Filed 2/23/16 A-American Storage Management v. Tony & Sons Construction CA5

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for 

publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication 

or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FIFTH APPELLATE DISTRICT

A-AMERICAN STORAGE MANAGEMENT 

CO., INC.,

Plaintiff and Respondent,

v.

TONY & SONS CONSTRUCTION et al.,

Defendants and Appellants.

CMSS I, L.P.,

Cross-complainant and Appellant;

v.

CASTLEPOINT NATIONAL INSURANCE 

COMPANY,

Intervener and Respondent.

F068379

(Super. Ct. No. 09CECG02451)

OPINION

APPEAL from a judgment of the Superior Court of Fresno County. M. Bruce 

Smith, Judge.

Kerley Schaffer and J. Edward Kerley for Defendants and Appellants.

No appearance for Plaintiff and Respondent.

Wood, Smith, Henning & Berman, Patrick S. Schoenburg and Nicholas M. Gedo 

for Cross-complainant and Appellant.

Nielsen, Haley & Abbott, James C. Nielsen and Mary N. Abbott for Intervener 

and Respondent.

-ooOoo-
2.

Sometime after CMSS I, L.P. (CMSS) used the services of subcontractor Tony & 

Sons Construction, Inc. (Tony & Sons) in the construction of self-storage units on real 

property located on Marks Avenue in Fresno (the property), CMSS sold the property to 

A-American Storage Management Co., Inc. (A-American). Following the sale, it was 

discovered that the self-storage units had leaky roofs and other defects, allegedly causing 

A-American substantial damages. For recourse, A-American initiated two tracks of 

litigation, one in arbitration and one in the trial court. Since A-American had an 

arbitration agreement with CMSS, it served a demand on CMSS that it arbitrate 

A-American’s claims against it for breach of contract, breach of warranty and other 

causes of action. At the same time, A-American filed a complaint in the trial court 

against Tony & Sons and others, but the complaint did not name CMSS as a defendant. 

A few months later, the parties in the trial court action stipulated to arbitrate their dispute 

and requested a stay of the action, which the trial court ordered.

Despite the court-ordered stay and without leave of the court, nonparty CMSS 

interjected itself into the trial court action by filing a cross-complaint, alleging causes of 

action for equitable indemnity and express indemnity against Tony & Sons. Tony & 

Sons’ attorney sent a letter objecting to the cross-complaint because CMSS was not a 

party to the action and because the action had been stayed. Nevertheless, and purely as a 

precaution, Tony & Sons filed an answer. Sometime later, however, Tony & Sons’ 

attorney substituted out of the case, leaving the corporate entity without an attorney 

through which to appear or act in the matter. As a result, the trial court eventually struck 

Tony & Sons’ answer and entered its default.

Meanwhile, in the arbitration proceedings, the arbitrator found in favor of 

A-American and against CMSS in the amount of approximately $1.3 million for breach 

of contractual warranty. The arbitrator did not find any liability on the part of Tony & 

Sons to A-American. CMSS swiftly returned to the trial court and requested the entry of 

a default judgment on its cross-complaint against Tony & Sons in the amount of 
3.

$1.3 million—the amount awarded against CMSS in the arbitration. At about the same 

time, Tony & Sons’ insurance carrier, CastlePoint National Insurance Company 

(CastlePoint), after having delayed in providing a defense because of an alleged lack of 

adequate information, filed a motion to intervene in the action for the purpose of raising 

defenses to CMSS’s cross-complaint against its insured, Tony & Sons. Both CMSS and 

Tony & Sons opposed intervention, arguing among other things, that CastlePoint had lost 

its right to intervene by failing to defend Tony & Sons earlier. The trial court granted 

CastlePoint’s motion to intervene.

CastlePoint then moved to strike the cross-complaint or, alternatively, for 

judgment on the pleadings. The motion to strike was made on the ground that the crosscomplaint was not filed in conformity with law because it was filed by a nonparty and 

without leave of the court. After taking the matter under submission, the trial court 

struck the cross-complaint on its own motion because the pleading was filed in violation 

of the stay order. The trial court also noted that CMSS was not a party to the action and 

“[n]either leave to intervene nor leave to file the cross-complaint was sought.” CMSS 

appeals and Tony & Sons cross-appeals. Both appellants challenge the order striking the 

cross-complaint, along with the intervention order that purportedly led to that result, 

contending that several factors militated against the relief granted by the trial court. On 

balance, after carefully considering the unusual facts and circumstances below, we are 

unable to conclude that the trial court abused its discretion. In the final analysis, CMSS 

filed an improper pleading that was subject to a motion to strike, whether on the court’s 

own motion or otherwise, because it was “not drawn or filed in conformity with the laws 

of this state ... or an order of the court.” (Code Civ. Proc., § 436, subd. (b).)1 

Accordingly, the order striking the cross-complaint is affirmed.

 

1 Unless otherwise indicated, all further statutory references are to the Code of Civil 

Procedure.
4.

FACTS AND PROCEDURAL HISTORY

On September 18, 2007, CMSS and A-American entered into a written purchase 

agreement whereby CMSS agreed to sell, and A-American agreed to purchase, the 

property, including multiple self-storage units constructed on the property, for a total 

purchase price of $5.2 million (the purchase agreement). Another entity, CMSS 

Management, Inc. (CMSS Management), was referred to in the purchase agreement as 

the general partner of CMSS. The purchase agreement contained an arbitration provision 

requiring all disputes between the parties to be decided by neutral binding arbitration. 

Paragraph 25 of the purchase agreement required CMSS to “assign” to A-American “all 

warranties” and “all ... rights” it had against “the contractors, subcontractors, suppliers 

and materialmen involved in the construction or operation of the Property.” Paragraph 28 

of the purchase agreement provided that CMSS, as the seller, represented and warranted 

to A-American, as the buyer, that to the best of CMSS’s knowledge, there were “no 

material defects presently existing in the roof systems, plumbing or electrical systems, 

mechanical systems or basic structural components or any other portion of the Property,” 

and that the property was “free of any material problems, including, but not limited to ... 

drainage problems ....” (Italics added.)

Sometime after taking possession of the property, A-American allegedly 

discovered a number of material defects, including leaks in the roof, lack of adequate 

pitch on the roof, improper installation of roof panels, and roofing materials not “drip 

formed,” all of which allegedly resulted in property damage due to water intrusion, mold 

contamination and loss of use of the property. As described more fully below, 

A-American sought recourse under two litigation tracks—one in arbitration and one in 

the trial court, each involving substantially the same allegations but naming different 

defendants.

In July 2009, A-American served on CMSS and CMSS Management a written 

demand for arbitration. The demand, although not a court-filed pleading, included causes 
5.

of action against CMSS and CMSS Management for breach of contract, rescission, 

breach of express warranty, breach of implied warranty, negligence, intentional 

misrepresentation and negligent misrepresentation. A copy of the purchase agreement 

was attached to the demand for arbitration.

In July 2009, A-American also filed a complaint in the trial court naming as 

defendants Tony & Sons, Tony Jose Lopez (Lopez), an individual, and Terrance John 

Cox (Cox), an individual. The complaint’s background factual allegations relating to the 

alleged material defects and the resulting damage to the property were the same as was 

stated in the demand for arbitration. Although CMSS’s role as seller of the property was 

mentioned in the complaint, CMSS was not named as a defendant therein, presumably 

because of its agreement to arbitrate. The complaint alleged that the purchase agreement 

between CMSS and A-American contained a provision that CMSS “assigned to 

[A-American] all warranties and all SELLERS’ rights against the contractors, 

subcontractors, suppliers and materialmen involved in the construction or operation of the 

Property, including Defendants TONY & SONS and LOPEZ.” A copy of the purchase 

agreement was attached to the complaint. The complaint included allegations that Tony 

& Sons and Lopez performed construction of certain improvements (i.e., self-storage 

units) on the real property. By inference from the allegations, Lopez was apparently the 

principal operator or owner of Tony & Sons; and Cox, by similar inference, was 

apparently the principal operator or owner of CMSS. Additionally, the complaint alleged 

in conclusory terms that Cox was the alter ego of CMSS. The complaint set forth causes 

of action for breach of contract, rescission, breach of express warranty, breach of implied 

warranty, negligence, intentional misrepresentation, negligent misrepresentation and alter 

ego.

On November 20, 2009, after the trial court received a stipulation of the parties to 

arbitrate the dispute set forth in the above complaint and a request to stay the action, the 

trial court issued its order that the action was “stayed, as to all parties and all causes of 
6.

action, pending completion of the agreed-upon alternative dispute resolution procedure 

and issuance of the arbitrator’s binding decision ....”

On June 4, 2010, CMSS interjected itself into the trial court action by filing a 

pleading that purported to be a cross-complaint against Tony & Sons. The crosscomplaint was filed notwithstanding the stay order and despite the fact that CMSS was 

not a party to the trial court action. CMSS’s cross-complaint alleged that Tony & Sons’ 

negligence as a subcontractor in the construction of improvements on the property made 

Tony & Sons primarily responsible for the property damages suffered by A-American. 

The causes of action set forth in the cross-complaint included equitable indemnity and 

express indemnity.

