Shinee, Elizabeth J. Gibbons, Amanda J. Waters, for Plaintiffs and
    Respondents.
    _______________________
    A public entity employer provided a defense for three employees under a
    reservation of rights, then refused to pay the resulting judgment for battery and civil
    rights violations on the ground that the employees acted with actual malice. The
    employees sought indemnification from their employer under Government Code section
    825.1 The trial court granted summary judgment in favor of the employees. On appeal,
    the public entity contends that because the defense was conducted under a reservation of
    rights, the employees had to satisfy the requirements of section 825.2 for indemnification.
    We hold that section 825.2 applies when a public entity employer provides a defense
    under a reservation of rights that includes reservation of the right not to indemnify for
    acts committed with actual fraud, corruption or actual malice. An employer’s reservation
    of the right to indemnity from the employee for acts committed with actual fraud,
    corruption or actual malice is necessarily a reservation of the right not to indemnify the
    employee for such acts. We reverse the judgment with directions.
    FACTS AND PROCEDURAL BACKGROUND
    On November 5, 2007, Los Angeles County Sheriff’s Deputies David Chang,
    Anthony Pimentel, and Kris Cordova assaulted inmate Alejandro Franco, including using
    pepper spray on his anus and genital area. Franco brought an action against the deputies
    for battery and civil rights violations under 42 U.S.C. § 1983. (Franco v. Gennaco, et al.,
    (C.D. Cal. Aug. 11, 2015, No. LA CV 09-00893-VBF-FFMx) (Franco).)
    The deputies signed agreements with the County of Los Angeles setting forth the
    terms and conditions under which the County would defend them. The first paragraph of
    each agreement listed circumstances under which the County might withdraw from
    defending a deputy, including if the County determined he did not act within the scope of
    his employment under section 995.2, subdivision (a)(1), or he acted or failed to act
    1   All further statutory references are to the Government Code, unless otherwise
    stated.
    2
    because of actual fraud, corruption, or actual malice under section 995.2, subdivision
    (a)(2).
    The second paragraph stated circumstances under which the County might not
    indemnify the deputy: “In defending you, the County reserves its right not to pay any
    judgment, compromise or settlement on your behalf until it is established that the injury
    arose out of an act or omission occurring within the scope of your employment as an
    employee or officer of the County. The County also will not pay any party of a claim or
    judgment that is for punitive or exemplary damages. (Section 825(a).)”
    The third paragraph stated circumstances under which the County might seek
    indemnification from the deputy: “If the County pays any claim or judgment, or any
    portion thereof, for an injury arising out of your act or omissions, the County may
    recover the amount of such payment from you unless you establish that the act or
    omission upon which the claim or judgment is based occurred within the scope of your
    employment as an employee or official of the County, and the County fails to establish
    that you acted or failed to act because of actual fraud, corruption or actual malice, or that
    you willfully failed or refused to reasonably cooperate in good faith in the defense
    conducted by the public entity. (Section 825.6.)”
    The agreement ended with a recitation in capital letters, “I request and agree that
    the County may provide for my defense in the subject action, subject to the reservations
    set forth above. I agree to cooperate fully with the attorneys the County provides to me,
    and keep them advised at all times of my mailing address and telephone number.”
    On September 9, 2010, following a jury trial, the jury found the deputies violated
    Franco’s federal civil rights, causing injury or harm to him. The jury also found each of
    the deputies acted with malice, oppression or reckless disregard in violating Franco’s
    civil rights. In addition, the jury found each of the deputies committed battery on Franco
    while acting within the course and scope of their employment with the Los Angeles
    County Sheriff’s Department, causing Franco injury or harm. Each of the deputies acted
    with malice, oppression, or fraud in committing battery on Franco.
    3
    Against each deputy, the jury awarded compensatory damages of $85,000 and
    punitive damages of $50,000. The total compensatory damage award was $255,000.