On June 11, 2010, Robert Cervantes, who was then the attorney for Tony & Sons, 

sent a letter to CMSS’s attorney, Steven McQuillan, objecting to the fact that CMSS had 

served both a cross-complaint and a request for production of documents on Tony & 

Sons. Cervantes objected that “neither document seems to be appropriate” because 

(1) “the proceedings in the Superior Court are stayed” by court order and (2) CMSS “is 

not a party to this action” and, thus, had no standing to cross-complain against Tony & 

Sons. Cervantes asked that McQuillan “voluntarily strike the cross-complaint.” In 

addition, Cervantes further objected to the discovery request on the ground that CMSS 

and Tony & Sons were both going to be parties in the arbitration with A-American and 

discovery in the arbitration would commence when the arbitrator was appointed. On 

June 16, 2010, McQuillan responded that he believed the cross-complaint was proper 

because “CMSS ... is the proper party and [Cox] should never have personally been 

named” in the complaint. Also, McQuillan indicated that it seemed best to file the crosscomplaint in the trial court because it was unclear the extent to which Tony & Sons was 

going to participate in the arbitration.

On July 8, 2010, Tony & Sons filed an answer to the cross-complaint. Cervantes 

wrote to McQuillan and explained that the answer was being filed as a cautionary 
7.

pleading only, “pending resolution of the CMSS issue.” Cervantes also made it clear that 

his client, Tony & Sons, had only agreed to arbitrate the dispute with A-American and 

Cox, not the claims that CMSS may have against Tony & Sons.

On September 30, 2010, Tony & Sons’ attorney (Cervantes) substituted out of the 

case, leaving the corporation without any legal representation or ability to appear in 

court. On April 13, 2011, in connection with a continued discovery motion filed by 

CMSS, the trial court struck Tony & Sons’ answer to the cross-complaint and entered 

default.

Meanwhile, in the arbitration proceedings, the arbitrator heard evidence on the 

submitted claims on May 23, 24, 25, and 26, 2011. On February 29, 2012, after taking 

the matter under submission, the arbitrator issued an award of approximately $1.3 million 

in favor of A-American against CMSS. The liability was based on the cause of action for 

breach of express warranty. The arbitrator found that CMSS, via Cox, had knowledge of 

the roof defects at the time of the sale. With respect to Tony & Sons, the arbitrator noted 

that although Tony & Sons had stipulated to arbitration, it did not appear at the hearing. 

Nevertheless, the arbitrator stated that no default would be entered in the arbitration 

proceedings because all claims in arbitration must be established. The arbitrator found 

that Tony & Sons was a subcontractor on the project and had no privity of contract with 

A-American, a subsequent purchaser of the property. Therefore, it appeared to the 

arbitrator that Tony & Sons did not owe a duty of care to A-American, and the arbitrator 

could not think of any theory under which Tony & Sons would owe such a duty. 

Accordingly, and inasmuch as the arbitrator was “unaware of any cross-action” by CMSS 

against Tony & Sons, the arbitrator dismissed Tony & Sons.

A-American filed a petition in the trial court to confirm the arbitration award. On 

July 3, 2012, the trial court confirmed the arbitration award and entered judgment in 

favor of A-American and against CMSS (and CMSS Management) in the sum of 
8.

approximately $1.3 million plus interest. Additionally, A-American’s case or complaint 

against Tony & Sons et al. was ordered dismissed.

On March 9, 2012, CMSS filed a statement of damages in the trial court in support 

of its cross-complaint against Tony & Sons, which statement was filed for the purpose of 

obtaining a default judgment against Tony & Sons. The statement of damages claimed as 

CMSS’s damages under the cross-complaint, the amount of damages awarded against 

CMSS in the arbitration, plus costs incurred in defending that matter, for a total damage 

claim against Tony & Sons in excess of $1.3 million.

On May 31, 2012, CMSS filed an application for a default judgment on its crosscomplaint against Tony & Sons, asking the trial court to enter a default judgment in the 

amount of $1,373,826.40 against Tony & Sons. On June 1, 2012, CastlePoint2 filed its 

motion to intervene in the trial court action. CastlePoint’s motion sought to file a 

complaint-in-intervention against CMSS as a means of asserting defenses to the crosscomplaint filed by CMSS against Tony & Sons. Both matters were heard on June 28, 

2012. The trial court denied without prejudice the request for default judgment because 

CMSS had failed to introduce sufficient evidence to establish a prima facie case. The 

motion to intervene was postponed to accommodate CMSS’s request to depose 

CastlePoint’s claim representative, Linda Reilly, and to allow the parties to file 

supplemental briefs.

In opposing the motion to intervene, CMSS argued that CastlePoint had lost the 

right to intervene in the action because it allegedly failed or refused to defend Tony & 

Sons. CMSS also argued the motion was untimely, due to CastlePoint’s alleged delay or 

lack of diligence. In early 2013, Tony & Sons and Lopez also filed papers opposing the 

motion. Tony & Sons and Lopez agreed with CMSS that CastlePoint had lost any right 

to intervene due to its failure to provide a defense at an earlier time. Moreover, according 

 

2 CastlePoint was formerly known as SUA Insurance Company.
9.

to Tony & Sons and Lopez, because CastlePoint had refused to provide a defense, Tony 

& Sons and Lopez had entered into a settlement arrangement with CMSS to protect 

themselves financially. Under that arrangement, Tony & Sons agreed it would not seek 

to set aside the default and would assign all of its rights against CastlePoint to CMSS. In 

exchange, CMSS agreed it would not execute on any judgment it obtained against Tony 

& Sons or Lopez. Tony & Sons and Lopez expressed their concern that if CastlePoint 

were permitted to intervene and succeeded in challenging the cross-complaint, the benefit 

of their advantageous settlement arrangement with CMSS would be lost. For similar 

reasons, they also argued that CastlePoint’s attorneys had a conflict of interest in regard 

to intervention, since CastlePoint’s interest was, at that time, in conflict with Tony & 

Sons’ and Lopez’s interests.

On January 31, 2013, after supplemental briefing, further discovery and further 

oral argument, the trial court took CastlePoint’s motion to intervene under submission. 

On March 18, 2013, the trial court granted the motion to intervene. The trial court’s 

ruling included a finding that “the supplemental papers filed by CastlePoint demonstrate 

that CastlePoint did not know of the cross-complaint against Tony Lopez and Tony & 

Sons ... until April of 2012” and, therefore, the motion was not untimely. Having been 

granted leave, CastlePoint proceeded to file its complaint-in-intervention. The 

complaint-in-intervention included the following allegation: “CastlePoint is the 

insurance carrier for [Tony & Sons] and has a direct interest in this matter that the Court 

has found justifies CastlePoint being granted leave to intervene. As intervene[e]r, 

CastlePoint may assert against CMSS any defenses that CastlePoint or [Tony & Sons] 

may have against CMSS and the Cross-Complaint.”

On April 5, 2013, CastlePoint filed its motion to strike the cross-complaint or, in 

the alternative, for judgment on the pleadings. As noted, the motion to strike challenged 

the cross-complaint because CMSS was not a party to the action and did not have leave 

of the court to intervene. The alternative relief seeking a judgment on the pleadings 
10.

argued that CMSS could not recover as a matter of law because (1) the pleadings showed 

that CMSS assigned all of its rights against Tony & Sons to A-American; (2) CMSS had 

no viable claim for equitable indemnity against Tony & Sons; and (3) there was no 

contract to support the claim of express indemnity.

On May 10, 2013, CMSS filed its opposition to CastlePoint’s motion to strike 

and/or for judgment on the pleadings. The opposition claimed that CMSS had standing 

to file the cross-complaint because CMSS should have been named as a party, and in any 

event, even if there was procedural error in filing the cross-complaint, CMSS argued it 

became moot when Tony & Sons filed an answer. CMSS then presented its further 

argument for why it believed the motion for judgment on the pleadings should likewise 

not be granted.

In addition to opposing CastlePoint’s motion, CMSS filed a renewed application 

for default judgment, which application was scheduled to be heard at the same hearing as 

CastlePoint’s motion to strike and/or for judgment on the pleadings. The combined 

hearings were held on June 20, 2013, and, following oral argument, both matters were 

taken under submission by the trial court.

On July 31, 2013, the trial court issued its written order. The order expressed the 

trial court’s ruling as follows: “Pursuant to ... § 436[, subdivision ](b), the Court strikes, 

sua sponte, the CMSS cross-complaint. Based thereon, the alternative motion for 

judgment on the pleadings is moot as is CMSS’[s] renewed application for default 

judgment.” After pointing out that a stay of the action had been imposed and that CMSS 

was not a party to the complaint, the trial court explained its ruling as follows: 

“Notwithstanding the stay, on June 4, 2010 CMSS [heretofore a stranger to the action] 

filed a cross-complaint against Tony & Sons .... Neither leave to intervene nor leave to 

file the cross-complaint was sought. [Tony & Sons] answered the cross-complaint 

despite the stay, there being no leave, as well as the fact it was a cross-complaint filed by 

a stranger to the litigation. [¶] Pursuant to ... section 436, courts are authorized to strike 
11.

a pleading at any time in their discretion. [Section] 436[, subdivision ](b) provides that a 

court may strike out all or any part of any pleading not drawn or filed in conformity with 

the laws of this state, a court rule, or an order of the court. The CMSS cross-complaint 

was not filed in conformity with the Civil Code of Procedure [sic] or the court’s 

November 20, 2009 order staying this action. Thus, the court strikes the CMSS crosscomplaint sua sponte, granting CMSS leave to file a petition seeking leave to intervene or 

they may elect to file a completely independent action. Consequently, the court finds the 

alternate motion for judgment on the pleadings and CMSS’[s] renewed application for 

default judgment to be moot.”3

CMSS’s notice of appeal followed. The notice of appeal stated that CMSS was 

appealing from the trial court’s order striking CMSS’s cross-complaint “and all 

underlying interlocutory orders.”4 Several days later, Tony & Friends filed a notice of 

cross-appeal. Our discussion below will begin with the appeal by CMSS. In a separate 

heading thereafter, we will discuss the cross-appeal by Tony & Friends.

DISCUSSION

I. Standard of Review

The trial court’s order is entitled to a presumption of correctness on appeal, and 

the appellant bears the burden of affirmatively demonstrating prejudicial error. (§ 475; 

Ferraro v. Camarlinghi (2008) 161 Cal.App.4th 509, 528; Denham v. Superior Court 

(1970) 2 Cal.3d 557, 566 (Denham); Yield Dynamics, Inc. v. TEA Systems Corp. (2007) 

154 Cal.App.4th 547, 556–557.) An order striking a pleading is reviewed under the 

 

3 The trial court’s explanation of its ruling was prefaced by the observation that “[c]learly, it 

is an understatement to say there have been a few irregularities [procedurally and otherwise] in 

this matter.”

4

In some instances, an order striking a complaint may be tantamount to a final judgment 

against the party (Adohr Milk Farms, Inc. v. Love (1967) 255 Cal.App.2d 366, 370) and, hence, it 

is appealable. In connection with such an appeal, an otherwise nonappealable, intermediate ruling 

affecting the merits thereof may likewise be reviewed. (§ 906; 9 Witkin, Cal. Procedure (5th ed. 

2008) Appeal, §§ 89–90, pp. 150–153.)
12.

abuse of discretion standard. (Pacific Gas & Electric Co. v. Superior Court (2006) 144 

Cal.App.4th 19, 23; Leader v. Health Industries of America, Inc. (2001) 89 Cal.App.4th 

603, 612.) An abuse of discretion occurs when the trial court’s ruling exceeded the 

bounds of reason, all the circumstances before it being considered. (Quiroz v. Seventh 

Ave. Center (2006) 140 Cal.App.4th 1256, 1282; Denham, supra, at p. 566.) We also 

recognize that the scope of discretion “‘always resides in the particular law being 

applied’” and, therefore, an “‘action that transgresses the confines of the applicable 

principles of law’” is outside the scope of discretion and “‘we call such action an abuse of 

discretion.’ [Citation.]” (Pacific Gas & Electric Co. v. Superior Court, supra, at p. 23.)

The trial court’s ruling will not be disturbed on appeal unless it is shown that the 

trial court clearly abused its discretion and that the abuse resulted in a miscarriage of 

justice. (Quiroz v. Seventh Ave. Center, supra, 140 Cal.App.4th at p. 1282; Denham, 

supra, 2 Cal.3d at p. 566.) “‘The burden is on the party complaining to establish an 

abuse of discretion, and unless a clear case of abuse is shown and unless there has been a 

miscarriage of justice a reviewing court will not substitute its opinion and thereby divest 

the trial court of its discretionary power.’ [Citations.]” (Denham, supra, at p. 566.)

In applying this standard of review, we also employ the equivalent of the 

substantial evidence test with respect to the trial court’s factual findings where there is 

conflicting substantial evidence and more than one possible inference may be drawn. (In 

re Executive Life Ins. Co. (1995) 32 Cal.App.4th 344, 358.) “[T]o the extent the trial 

court had to review the evidence to resolve disputed factual issues, and draw inferences 

from the presented facts, an appellate court will review such factual findings under a 

substantial evidence standard. Our power in this regard ‘begins and ends with the 

determination as to whether there is any substantial evidence, contradicted or 

uncontradicted, which will support the finding of fact. [Citations.] [¶] When two or 

more inferences can reasonably be deduced from the facts, a reviewing court is without 
13.

power to substitute its deductions for those of the trial court.’ [Citation.]” (Shapiro v. 

San Diego City Council (2002) 96 Cal.App.4th 904, 912.)

II. Proper Grounds Existed to Strike the Cross-Complaint

The trial court struck the cross-complaint pursuant to section 436. That section 

provides, in relevant part, as follows: “The court may, upon a motion made pursuant to 

Section 435, or at any time in its discretion, and upon terms it deems proper: [¶] ... [¶] 

(b) Strike out all or any part of any pleading not drawn or filed in conformity with the 

laws of this state, a court rule, or an order of the court.” (§ 436.) Subdivision (b) of 

section 436 is commonly invoked to challenge pleadings filed in violation of a deadline, 

court order, or requirement of prior leave of court. (Ferraro v. Camarlinghi, supra, 161 

Cal.App.4th at p. 528; Leader v. Health Industries of America, Inc., supra, 89 

Cal.App.4th at p. 613.) A trial court has discretion to strike a pleading filed in disregard 

of established procedural requirements or court orders, such as where an amendment is 

filed without obtaining leave to amend, or where the pleading is not in conformity with a 

prior ruling of the court. (Leader v. Health Industries of America, Inc., supra, at p. 613.) 

In the same vein, a pleading filed by a nonparty who has not first obtained leave to 

intervene in the action is subject to a motion to strike under section 436. (Milstein v. 

Turner (1951) 107 Cal.App.2d 184, 185; Estate of Walters (1949) 89 Cal.App.2d 797, 

798–800.) As the statutory wording makes clear, a trial court may strike the errant 

pleading on a motion made by a party or on its own motion. (§ 436 [the court may strike 

pleading “at any time in its discretion”]; Lodi v. Lodi (1985) 173 Cal.App.3d 628, 631 

[noncompliant complaint was “subject to the court’s own motion to strike under 

section 436, subdivision (b)”].)

Here, CMSS’s cross-complaint manifestly failed to comply with the established 

procedural laws of this state. Section 428.10 only permits a cross-complaint to be filed 

by “[a] party against whom a cause of action has been asserted in a complaint or crosscomplaint ....” Since CMSS was not named as a party to the complaint filed by 
14.

A-American and since no cause of action was asserted against CMSS therein, CMSS did 

not have any right or standing to file a cross-complaint in the court action. In its appeal, 

CMSS suggests there was some ambiguity in the allegations on the issue of whether 

CMSS was a defendant because Cox was sued in the complaint as the alter ego of CMSS 

and CMSS Management. That suggestion is unconvincing for two reasons. First, CMSS 

concedes in its opening brief that CMSS was not named as a party to the complaint. 

Second, A-American’s allegations were not unclear about who was being sued: Cox was 

being sued individually on the theory that, as alter ego of the entities, he was the actual 

responsible party under the complaint’s allegations. Moreover, under the totality of the 

circumstances, CMSS would have known that it was not being sued in the trial court 

action because A-American was pursuing its claims against CMSS separately in the 

arbitration. We conclude that the cross-complaint filed by CMSS in the trial court was 

filed in violation of section 428.10 and, accordingly, the cross-complaint was subject to a 

motion to strike under section 436, subdivision (b), on that ground.

Additionally, because CMSS was not a party to the trial court action, but was an 

outsider to same, CMSS would have had to seek and obtain leave to intervene pursuant to 

section 387 to file a pleading therein. It did not do so. Because it improperly interjected 

itself into the action without first obtaining leave to intervene, the cross-complaint filed 

by CMSS was subject to a motion to strike under section 436, subdivision (b), on this 

additional ground. (Milstein v. Turner, supra, 107 Cal.App.2d at p. 185; Estate of 

Walters, supra, 89 Cal.App.2d at pp. 798–800.)

Finally, as the trial court expressly found in striking the cross-complaint on its 

own motion, the cross-complaint (along with Tony & Sons’ answer thereto) was filed in 

violation of the trial court’s stay order. The stay order was broadly worded, stating that 

“the above-captioned action is stayed, as to all parties and all causes of action, pending 

completion of the agreed-upon alternative dispute resolution procedure and issuance of 

the arbitrator’s binding decision ....” We believe the stay order was broad enough to 
15.

encompass any and all proceedings in the court action that touched upon the matters sent 

by the court to arbitration (i.e., the entire civil action and all causes of action therein), 

including the filing of any cross-complaints that were integrally related to issues and 

claims in A-American’s complaint, which was the case here. Also, because of the 

necessary overlap of issues between the main complaint and cross-complaint, the stay 

would have been of no benefit to the parties if the filing and prosecution of CMSS’s 

cross-complaint could be treated as an exception to the stay. “The purpose of the 

statutory stay is to protect the jurisdiction of the arbitrator by preserving the status quo

until arbitration is resolved. [Citations.]” (Fed. Ins. Co. v. Superior Court (1998) 60 

Cal.App.4th 1370, 1374.) Furthermore, “[o]nce a court grants the petition to compel 

arbitration and stays the action at law, the action at law sits in the twilight zone of 

abatement with the trial court retaining merely vestigial jurisdiction over matters 

submitted to arbitration.” (Brock v. Kaiser Foundation Hospitals (1992) 10 Cal.App.4th 

1790, 1796.) In light of these principles, of which the trial court would have been well 

aware, we believe it is most reasonable to construe the scope of the trial court’s stay order 

as including the filing and prosecution of a potential cross-complaint such as the one filed 

by CMSS. Therefore, the filing of CMSS’s cross-complaint was not in conformity with 

the trial court’s standing order to stay the action pending arbitration.

On this issue of whether the filing of the cross-complaint violated the stay, CMSS 

seeks to take advantage of the fact that it was an outsider to the action by arguing that, 

since it was not a party and did not sign the stipulation to arbitrate, the order did not 

apply to it and, thus, it was free to file and pursue the cross-complaint. We disagree 

because, as noted above, the scope of the trial court’s order was broad enough to cover 

the cross-complaint.5 (See Marcus v. Superior Court (1977) 75 Cal.App.3d 204, 209 

 

5 Also, it is reasonable to assume that, through Cox, CMSS would have been fully aware of 

the trial court’s stay order.
16.