    Judgment was entered on September 28, 2010, against the deputies and in favor of
    Franco. The deputies were jointly and severally liable for an award of costs of $6,754.80
    and attorney fees of $189,331.67. The total judgment, excluding punitive damages, was
    $451,086.47. The judgment has not been paid.
    The deputies’ request for indemnification from the Los Angeles County Board of
    Supervisors was denied. The deputies filed a claim for damages with the County on July
    11, 2011. On February 28, 2012, the deputies filed a complaint against several
    defendants, including the County, the Board of Supervisors, and the Los Angeles County
    Office of the County Counsel, seeking to compel payment of the Franco judgment. On
    June 17, 2013, the deputies filed the operative third amended complaint for
    indemnification of the compensatory damages award. The complaint alleged Franco was
    the “real party in interest” to whom the damages were owed. The deputies were seeking
    indemnification for these damages. The cause of action for indemnification was based on
    sections 814 and 825. The deputies alleged they were entitled to indemnification for all
    economic, non-punitive damages awarded in Franco as a matter of law.
    On August 14, 2014, the county defendants filed a motion for summary judgment,
    or in the alternative, summary adjudication, on grounds including that: 1) the deputies’
    claim for indemnification was barred under section 825, subdivision (b), because the jury
    found the deputies acted with malice; 2) the deputies were not entitled to attorney fees
    under section 800; and 3) the Board of Supervisors and the County Counsel were immune
    as a matter of law. The deputies opposed the motion.
    The deputies filed a motion for summary judgment, or in the alternative, summary
    adjudication, on August 15, 2014. The deputies argued the County must indemnify them,
    because: 1) the County was liable for their conduct in the course and scope of their
    employment under section 815.2; 2) the County provided a defense under section 825,
    subdivision (a), and as a result, the County required to pay the judgment based on acts
    arising out of the course and scope of their employment; and 3) the County reserved the
    4
    right not to pay the judgment only if the acts were not in the course and scope of
    employment. The County opposed the motion.
    A hearing was held on the motions. At the time of the hearing, Franco had
    attached the deputies’ bank accounts and was seeking to execute on the judgment in the
    underlying action. On December 18, 2014, the trial court granted the deputies’ motion
    for summary adjudication on the issue of indemnification based on finding the County
    was required to indemnify the deputies, excluding punitive damages, pursuant to section
    825, subdivision (a), and the reservation of rights. The trial court denied the county
    defendants’ motion for summary adjudication of the indemnification claim, finding it was
    not barred by application of section 825.2, subdivision (b), but granted summary
    adjudication on the issues of attorney fees and immunity of the Board of Supervisors and
    the County Counsel. The trial court entered judgment in favor of the deputies based on
    the court’s rulings on the summary adjudication motion, ordering that the deputies
    recover indemnification from the County of $451,086.47. The County filed a timely
    notice of appeal.
    DISCUSSION
    Standard of Review and Principles of Statutory Interpretation
    We review the trial court’s rulings on summary judgment motions de novo.
    (MacIsaac v. Waste Management Collection & Recycling, Inc. (2005) 
    134 Cal. App. 4th 1076
    , 1081-1082 (MacIsaac).) “On appeal from the granting of a motion for summary
    judgment, we examine the record de novo, liberally construing the evidence in support of
    the party opposing summary judgment and resolving doubts concerning the evidence in
    favor of that party.” (Miller v. Department of Corrections (2005) 
    36 Cal. 4th 446
    , 460.)
    We also review questions of statutory interpretation de novo. 
    (MacIsaac, supra
    ,
    134 Cal.App.4th at pp. 1081-1082.) “We begin with the fundamental rule that our
    primary task is to determine the lawmakers’ intent.” (Delaney v. Superior Court (1990)
    5
    
    50 Cal. 3d 785
    , 798.) To determine legislative intent, “we first look to the plain meaning
    of the statutory language, then to its legislative history and finally to the reasonableness
    of a proposed construction.” (Riverview Fire Protection Dist. v. Workers’ Comp.
    Appeals Bd. (1994) 
    23 Cal. App. 4th 1120
    , 1126.)