[§ 1281.4 vests the court “‘with authority to stay “the action or proceeding” as to all 

issues, as to all causes of action, and as to all parties, until arbitration is concluded’” 

whether or not the party seeking the stay was a party to arbitration agreement].) As 

correctly stated by CastlePoint, “CMSS’s odd argument that because it had improperly 

intruded into the action as a non-party it was free to disregard a standing court order 

plainly lacks merit.” We conclude that CMSS’s filing of its cross-complaint without 

seeking leave or obtaining relief from the stay order, violated the trial court’s stay order 

and provided an independent ground for striking the cross-complaint under section 436.

In conclusion, the cross-complaint was subject to being stricken by the trial court 

under section 436 for at least three reasons: (1) CMSS was not a party to the action and, 

thus, it did not have any right or standing to file a cross-complaint under section 428.10; 

(2) CMSS did not seek leave to intervene in the action; and (3) the cross-complaint was 

filed in violation of the order staying the action. Consequently, it appears from what has 

been considered so far that the trial court acted within the scope of its discretion under 

section 436 when it struck the defective cross-complaint in this case.6

III. Other Circumstances Did Not Show Abuse of Discretion

CMSS argues, in essence, that even if the cross-complaint was technically filed in 

violation of procedural or other requirements, the trial court nevertheless abused its 

discretion in striking the cross-complaint if that ruling is considered in light of other

factors involved in the case. We now consider these arguments.

A. Propriety of CastlePoint’s Intervention

CMSS contends that the trial court erred in striking the cross-complaint because 

CastlePoint should never have been allowed to intervene in the first place. The argument 

 

6 While CMSS attempts to isolate the violation of the stay order, we reject that attempt. 

Each of these three reasons supported the trial court’s decision to strike the cross-complaint. But 

even if one reason was hypothetically deficient, either of the other two would suffice. We affirm 

the trial court’s decision when it reaches the correct result, even if the reason given by the trial 

court may have been incorrect. (People v. Zapien (1993) 4 Cal.4th 929, 976.)
17.

seems to be that if CastlePoint had not been granted leave to intervene, the trial court 

would not have had an occasion to consider grounds for granting a motion to strike the 

cross-complaint.

Preliminarily, we observe two significant weaknesses in CMMS’s argument, both 

of which relate to the fact that the trial court struck the cross-complaint on grounds that 

were, to a significant extent, on the court’s own motion or sua sponte. First, the 

assumption that, apart from CastlePoint’s intervention, the trial court would never have 

stricken the cross-complaint is not necessarily accurate. The violation of the stay order 

and other procedural violations in filing the cross-complaint were flagrant defects that 

might very well have been spotted by the trial court in connection with other proceedings, 

such as CMSS’s renewed application for a default judgment. If that had occurred, the 

motion to strike could have been granted on the trial court’s own motion, regardless of 

whether CastlePoint had intervened. Thus, the fact that the trial court acted on grounds 

that were, at least in part, on its own motion substantially undermines CMSS’s claim that 

if the trial court had not allowed CastlePoint to intervene, the cross-complaint would not 

have been stricken. Second, because a trial court has discretion to strike an improperly 

filed pleading at any time on its own motion,7 we are not convinced that it is relevant 

how the pleading’s defects were first brought to the trial court’s attention. In fact, by 

analogy to another context in which trial courts have discretion to grant relief on their 

own motion—i.e., motions for reconsideration—we conclude it does not matter whether 

the information upon which the trial court struck the cross-complaint came to the trial 

court’s attention as a result of CastlePoint’s intervention (and subsequent motion to 

strike), or from the trial court’s own inquiry, or some other source. (See, e.g., In re 

 

7 We note the trial court’s discretion to strike an improper pleading is not only based on 

section 436, but also on a court’s inherent power to prevent a party from disregarding established 

procedural processes. (Loser v. E.R. Bacon Co. (1962) 201 Cal.App.2d 387, 390; accord, Leader 

v. Health Industries of America, Inc., supra, 89 Cal.App.4th at p. 613.)
18.

Marriage of Barthold (2008) 158 Cal.App.4th 1301, 1303–1304, 1308 [despite 

improperly filed motion under section 1008, a trial court may reconsider a prior order on 

its own motion; it was immaterial what may have triggered the trial court’s insight into 

the need to exercise its inherent power to correct an erroneous ruling on its own motion]; 

Le Francois v. Goel (2005) 35 Cal.4th 1094, 1108.)8

For the above reasons, CMSS’s attack on the intervention order as an indirect 

means of challenging the trial court’s order striking the cross-complaint falls short of the 

mark and is inadequate to demonstrate that an abuse of discretion occurred with respect 

to the order striking the cross-complaint. But, even assuming for the sake of argument 

that the sua sponte order striking the cross-complaint depended on the validity of 

CastlePoint’s intervention, CMSS has failed to demonstrate that reversible error occurred 

with respect to the intervention order, as we proceed to explain below.

In its order granting intervention, the trial court explained the ground for its 

decision as follows: “[I]f CMSS obtains [a] default judgment against Tony Lopez and his 

construction company, CMSS will be able to bring a direct action against Castle[P]oint. 

This exposure to such direct liability has been repeatedly held sufficient to create a basis 

for insurer intervention in a third party action against the insured. [Citation.]” This 

specific rationale expressed by the trial court in its order is well established as a proper 

basis for granting intervention. As summarized by the Court of Appeal in Western 

Heritage Ins. Co. v. Superior Court (2011) 199 Cal.App.4th 1196 at page 1205: “‘[A] 

judgment creditor who has prevailed in a lawsuit against an insured party may bring a 

direct action against the insurer subject to the terms and limitations of the policy. 

 

8 We would add that the equities do not favor CMSS on this particular issue. As discussed 

above, CMSS was itself a nonparty to the action but, unlike CastlePoint, it failed to obtain leave 

to intervene. It also did not seek relief from the stay order when it interposed its cross-complaint. 

So, here we have CMSS, a nonparty who intruded into the action by improperly filing a crosscomplaint without judicial permission to intervene, and by means of which gained an advantage it 

arguably never should have had (i.e., Tony & Sons’ default), now criticizing the intervention of 

CastlePoint who did obtain leave of the court. The scene may win points for irony, but not equity.
19.

[Citation.]’ [Citation.] [¶] This exposure to such direct liability has been repeatedly held 

sufficient to create a basis for insurer intervention in a third party action against the 

insured. ‘Intervention may ... be allowed in the insurance context, where third party 

claimants are involved, when the insurer is allowed to take over in litigation if its insured 

is not defending an action, to avoid harm to the insurer.’ [Citation.] [¶] Thus, for 

example, insurers have been permitted to intervene when the third party has obtained a 

default against the insured. [Citations.] Similarly, an insurer may intervene when its 

insured’s answer has been stricken because its corporate status has been suspended. 

[Citation.]” (Fns. omitted; accord, Reliance Ins. Co. v. Superior Court (2000) 84 

Cal.App.4th 383, 386–387.)9

In opposing intervention, CMSS argued to the trial court that CastlePoint had 

refused to defend its insured and, as a result of such refusal, CastlePoint had forfeited 

whatever right it otherwise may have had to intervene in the action. The same argument 

is now made in the present appeal. Of course, CMSS is correct in principle that an 

insurer’s right to intervene is “defeated ... by a refusal to defend.” (Western Heritage 

Ins. Co. v. Superior Court, supra, 199 Cal.App.4th at p. 1212.) As articulated in Gray v. 

Begley (2010) 182 Cal.App.4th 1509 at pages 1522–1523: “[I]f the insurer denies 

coverage and refuses to provide a defense, the insurer ‘does not have a direct interest in 

the litigation between the plaintiff and the insured to warrant intervention. The rationale 

behind this rule is that by its denial, the insurer has lost its right to control the litigation.’ 

[Citation.] When an insurer refuses to defend, it may be bound by a default judgment 

against its insured [citation], or a reasonable, noncollusive settlement reached by its 

insured with the claimant [citation].” (See Hinton v. Beck (2009) 176 Cal.App.4th 1378, 

 

9

In such circumstances, the elements for intervention under section 387, subdivision (a), 

have been found satisfied in particular cases. These elements are: (1) the intervener has a direct 

and immediate interest in the litigation; (2) the intervention will not enlarge the issues in the case, 

and (3) the reasons for intervention outweigh opposition by the existing parties. (Truck Ins. 

Exchange v. Superior Court (1997) 60 Cal.App.4th 342, 346.)
20.

1384 [“an insurer who denies coverage and refuses to defend its insured does not have a 

direct interest in the litigation between the plaintiff and the insured to warrant 

intervention”].)

In addressing this argument in its order, the trial court stated that “[w]hile not 

wholly unpersuasive, [CMSS’s] arguments in opposition are for the most part factual in 

nature and more appropriate for law and motion matters further down the road, rather 

than denial of a motion for leave to intervene.” Although the trial court’s comment about 

the matter being “not wholly unpersuasive” is somewhat unclear as to the court’s actual

level of consideration of that matter, it appears to imply at the very least that the trial 

court did not believe the evidence was such that it required a denial of the motion. Thus, 

CastlePoint was allowed to intervene, but a subsequent motion could be filed to address 

the issue further if CMSS so desired.10 In the end, the concerns expressed by the 

opposing parties were found by the trial court to be outweighed by CastlePoint’s 

substantial interest in intervening under the rationale of Western Heritage Ins. Co. v. 

Superior Court, supra, 199 Cal.App.4th at page 1205, particularly in light of the fact that 

a denial of intervention would likely “result in liability for Castle[P]oint for a [default] 

judgment” of approximately $1.3 million. With respect to its decision to allow 

intervention, the trial court also correctly noted that section 387 is to be liberally 

construed in favor of intervention. (Lindelli v. Town of San Anselmo (2006) 139 

Cal.App.4th 1499, 1505.)