    The words of the statute are the first step in the interpretive process. (Mt. Hawley
    Ins. Co. v. Lopez (2013) 
    215 Cal. App. 4th 1385
    , 1397.) “We give the words of the statute
    ‘a plain and commonsense meaning’ unless the statute specifically defines the words to
    give them a special meaning. [Citations.] If the statutory language is clear and
    unambiguous, our task is at an end, for there is no need for judicial construction.
    [Citations.] In such a case, there is nothing for the court to interpret or construe.
    [Citation.]” 
    (MacIsaac, supra
    , 134 Cal.App.4th at p. 1083.)
    We do not interpret the words of the statute in isolation. 
    (MacIsaac, supra
    , 134
    Cal.App.4th at p. 1083.) “Rather, we construe the words of the statute in context,
    keeping in mind the statutory purpose. [Citation.] We will not follow the plain meaning
    of the statute ‘when to do so would “frustrate[ ] the manifest purposes of the legislation
    as a whole or [lead] to absurd results.”‘ [Citations.] Instead, we will ‘“interpret
    legislation reasonably and . . . attempt to give effect to the apparent purpose of the
    statute.”‘ [Citation.]” (Ibid.)
    “When the plain meaning of the statute’s text does not resolve the interpretive
    question, we must proceed to the second step of the inquiry. [Citations.] In this second
    step, ‘the courts may turn to rules or maxims of construction “which serve as aids in the
    sense that they express familiar insights about conventional language usage.”‘ [Citation.]
    We may also look to a number of extrinsic aids, including the statute’s legislative history,
    to assist us in our interpretation. [Citations.]” 
    (MacIsaac, supra
    , 134 Cal.App.4th at
    pp.1083-1084, fn. omitted.)
    “If ambiguity remains after resort to secondary rules of construction and to the
    statute’s legislative history, then we must cautiously take the third and final step in the
    interpretive process. [Citation.] In this phase of the process, we apply ‘reason,
    practicality, and common sense to the language at hand.’ [Citation.] Where an
    6
    uncertainty exists, we must consider the consequences that will flow from a particular
    interpretation. [Citation.]” 
    (MacIsaac, supra
    , 134 Cal.App.4th at p. 1084.)
    Indemnification
    The deputies contend they are entitled to indemnification from the County under
    section 825. The County asserts section 825.2 applies in this case, because the defense
    was provided under a reservation of rights. We conclude that section 825.2 applies when
    a public entity employer provides a defense under a reservation of rights that includes a
    reservation of the right not to pay a judgment based on actual fraud, corruption or actual
    malice.
    “In 1963, the Tort Claims Act was enacted in order to provide a comprehensive
    codification of the law of governmental liability and immunity in California. (Los
    Angeles Police Protective League v. City of Los Angeles (1994) 
    27 Cal. App. 4th 168
    ,
    174.) As part of its overall statutory scheme, the Tort Claims Act provides that in the
    usual civil case brought against a public employee, a public entity is required to defend
    the action against its employee [(§ 995 et seq.)] and to pay any claim or judgment against
    the employee in favor of the third party plaintiff (§ 825 et seq.). A principal purpose of
    the indemnification statutes is to assure ‘the zealous execution of official duties by public
    employees.’ (Johnson v. State of California (1968) 
    69 Cal. 2d 782
    , 792.)” (Farmers Ins.
    Group v. County of Santa Clara (1995) 
    11 Cal. 4th 992
    , 1001, fn. omitted.)
    A public entity’s duty to defend an employee is contained in sections 995 through
    996.6. Upon an employee’s request, with certain exceptions as provided in sections
    995.2 and 995.4, “a public entity shall provide for the defense of any civil action or
    proceeding brought against him, in his official or individual capacity or both, on account
    of an act or omission in the scope of his employment as an employee of the public
    entity.” (§ 995) A public entity may refuse to provide for an employee’s defense if the
    public entity determines: 1) the act or omission was not within the employee’s scope of
    employment; 2) the employee acted or failed to act because of actual fraud, corruption, or
    7
    actual malice; or 3) the defense would create a specific conflict of interest between the
    public entity and employee, as defined by the statute. (§ 995.2, subd. (a).)