On appeal, CMSS argues the trial court got it wrong. According to CMSS, the 

evidence presented in connection with the motion to intervene conclusively demonstrated 

that CastlePoint had, by means of delay or inaction, denied coverage and refused to 

defend its insured. Thus, CMSS insists the trial court abused its discretion when it 

 

10 We note that CMSS could have brought such a motion and, if necessary, could have 

requested a continuance of CastlePoint’s motion to strike if more time were needed. However, it 

does not appear from the record that CMSS pursued the matter further in the trial court.
21.

permitted CastlePoint to intervene in the action. On balance, we disagree. (Lindelli v. 

Town of San Anselmo, supra, 139 Cal.App.4th at p. 1505 [our review of an order granting 

or denying intervention is under an abuse of discretion standard].) As the summary 

below indicates, the evidence was not entirely on CMSS’s side and did not necessarily 

require a conclusion that CastlePoint was guilty of refusing to defend Tony & Sons.

1. Evidence on Issue of Alleged Refusal to Defend Does Not

Establish Trial Court Abused Its Discretion in Granting 

Intervention

We begin by noting the evidence offered in opposition to the motion to intervene 

on the issue of whether CastlePoint had refused to defend its insured. One of CMSS’s 

attorneys, F. William Jackson, submitted a declaration attaching certain exhibits. 

Included were letters allegedly sent by Cervantes on behalf of Tony & Sons to 

CastlePoint. The letters tendered the A-American lawsuit to CastlePoint and requested 

that a defense be provided to Tony & Sons. CastlePoint objected at the hearing of the 

motion that these letters were not authenticated, were unsigned and the dates on them 

were crossed out and obviously altered. We have not been informed of any ruling on 

those objections. In any event, as will be seen below, it is not disputed that Cervantes 

tendered the A-American claims against Tony & Sons to CastlePoint by early 2010.

A declaration of David Ezra was also attached to CMSS’s opposition. Ezra was 

an attorney representing Safeco, an insurance company insuring CMSS. Ezra’s 

declaration summarized his efforts to get CastlePoint/SUA to cover CMSS as an 

additional insured and/or to provide coverage to Tony & Sons in the A-American 

litigation. Ezra’s declaration stated that, in email communications with CastlePoint’s 

claims examiner, Linda Reilly, during May and June 2011, he indicated to her that he 

would try to find out about the dates the construction work was performed, but he 

surmised the work would likely have been performed by Tony & Sons in 2006 or 2007, 

prior to the closing of the sale of the property in December 2007. He said there also may 
22.

have been some work performed in 2008. According to Ezra, Reilly subsequently denied 

any additional insured coverage to CMSS.

Additionally, a declaration of David Weiland was submitted in opposition to the 

motion. Weiland was the attorney for Cox and CMSS. Weiland noted in his declaration 

that Safeco had agreed to defend his client subject to a reservation of rights. As a result 

of the reservation of rights, Weiland investigated other sources of potential coverage, 

including insurance coverage obtained by the contractor who built the storage facility at 

issue, Tony & Sons. After learning that CastlePoint/SUA was an insurer of Tony & 

Sons, Weiland forwarded or copied certain pertinent information to CastlePoint, 

including copies of correspondence. This included an April 14, 2011, letter that Weiland 

wrote to Rosemarie Winegarner of Blair & Company, which company was acting on 

behalf of a third party administrator for Lloyd’s of London.11 The April 14, 2011, letter 

stated that attachments thereto included pleadings and correspondence in the A-American 

lawsuit.12 The letter further noted Weiland’s understanding that Tony & Sons was 

involved in the construction of storage units during 2006, 2007 and 2008. Toward the 

end of the same letter, Weiland referred to the fact that a default had been taken against 

Tony & Sons in the litigation. Reilly responded by email that the matter referenced in the 

letter did not appear to be a claim that was assigned to her and requested that Weiland 

provide a claim number and/or forward it to the assigned adjuster. Weiland replied by 

email that he did not know of any claim number. Reilly then provided assistance to 

Weiland, per his request, in how to make a new claim on behalf of his clients.

 

11 Lloyds of London apparently provided commercial general liability coverage to Tony & 

Sons at some point in time.

12 In a supplemental declaration, Weiland stated that he had directed his secretary to transmit 

to Reilly, in addition to the April 14, 2011, letter, copies of the A-American complaint, arbitration 

demand, and notice of the court’s order striking Tony & Sons’ answer.
23.

Lopez also submitted a declaration opposing the motion to intervene. Lopez 

stated that Cervantes, the attorney he and Tony & Sons had retained, sent multiple letters 

to CastlePoint/SUA requesting that a defense be provided concerning the A-American 

lawsuit. These included some of the same unsigned letters with altered dates that were 

attached to the above referenced declaration of Jackson, purportedly sent in early 2010. 

Lopez’s declaration included as an attachment a May 7, 2010, letter, apparently signed by 

Cervantes, informing CastlePoint that because no response to prior coverage requests had 

been given by CastlePoint, Cervantes believed that CastlePoint was acting in bad faith.

In support of the motion to intervene, CastlePoint submitted the declaration of its 

claims examiner in this matter, Linda Reilly.13 Reilly stated that CastlePoint, formerly 

known as SUA, provided insurance coverage for Tony & Sons “during the period 

7/30/2005 through 4/19/2007, and again during the period 1/04/2008 through 7/07/2008.” 

The relevant claims file concerning Tony & Sons reflected that A-American’s lawsuit 

against Tony & Sons was tendered by a letter dated February 23, 2010, from Tony & 

Sons’ attorney, Robert Cervantes. Thereafter, CastlePoint made several unsuccessful 

attempts to obtain essential information from Cervantes and/or Lopez in order to 

ascertain if there was coverage. In particular, CastlePoint sought information as to the 

scope of work, dates of work, and date of completion of the work. The information was 

important for the determination of coverage because the subject policies had exclusions 

for work completed prior to the inception of the policies. For whatever reason, Cervantes 

and Lopez did not provide the information requested.

Reilly also stated in her declaration that on March 11, 2010 and June 28, 2010, 

Cervantes’s assistant, Michael Braa, communicated with Reilly’s predecessor at 

 

13 Reilly stated her official position was “Senior Claims Liability Examiner for the Tower 

Group Companies,” and explained that “Tower Group Companies is the umbrella company for a 

number of insurance carriers, including CastlePoint ....” She took over handling the claims file in 

this matter in March 2011 from her predecessor, along with about 120 other newly assigned files.
24.

CastlePoint, Sandy Marcy,14 about this matter. Braa stated that he did not know when 

the work was performed, the specific scope of the work, or whether there were any 

contracts. Braa further confirmed that the complaint by A-American had been answered, 

the parties had stipulated to arbitration and a stay of the civil action had been ordered. 

Marcy continued to urge Braa to obtain the pertinent information as to when the work 

was performed and completed so that she could conclude her coverage analysis. Braa 

subsequently responded that he was not able to confirm when the work was completed, 

and he explained further that Lopez spends a great deal of time in Mexico and is difficult 

to reach.

According to Reilly’s declaration, CastlePoint made additional efforts in 2011 and 

2012 to obtain the needed information from Cervantes, Braa, or Lopez and also engaged 

the services of a private investigator. The private investigator was hired to review 

documents on file with the City of Fresno in order to ascertain when the certificate of 

occupancy was issued, as well as to review the building permits and inspection sign-off 

records in an effort to determine when the work on the project was completed. The 

private investigator reported that the notice of completion date was in March 2005, a date 

which predated any of CastlePoint’s policies insuring Tony & Sons.

On April 27, 2012, Lopez finally called CastlePoint and spoke to Reilly about the 

project. He informed CastlePoint that the work his company did on the project was 

performed in 2006 and 2007. Based on this information, on May 1, 2012, CastlePoint 

retained Attorney Michael Montgomery of Waters, McCluskey & Boehle to defend Tony 

& Sons.15

 

14 Marcy handled this matter until March 1, 2011, at which point Reilly took over the claims 

file. Some of what Reilly’s declaration reports is based on the records in the claims file from the 

time when Marcy was still handling it.

15 After being assigned to represent Tony & Sons, Montgomery made numerous efforts to 

contact Tony Lopez of Tony & Sons, but at the time the motion to intervene was filed, 

Montgomery had still been unsuccessful in those efforts.
25.

Reilly’s acknowledged in her declaration that she had been contacted by coverage 

attorney, David Ezra, who represented Safeco, an insurer for CMSS. Ezra advised Reilly 

that he was tendering the defense of Safeco’s insureds (CMSS and Cox) based on an 

assumption that CMSS and/or Cox were additional insureds under the CastlePoint 

policies. Since CMSS and Cox were not named as additional insureds, Reilly declined 

the tender by CMSS and Cox. In addition, Reilly’s declaration acknowledged that David 

Weiland, private counsel for CMSS and Cox, had contacted Reilly by email and had 

copied her on a letter to an adjuster at Blair & Co. whereby Weiland demanded defense 

and indemnity from another insurance company. Reilly did not believe she reviewed the 

contents of that letter, but promptly sent an email response advising that the letter did not 

appear to involve a claim that had been assigned to her.16 Reilly suggested that Weiland 

provide the claim number and forward the letter to the assigned adjuster. Weiland then 

asked how to go about presenting a tender for coverage, and she provided that 

information to him.

As noted previously above, the trial court postponed the motion to intervene to 

allow the deposition of Reilly to be taken by CMSS and also to allow the parties to file 

supplemental papers. Reilly was deposed on January 8, 2013. In her deposition, Reilly 

testified that CastlePoint did not learn that CMSS had filed a cross-complaint or that a 

default had been taken against Tony & Sons until such information was discovered by its 

retained attorney, Michael Montgomery, in approximately May 2012. Reilly’s deposition 

testimony included the following series of questions and answers:

“Q. ... So from the beginning of your handling of the claim file 

through today, you’ve never seen a cross-complaint by Mr. McQuillan’s 

office on behalf of CMSS against Tony [&] Sons?

“A. No.

 

16 In her deposition, Reilly stated she had just been assigned 120 files and did not at that time 

recognize the name as one of her claims files.
26.

“Q. ... And any time before your retention of Mr. Montgomery’s 

office to represent Tony [&] Sons in May of 2012, did anyone tell you that 

Tony [&] Sons had been subject to default in the A-American proceedings?

“A. No. [¶] ... [¶]

“Q. ... Did you understand Mr. Wieland to be presenting a matter 

on behalf of CMSS to Tower for coverage?

“A. Yes.” [¶] ... [¶]

“Q. And you understood Mr. Ezra to be seeking coverage on 

behalf of Safeco and CMSS from CastlePoint?

“A. Yes.

“Q. At any point in all of your communications with 

Mr. Weiland’s office or Mr. Ezra’s office, did anyone provide you with a 

copy of a cross-complaint that CMSS had filed against Tony [&] Sons?

“A. No.

“Q. Did they in any of those communications mention such a 

cross-complaint?

“A. No.

“Q. Did either Mr. Weiland’s office or Mr. Ezra’s office mention 

to you in words or substance that a default had been entered against Tony 

[&] Sons?

“A. No.

“Q. Are you aware that a default had, in fact, been entered before 

your communications with Mr. Weiland’s office and Mr. Ezra’s office?

“A. Was I aware?

“Q. Yes.

“A. No. No.

“Q. Did ... anyone from Mr. Cervantes’ office ever provide you 

with a copy of any cross-complaint on behalf of CMSS against Tony [&]

Sons?
27.

“A. No.

“Q. Has anyone before today ever informed you that 

Mr. McQuillan’s office submitted a cross-claim in arbitration proceedings 

on behalf of CMSS against Tony [&] Sons?

“A. No.

“Q. Have you ever seen such a cross-claim?

“A. No.

“Q. At any time before the retention of Mr. Montgomery’s office 

in May of 2012, did anyone from Mr. McQuillan’s office, from 

Mr. Cervantes’ office, from Mr. Ezra’s office or from Mr. Wieland’s office 

suggest in words or substance to you that Tony [&] Sons or Tony Lopez 

were in any jeopardy?

“A. No.”

In summary, the evidence relied on by CastlePoint reflected that, in early 2010, 

Cervantes tendered the A-American lawsuit to CastlePoint, requesting that a defense be 

provided to Tony & Sons. CastlePoint understood that a civil action had been filed by 

A-American against Tony & Sons and that the action had been stayed pending 

arbitration. Thereafter, CastlePoint attempted to find out when the work was performed 

by Tony & Sons so that it could decide whether coverage existed, but that effort was 

frustrated until Tony Lopez finally contacted Reilly in April 2012. Until that time, 

CastlePoint was unaware that CMSS had filed an unauthorized cross-complaint in the 

civil action or that a default had been taken against Tony & Sons.

On the basis of Reilly’s version of events, including her declaration and deposition 

testimony, the trial court found that the earliest CastlePoint was aware of the crosscomplaint was “April of 2012 when Tony Lopez called Ms. Reilly and notified her that 

there was work done during the coverage periods.” As a result of this finding, and 

because “[t]he opposition papers [did] not demonstrate adequate facts to the contrary,” 
28.

the trial court concluded that the motion to intervene (initially filed in June 2012) was 

“not untimely” and that CastlePoint had not been “dilatory in requesting intervention.”

As outlined above, there was at least some evidence to support an inference that 

CastlePoint did not refuse to defend Tony & Sons. Consequently, it does not appear that 

the evidentiary presentation relating to refusal to defend is sufficient to clearly establish 

the trial court abused its discretion in granting the motion.

Moreover, we believe this case was unique in certain key respects that supported 

the trial court’s exercise of discretion to grant intervention. As noted, when CastlePoint 

learned that litigation was filed by A-American against Tony & Sons, it also understood 

that the matter was sent to arbitration and the entire court action was stayed.

17 No 

liability was found against Tony & Sons to A-American in the arbitration, but solely 

against CMSS. Therefore, we are not dealing with the question of whether failure to 

promptly defend Tony & Sons in the arbitration tribunal resulted in liability against Tony 

& Sons there. Rather, we are dealing with an irregular and unexpected development in 

the court action: The intrusion of an unauthorized cross-complaint by nonparty CMSS 

against Tony & Sons, which pleading was unilaterally interjected into that stayed action 

without leave and contrary to procedural law. As the trial court found, CastlePoint had 

no knowledge of this rogue pleading until April 2012, when Lopez finally contacted 

CastlePoint. At that point, CastlePoint moved quickly to retain counsel to defend its 

insured in the court action relating to the cross-complaint. In summary, it was in the 

midst of this highly unusual context that the trial court indicated (in its order granting 

intervention) that, although the opposition arguments relating to refusal to defend were 

 

17 As we noted above regarding the effect of the stay order, “[o]nce a court grants the 

petition to compel arbitration and stays the action at law, the action at law sits in the twilight zone 

of abatement with the trial court retaining merely vestigial jurisdiction over matters submitted to 

arbitration.” (Brock v. Kaiser Foundation Hospitals, supra, 10 Cal.App.4th at p. 1796.)
29.

“not wholly unpersuasive,” nevertheless the trial court’s discretion would be exercised in 

favor of allowing CastlePoint to intervene.18

On balance, we are unable to conclude the trial court acted beyond the range of its 

discretion when it allowed CastlePoint to intervene, and this conclusion is further 

strengthened by the unique and irregular circumstances before the trial court. Since 

CMSS has not established that the trial court exceeded the bounds of reason in granting 

intervention to CastlePoint, its challenge to that ruling fails. Therefore, the alleged 

invalidity of the intervention order does not provide support to CMSS’s position on 

appeal that the trial court erred in striking the cross-complaint.

2. Trial Court’s Procedural Rulings to Allow Subsequent Motions 

Did Not Establish an Abuse of Discretion in Granting Intervention

Additionally, CMSS argues that intervention was improperly granted because the 

trial court described CMSS’s assertions on the issue of refusal-to-defend as “not wholly 

unpersuasive” and allowed that a subsequent motion could be brought on the law and 

motion calendar on that factual issue. According to CMSS, the trial court abused its 

discretion by granting intervention without first fully and conclusively adjudicating the 

refusal-to-defend issue. We disagree that CMSS has shown a prejudicial abuse of 

discretion. The order granting the motion expressly confirmed that the trial court had 

reviewed the parties’ declarations, and the trial court acknowledged its understanding that 

intervention is defeated by a refusal to defend. As noted previously above, although the 

trial court’s comment about the matter being “not wholly unpersuasive” is somewhat 

unclear as to the court’s actual level of consideration of that matter, it appears that the 

trial court did not believe the state of the evidence required a denial of the motion. Thus, 

 

18 In so holding, the trial court indicated that, under the circumstances, the case should 

follow certain principles expressed in Western Heritage Ins. Co v. Superior Court, supra, 199 

Cal.App.4th at page 1205, which permit an insurer to intervene in a third party action against the 

insured where section 11580 of the Insurance Code would allow a judgment creditor who has or 

will obtain a default judgment therein to proceed directly against the liability insurer.
30.

the trial court allowed CastlePoint to intervene, but a subsequent motion could be filed to 

address the issue further if CMSS so desired. CMSS has not adequately shown how the 

trial court’s approach exceeded the bounds of reason under the circumstances. Nor has 

prejudice been shown. CMSS could have brought such a motion and, if necessary, could 

have requested a continuance of CastlePoint’s motion to strike if more time was needed. 

However, it does not appear from the record that CMSS pursued the matter further in the 

trial court.

Similarly, CMSS makes the argument that the trial court put the cart before the 

horse by granting intervention without first resolving the issue raised by CMSS and Tony 

& Sons that CastlePoint’s appointment of Montgomery created a conflict of interest with 

the insured and warranted Montgomery’s disqualification. The trial court held that it 

would not address that issue until an actual motion to disqualify counsel was on file. 

Thus, CMSS and/or Tony & Sons were free to promptly pursue a motion to disqualify 

counsel after intervention was granted, but the record does not reflect that they actually 

did so. CMSS has failed to show that, by simply requiring parties to bring a separate 

motion to disqualify counsel, the trial court prejudicially abused its discretion in granting 

intervention.

B. Equitable Estoppel

CMSS argues that principles of equitable estoppel insulated the cross-complaint 

from being subject to a motion to strike by CastlePoint. For at least two reasons we 

disagree that equitable estoppel provides a basis for reversal of the trial court’s order 

striking the cross-complaint. First, the cross-complaint was stricken on the trial court’s 

own motion based on violation of the stay order and, therefore, any claim that CastlePoint 

was estopped does not impact the court’s sua sponte order. Second, CMSS has failed to 

persuade us that, under the circumstances, equitable estoppel would preclude CastlePoint 

from raising the grounds it did for striking the cross-complaint (i.e., that CMSS was not a 
31.

party and did not obtain leave to intervene). Below, we briefly explain why that theory 

does not assist CMSS in this appeal.

“‘[T]he doctrine of equitable estoppel is founded on concepts of equity and fair 

dealing.’ [Citation.] ‘The essence of an estoppel is that the party to be estopped has by 

false language or conduct “led another to do that which he ... would not otherwise have 

done and as a result thereof that he ... has suffered injury.” [Citation.]’ [Citation.]” 