    A public entity’s duty to indemnify an employee is contained in sections 825
    through 825.6. Under section 825, subdivision (a), if an employee makes a timely
    request in writing that a public entity provide a defense in a civil action for an injury
    arising out of an act or omission occurring within the scope of his or her employment,
    and the public entity conducts the defense with the employee’s reasonable good-faith
    cooperation, “the public entity shall pay any judgment based thereon or any compromise
    or settlement of the claim or action to which the public entity has agreed.” 2 If the public
    entity conducted the defense pursuant to an agreement reserving the right not to pay the
    judgment until it is established that the injury occurred from an act or omission within the
    scope of employment, then the public entity is required to pay the judgment only if it is
    established that the injury occurred from an act or omission within the scope of
    2 Section 825, subdivision (a), provides: “Except as otherwise provided in this
    section, if an employee or former employee of a public entity requests the public entity to
    defend him or her against any claim or action against him or her for an injury arising out
    of an act or omission occurring within the scope of his or her employment as an
    employee of the public entity and the request is made in writing not less than 10 days
    before the day of trial, and the employee or former employee reasonably cooperates in
    good faith in the defense of the claim or action, the public entity shall pay any judgment
    based thereon or any compromise or settlement of the claim or action to which the public
    entity has agreed. [¶] If the public entity conducts the defense of an employee or former
    employee against any claim or action with his or her reasonable good-faith cooperation,
    the public entity shall pay any judgment based thereon or any compromise or settlement
    of the claim or action to which the public entity has agreed. However, where the public
    entity conducted the defense pursuant to an agreement with the employee or former
    employee reserving the rights of the public entity not to pay the judgment, compromise,
    or settlement until it is established that the injury arose out of an act or omission
    occurring within the scope of his or her employment as an employee of the public entity,
    the public entity is required to pay the judgment, compromise, or settlement only if it is
    established that the injury arose out of an act or omission occurring in the scope of his or
    her employment as an employee of the public entity. [¶] Nothing in this section
    authorizes a public entity to pay that part of a claim or judgment that is for punitive or
    exemplary damages.”
    8
    employment. (§ 825, subd. (a).) The public entity is not authorized under this section to
    pay punitive or exemplary damages. (§ 825, subd. (a).)
    It is clear that under the provisions of section 825 alone, the County would be
    required to pay the non-punitive damages awarded against the deputies. The County
    conducted the defense. It reserved the right not to pay the judgment until it was
    established that the acts occurred within the scope of employment, but the jury found the
    acts causing Franco’s injuries occurred within the scope of the deputies’ employment.
    The County contends, however, that section 825.2 applies when an employee
    seeks indemnification and the public entity conducted the employee’s defense under a
    reservation of rights. Section 825.2, subdivision (a), states that, except as provided in
    subdivision (b), if an employee pays a judgment, or any portion of a judgment, that the
    public entity is required to pay under section 825, he is entitled to recover the amount of
    the payment from the public entity. Section 825.2, subdivision (b), provides: “If the
    public entity did not conduct his defense against the action or claim, or if the public entity
    conducted such defense pursuant to an agreement with him reserving the rights of the
    public entity against him, an employee or former employee of a public entity may recover
    from the public entity under subdivision (a) only if he establishes that the act or omission
    upon which the claim or judgment is based occurred within the scope of his employment
    as an employee of the public entity and the public entity fails to establish that he acted or
    failed to act because of actual fraud, corruption or actual malice or that he willfully failed
    or refused to conduct the defense of the claim or action in good faith or to reasonably
    cooperate in good faith in the defense conducted by the public entity.”