(Steinhart v. County of Los Angeles (2010) 47 Cal.4th 1298, 1315.)19 The elements of 

estoppel are “‘(1) the party to be estopped must be apprised of the facts; (2) he must 

intend that his conduct shall be acted upon, or must so act that the party asserting the 

estoppel has a right to believe it was so intended; (3) the other party must be ignorant of 

the true state of facts; and (4) he must rely upon the conduct to his injury. [Citation.]’ 

[Citation.] The detrimental reliance must be reasonable.” (Schafer v. City of Los Angeles

(2015) 237 Cal.App.4th 1250, 1261; see 13 Witkin, Summary of Cal. Law (10th ed. 

2005) Equity, §§ 190–191, pp. 527–529.)

CMSS argues that CastlePoint was estopped to raise the legal defects regarding the 

cross-complaint because, at the time the cross-complaint was filed, Tony & Sons did not 

file a pleading objection in court, but instead filed an answer. As a result of such 

conduct, CMSS purportedly was led to believe the cross-complaint was acceptable and 

would not be challenged. This allegedly caused prejudice because if the defects had been 

raised by a motion at the outset, CMSS “easily could have remedied them within a matter 

of a few weeks.” Instead, CMSS went to the arbitration employing a strategy that relied 

on the existence of the Tony & Sons’ default under the cross-complaint.

 

19 As expressed in Evidence Code section 623: “Whenever a party has, by his own 

statement or conduct, intentionally and deliberately led another to believe a particular thing true 

and to act upon such belief, he is not, in any litigation arising out of such statement or conduct, 

permitted to contradict it.”
32.

We are not persuaded that CMSS satisfied the elements of equitable estoppel. 

Aside from the fact that CMSS, not Tony & Sons (or CastlePoint), was responsible for 

the legal propriety of CMSS’s pleading, the record shows that objections were made to 

the cross-complaint, albeit not in a formal motion. Shortly after the cross-complaint was 

served, Cervantes sent a letter to CMSS’s attorney, Steven McQuillan, objecting to the 

propriety of the cross-complaint because (1) the proceedings in the superior court were 

stayed by court order and (2) CMSS was not a party to the action and, thus, had no 

standing to cross-complain against Tony & Sons. In that letter, Cervantes asked that 

McQuillan “voluntarily strike the cross-complaint.” Thus, CMSS was alerted to the 

pleading’s legal deficiencies at the very beginning, but elected not to remedy them, 

choosing instead to rely on its assumptions that the allegations were sufficiently 

ambiguous to permit the cross-complaint and/or that the stay did not apply. Thereafter, 

when Tony & Sons filed an answer to the cross-complaint, Cervantes warned that the 

answer was being filed as a cautionary pleading only.

Here, because CMSS was alerted to the cross-complaint’s legal and procedural 

defects at the outset, and since CMSS was responsible for the propriety of its own 

pleading, when CMSS declined to remedy those defects, it did so at its own risk. 

Nothing in the record suggests there were any words or conduct on the part of Tony & 

Sons or CastlePoint that would have reasonably misled CMSS or induced it to refrain 

from taking prompt curative steps with respect to the cross-complaint. In short, equitable 

estoppel clearly falters because CMSS was not ignorant of the problems relating to the 

cross-complaint, was not induced by Tony & Sons or CastlePoint to refrain from 

corrective action, and could not reasonably rely that the cross-complaint was invulnerable 

to a subsequent motion to strike. On this record, we conclude that elements (2), (3) and 

(4) of equitable estoppel were lacking. As a result, equitable estoppel did not apply to 

insulate the cross-complaint from the motion to strike.
33.

IV. Tony & Sons’ Cross-Appeal

In its cross-appeal, Tony & Sons makes many of the same arguments that were 

raised by CMSS and addressed by us in the discussion above. In a nutshell, Tony & Sons 

contends the trial court abused its discretion in striking the cross-complaint because 

CastlePoint should never have been permitted to intervene in the action in the first place. 

Thus, following the approach taken by CMSS, Tony & Sons’ cross-appeal attacks the 

order striking the cross-complaint indirectly by challenging the validity of the 

intervention order. According to Tony & Sons, intervention was improper because 

CastlePoint refused to defend Tony & Sons and, consequently, CastlePoint lost any right 

to intervene in the action. Furthermore, Tony & Sons maintains that CastlePoint’s refusal 

to defend made it necessary for Tony & Sons to enter into a protective settlement with 

CMSS. That settlement was effectively undone when the trial court struck the crosscomplaint, since the settlement allegedly depended on the default against Tony & Sons 

on the cross-complaint remaining intact. Also, the existence of the settlement allegedly 

meant that CastlePoint had a conflict of interest with its insured and should not have been 

permitted to intervene. We address each of these arguments below.

Before doing so, however, we observe that Tony & Sons’ attack on the 

intervention order as a method of challenging the order striking the cross-complaint 

suffers from the same flaw we noted regarding CMSS’s similar argument. Namely, the 

trial court’s order striking the cross-complaint was on the court’s own motion, based on 

grounds raised by the court itself (i.e., the violation of the stay order) and, therefore, it did 

not depend on the validity of the intervention order. Whether or not the trial court had 

granted CastlePoint’s intervention motion, the court had independent discretion to strike 

sua sponte, at any time, the subject cross-complaint, which was “not drawn or filed in 

conformity with the laws of this state, a court rule, or an order of the court.” (§ 436, 

subd. (b).) Accordingly, the attack by Tony & Sons on the intervention order does not 

and cannot adequately demonstrate that the trial court abused its discretion in striking the 
34.

cross-complaint. Nevertheless, as we did with CMSS’s similar argument, we briefly 

address Tony & Sons’ challenge to the intervention order in an abundance of caution. 

Although unnecessary to our disposition, we believe our discussion thereof will reflect 

that, even assuming the order striking the cross-complaint depended on the validity of the 

intervention order, the cross-appeal would still fail.

With that caveat in mind, we now proceed to Tony & Sons’ arguments that 

intervention was improperly granted.

A. CastlePoint’s Alleged Lack of Direct Interest Based on Asserted 

Refusal to Defend

Tony & Sons asserts that intervention was erroneously granted by the trial court 

based on the evidence that CastlePoint had refused to defend its insured, Tony & Sons. 

We start by reiterating the relevant principles of law: “[I]f the insurer denies coverage 

and refuses to provide a defense, the insurer ‘does not have a direct interest in the 

litigation between the plaintiff and the insured to warrant intervention. The rationale 

behind this rule is that by its denial, the insurer has lost its right to control the litigation.’ 

[Citation.] When an insurer refuses to defend, it may be bound by a default judgment 

against its insured [citation], or a reasonable, noncollusive settlement reached by its 

insured with the claimant [citation].” (Gray v. Begley, supra, 182 Cal.App.4th at 

pp. 1522–1523: accord, Hinton v. Beck, supra, 176 Cal.App.4th at p. 1384 [“an insurer 

who denies coverage and refuses to defend its insured does not have a direct interest in 

the litigation between the plaintiff and the insured to warrant intervention”].)20

We have already summarized herein the relevant facts presented to the trial court 

on the issue of refusal to defend in our discussion above addressing CMSS’s appeal on 

 

20 Tony & Sons’ opening brief in the cross-appeal argues that whenever an insurer fails to 

take advantage of an opportunity to defend the insured, it loses the right to intervene. More 

accurately stated, however, the rule is that where an insurer denies coverage and refuses to 

defend, the right to intervene is lost.
35.

that ground. In that part of our opinion, we held that because there was some substantial 

evidence to support CastlePoint’s position that it did not refuse to defend Tony & Sons, 

we were unable to conclude that the trial court clearly committed an abuse of its 

discretion in granting the motion to intervene. We further held that unique procedural 

facts of the case supported the exercise of the trial court’s discretion to allow CastlePoint 

to intervene. Here, Tony & Sons’ cross-appeal relies on the same factual record, arguing 

in essence that because CastlePoint did not defend Tony & Sons between 2010 and 2012, 

the prolonged delay as a matter of law constituted an implied refusal to defend. 

However, as indicated previously, we do not agree that the evidence presented in the trial 

court required that conclusion, or that it was the only permissible inference. To reiterate, 

Reilly’s declaration and deposition testimony reflected that CastlePoint understood in 

2010 that a civil action had been filed by A-American against Tony & Sons, but the 

action had been fully stayed while the dispute proceeded to arbitration. Meanwhile, 

CastlePoint attempted to find out when the work was performed by Tony & Sons to 

determine whether coverage existed, but that effort was frustrated until Tony Lopez 

finally contacted Reilly in April 2012. Based on Reilly’s testimony, until Lopez called 

her and Montgomery was retained to defend Tony & Sons (i.e., April/May 2012), 

CastlePoint had been unaware that nonparty CMSS had filed an unauthorized crosscomplaint in the civil action against Tony & Sons or that a default had been taken on said 

cross-complaint. The trial court’s finding on that timing issue was supported by 

substantial evidence. Under all of the circumstances, including the unique procedural 

situation below, we hold (as we did concerning CMSS’s similar argument) that Tony & 

Sons has not demonstrated the trial court’s intervention order exceeded the bounds of 

reason due to the alleged refusal to defend.