    Although section 825.2 states that it applies when an employee pays a judgment
    and seeks to recover those payments, the terms “pays” and “recover” have been
    interpreted broadly and do not require literal payment. (Rivas v. City of Kerman (1992)
    
    10 Cal. App. 4th 1110
    , 1120.) Section 825.2 has been interpreted to apply when a
    judgment is entered against the employee. (Ibid.) “A literal interpretation of section
    825.2, subdivision (a) would also lead to great injustice for potentially innocent
    employees, denied a defense by their public entity employer, who nonetheless become
    9
    liable for a judgment arising out of the course and scope of their employment with the
    public entity. Such employees would be required to pay the judgment, in many cases
    bankrupting themselves, before triggering any duty on the part of the public entity
    employer to reimburse them for their losses. To the extent the judgment exceeds the
    employee’s assets, the injured plaintiff would also be irreparably injured as he or she
    would have no ability to collect on the judgment for any amount in excess of the
    employee’s ability to pay.” (Id. at pp. 1120-1121.)
    In cases where the public entity has defended an action under a reservation of
    rights, it would lead to an absurd result to require literal payment before applying section
    825.2. If literal payment were required to satisfy section 825.2, then the right to
    indemnification when a defense has been conducted under a reservation of rights would
    depend on the speed and success of a third party’s enforcement procedures. In this case,
    for example, the deputies would have the right to indemnification under section 825 as
    long as no payment has been made, but as soon as Franco attached their bank accounts
    and obtained a payment on the judgment, the deputies would have been required satisfy
    the provisions of section 825.2 to receive indemnification. This would lead to injustice.
    The terms “pays” and “recover” must be interpreted broadly to include situations where a
    judgment is entered against an employee in order to harmonize the provisions of sections
    825 and 825.2.
    Section 825.2, subdivision (b), applies when a public entity conducts a defense
    pursuant to an agreement “reserving the rights of the public entity against him,” but it is
    not clear from the statute which rights the public entity must reserve to trigger the
    protections of section 825.2. A literal interpretation of section 825.2 would allow the
    public entity to reserve any right and invoke the protections of section 825.2. Under this
    interpretation, the rights reserved in the agreement could have no connection to the rights
    enforced in section 825.2, which would not effect the purpose of the statutory scheme.
    The agreement referred to in section 825.2 could be the same as the agreement referred to
    in section 825 reserving the right not to pay any judgment until it is established that the
    injury occurred from an act or omission within the scope of employment. Although this
    10
    interpretation would harmonize the statutory provisions, it would not provide any notice
    that the public entity would have the right not to pay a judgment arising from an act or
    omission within the scope of employment because of actual malice, corruption or actual
    fraud. The most sensible interpretation is that the agreement must reserve the right not to
    pay a judgment arising from an act or omission within the scope of employment because
    of actual malice, corruption or actual fraud in order for the public entity to rely on the
    protection of that right under section 825.2.
    Our interpretation is supported by the legislative history. The California Law
    Revision Commission issued several recommendations in 1963 which formed the basis of
    the Tort Claims Act, including the following: “11. Whenever a public entity is held
    liable for acts of an employee committed with actual fraud, corruption or actual malice,
    the public entity should have the right to indemnity from the employee. This right to
    indemnity, however, should not exist in any case where the public entity has undertaken
    the defense of the employee, unless the public entity has reserved a right of indemnity by
    agreement with the employee. In conducting an employee’s defense, the entity’s interest
    might be adverse to the interest of the employee. For example, if both the employee and
    the entity were joined as defendants, the public entity’s interest might be best served by
    showing malice on the part of the employee; for if the employee acted with malice the
    public entity could recover indemnity from the employee for any amounts the entity was
    required to pay. Hence, the undertaking of an employee’s defense should constitute a
    waiver of the public entity’s right to indemnity unless, by agreement between the entity
    and the employee, the public entity’s right of indemnity is reserved.” (Recommendation
    Relating to Sovereign Immunity, Tort Liability of Public Entities and Public Employees
    (Jan. 1963) 1 Cal. Law Revision Com. Rep. (1963) p. 819.)
    We hold that when a public entity defends an employee under a reservation of
    rights which includes reserving the right of indemnity for acts or omissions because of
    actual malice, corruption or actual fraud, then the requirements of section 825.2 must be
    satisfied to be entitled to indemnification.
    11
    The agreement reserving the public entity’s rights in this case included a
    reservation of the right to indemnity from the deputies for acts or omissions taken
    because of actual malice, corruption or actual fraud, as authorized under section 825.6.3
    By necessary implication, the County reserved the right not to indemnify the deputies for
    acts within the course and scope of their employment that were taken with actual malice.
    Having reserved that right, the County could invoke section 825.2. The County showed
    the jury found the deputies acted with actual malice, or at the very least, a triable issue of
    fact existed as to whether the deputies acted with malice. Therefore, the deputies’ motion
    for summary adjudication of the issue of indemnification should have been denied.
    3 Section 825.6 provides, “(a)(1) Except as provided in subdivision (b), if a public
    entity pays any claim or judgment, or any portion thereof, either against itself or against
    an employee or former employee of the public entity, for an injury arising out of an act or
    omission of the employee or former employee of the public entity, the public entity may
    recover from the employee or former employee the amount of that payment if he or she
    acted or failed to act because of actual fraud, corruption, or actual malice, or willfully
    failed or refused to conduct the defense of the claim or action in good faith. Except as
    provided in paragraph (2) or (3), a public entity may not recover any payments made
    upon a judgment or claim against an employee or former employee if the public entity
    conducted his or her defense against the action or claim. [¶] (2) If a public entity pays
    any claim or judgment, or any portion thereof, against an employee or former employee
    of the public entity for an injury arising out of his or her act or omission, and if the public
    entity conducted his or her defense against the claim or action pursuant to an agreement
    with him or her reserving the rights of the public entity against him or her, the public
    entity may recover the amount of the payment from him or her unless he or she
    establishes that the act or omission upon which the claim or judgment is based occurred
    within the scope of his or her employment as an employee of the public entity and the
    public entity fails to establish that he or she acted or failed to act because of actual fraud,
    corruption, or actual malice or that he or she willfully failed or refused to reasonably
    cooperate in good faith in the defense conducted by the public entity. [¶] (3) If a public
    entity pays any claim or judgment, or any portion thereof, against an employee or former
    employee of the public entity for an injury arising out of his or her act or omission, and if
    the public entity conducted the defense against the claim or action in the absence of an
    agreement with him or her reserving the rights of the public entity against him or her, the
    public entity may recover the amount of that payment from him or her if he or she
    willfully failed or refused to reasonably cooperate in good faith in the defense conducted
    by the public entity.”
    12
    The judgment in favor of the deputies and the portion of the order granting the
    deputies’ motion for summary adjudication of the indemnification claim are reversed.
    The portion of the order denying the county defendants’ motion for summary
    adjudication based on the application of section 825.2 must also be reversed. The matter
    is remanded for further proceedings consistent with this opinion.
    DISPOSITION
    The judgment and the portion of the order granting summary adjudication in favor
    of David Chang, Anthony Pimentel, and Kris Cordova are reversed. The portion of the
    order denying the County’s motion for summary adjudication of the indemnification
    claim is also reversed. The trial court is directed to enter a new and different order
    denying the motion for summary adjudication brought by Chang, Pimentel, and Cordova,
    and to conduct further proceedings on the County’s motion for summary adjudication in
    accordance with this opinion. The County is awarded its costs on appeal.
    KRIEGLER, J.
    We concur:
    TURNER, P.J.
    BAKER, J.
    13
    

Document Info

Docket Number: B261194

Citation Numbers: 1 Cal. App. 5th 25, 204 Cal. Rptr. 3d 293, 2016 Cal. App. LEXIS 539

Judges: Kriegler, Turner, Baker

Filed Date: 6/1/2016

Precedential Status: Precedential

Modified Date: 11/3/2024