B. Alleged Expansion of Issues

Tony & Sons additionally argues that intervention should not have been granted to 

CastlePoint because doing so impermissibly enlarged the issues in the litigation. (See 
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Truck Ins. Exchange v. Superior Court, supra, 60 Cal.App.4th at p. 346 [one element for 

allowing intervention under § 387, subd. (a), is that intervention will not enlarge the 

issues in the case].) We disagree. There is no attempt here to interject new issues 

beyond the scope of the lawsuit. (See, e.g., People ex rel. Rominger v. County of Trinity

(1983) 147 Cal.App.3d 655, 661 [“the interveners may not enlarge the issues so as to 

litigate matters not raised by the original parties”]; Kuperstein v. Superior Court (1988) 

204 Cal.App.3d 598, 600–601 [intervention impermissibly interjected collateral coverage 

issues into the case].) Rather, in the present case, CastlePoint merely sought to raise the 

legal inadequacies of the cross-complaint, including that it failed to state any cause of 

action and was not filed in conformity with law. We do not believe that said intervention 

by CastlePoint—the impact of which amounted to shining the light on the crosscomplaint’s manifest deficiencies and violations of procedural law—represented a 

material expansion of the scope of the issues in the case.

C. Interests of Parties Opposing Intervention

Tony & Sons further argues that intervention was improperly granted because any 

grounds for intervention were assertedly outweighed by opposing reasons raised by the 

existing parties in the action. (See Reliance Ins. Co. v. Superior Court, supra, 84 

Cal.App.4th at p. 386 [intervention must “outweigh any opposition by the [existing]

parties”].) One of the main arguments presented in opposition to intervention was Tony 

& Sons’ desire to preserve the settlement arrangement that Tony & Sons had reached 

with CMSS. Allegedly, Tony & Sons had reached a settlement arrangement with CMSS 

to protect itself from liability after it appeared that CastlePoint had refused to defend. 

According to Tony & Sons, since the settlement terms depended on the default remaining 

intact, CastlePoint’s intervention to challenge the cross-complaint on which the default 

was taken allegedly undermined the settlement.

As to the existence of the alleged settlement, there was evidence presented to the 

trial court of an oral settlement agreement between Tony & Sons and CMSS, apparently 
37.

occurring shortly before or in close proximity to the time CastlePoint sought to defend 

and intervene. The declaration of CMSS’s attorney, Weiland, filed in June 2012, stated 

as follows regarding this alleged agreement: “I called Mr. Lopez using his cell phone 

number in March and April of 2012, and spoke with him more than once regarding the 

prove-up proceedings. I explained to Mr. Lopez that [CMSS] would refrain from 

executing on the default judgment against [Tony & Sons] if he would agree to assign to 

[CMSS] his rights against [CastlePoint] ... for bad faith and accept service of the hearing 

notice and supporting declarations for the prove-up hearing. He agreed.” Additionally, a 

subsequent declaration signed by Lopez stated an erroneous belief on his part that “[a]n 

award was made against us for $1,376,739,” which motivated his desire to settle with 

CMSS. Of course, the only award that had been entered was against CMSS, not against 

Lopez or Tony & Sons and, in actuality, Tony & Sons had been dismissed by the 

arbitrator after a finding of no liability was made. Lopez’s declaration then stated: “In 

order to protect myself financially, I agreed with CMSS that in return for leaving the 

default in place and assigning some of our rights against [CastlePoint], CMSS would give 

me in return a covenant not to execute on the judgment it had obtained against us.” 

Again, no judgment had been obtained against Lopez or Tony & Sons, so that assumption 

was entirely mistaken. Nevertheless, the terms of the agreement as described by Lopez 

were consistent with what was stated in Weiland’s declaration.

The legal framework to be considered is that “[w]hen an insurer refuses to defend, 

it may be bound by a default judgment against its insured [citation], or a reasonable, 

noncollusive settlement reached by its insured with the claimant [citation].” (Gray v. 

Begley, supra, 182 Cal.App.4th at pp. 1522–1523, italics added.) Since we have 

concluded herein that the record concerning the refusal-to-defend issue did not establish 

the trial court abused its discretion in granting the intervention motion, it follows by 

parity of reasoning that Tony & Sons’ settlement arrangement that was allegedly 

necessitated by the same purported refusal to defend likewise does not establish a clear 
38.

abuse of discretion. Furthermore, we stress a point made by us previously herein, that we 

are dealing with intervention that was granted in light of the bizarre and irregular 

circumstance of an unauthorized, improperly filed cross-complaint interposed without 

permission into a previously stayed court action, of which pleading CastlePoint was 

unaware until April 2012, when Lopez finally contacted CastlePoint. It was within this 

highly unusual context that the trial court held that, although the opposition arguments 

relating to refusal to defend were “not wholly unpersuasive,” nonetheless the court’s 

discretion would be exercised in favor of granting the motion. On balance, and 

particularly when the unique circumstances before the trial court are considered, we are 

unable to conclude the trial court acted beyond the range of its broad discretion when it 

allowed CastlePoint to intervene, notwithstanding Tony & Sons’ concerns about its 

settlement efforts.

On this issue, we note that CastlePoint suggests the purported settlement “deal” 

between CMSS and Tony & Sons is a red herring. CastlePoint argues that the alleged 

deal is wholly illusory, because the deal was never finalized in writing and, more 

importantly, CMSS previously assigned all of its rights versus Tony & Sons to AAmerican. The assertion that CMSS assigned all of its rights over to A-American is 

based on the terms of the purchase agreement between CMSS and A-American, as was 

referenced in the pleadings, which purchase agreement provided that CMSS was required 

to assign to A-American all warranties and all of CMSS’s rights against contractors and 

subcontractors on the project, which would obviously include Tony & Sons and Lopez. 

Both CMSS and Tony & Sons21 oppose CastlePoint’s line of argument on the grounds 

that (1) the record does not establish that CMSS actually assigned its rights, but only that 

it was supposed to do so in the future and (2) even if it occurred, the assignment would 

not necessarily apply to subsequently accruing rights of indemnity. We find that this 

 

21 A joint reply brief was filed herein by these parties.
39.

particular issue is not adequately developed on appeal for us to conclusively decide the 

matter. Also, since as discussed above, the intervention order is sustainable without the 

necessity to consider the illusory agreement argument, we decline to reach it. CastlePoint 

further argues that the entire cross-complaint is a sham or utterly without merit, which 

claims we briefly comment on in part V.

D. Disqualifying Conflict of Interest

Finally, Tony & Sons’ cross-appeal argued that intervention should not have been 

granted because of an alleged disqualifying conflict of interest on the part of CastlePoint 

and/or its attorney. Specifically, Tony & Sons had an interest in keeping the default in 

place to preserve the terms of its settlement arrangement with CMSS; whereas, 

CastlePoint and Montgomery were seeking to raise defenses to the cross-complaint that 

would put the default (and the settlement) in jeopardy. This point was articulated by the 

parties opposing the intervention motion, with a request that the trial court disqualify 

Montgomery and his law firm. The trial court’s order granting intervention stated as 

follows: “Finally, the opposition papers contain a request to disqualify Mr. Montgomery 

and his firm from representing Castle[P]oint. Defendants have not brought a noticed 

motion to disqualify counsel. Without a separately noticed motion, the court will not 

consider such a request in connection with a motion for leave to intervene. As such the 

court’s ruling on leave to intervene in no way addresses disqualification.”

The trial court plainly invited Tony & Sons or CMSS to bring a motion to 

disqualify counsel, at which point the matter would be considered and resolved. There is 

no reason to believe it could not have been resolved in a prompt fashion by the trial court. 

Despite that invitation to pursue the issue by a separate motion, nothing in the record 

reflects that Tony & Sons or CMSS ever took that relatively simple step. Also, in 

response to the claim that Montgomery should have been disqualified, CastlePoint points 

out that Lopez successfully rebuffed the attempts by Montgomery to become his attorney 

of record and provide a defense. And when the complaint-in-intervention was actually 
40.

filed, it reflected that another law firm had associated (i.e., Nielsen, Haley & Abbott 

LLP), and that it was the Nielsen firm that actually filed and served the pleading on 

behalf of CastlePoint. Based on the foregoing, the attorney disqualification question was 

far from clear, and we conclude that Tony & Sons has failed to demonstrate on appeal 

that the trial court’s ruling directing that a separate motion be filed was an abuse of 

discretion.

As to the broader issue of a conflict of interest, even assuming arguendo that it 

would ordinarily have been inappropriate to grant intervention where the insured had 

asserted such a conflict may exist, we believe it was not an abuse of discretion to allow 

CastlePoint’s intervention in this particular instance, in light of the peculiar procedural 

facts and circumstances before the trial court, as we have explained repeatedly herein. 

For all of the above reasons, Tony & Sons’ cross-appeal has failed to establish an abuse 

of discretion in regard to the intervention order as an arguable basis for challenging the 

order striking the cross-complaint.

V. Other Issues and Summary of Disposition

In opposing the present appeal and cross-appeal, CastlePoint makes the point that 

even if the cross-complaint had not been stricken by the trial court, CMSS could not have 

recovered on its cross-complaint as a matter of law. Thus, according to CastlePoint, no 

prejudice can be shown to have resulted from the trial court’s order striking that pleading. 

To support this argument, CastlePoint challenges the validity of the two essential causes 

of action alleged in the cross-complaint: (1) equitable or implied indemnity and 

(2) express indemnity.22 These were the same grounds raised in CastlePoint’s motion for 

judgment on the pleadings filed in conjunction with its motion to strike. As to the claim 

for equitable indemnity, CastlePoint correctly observes that the law recognizes no right to 

 

22 CastlePoint also asserted that CMSS assigned all of its rights against Tony & Sons to 

A-American, which allegedly divested it of any right or standing to sue Tony & Sons in the crosscomplaint. We briefly alluded to this assertion above, and we declined to reach that matter.
41.

equitable indemnity for a liability based on breach of contract. (See Stop Loss Ins. 

Brokers, Inc. v. Brown & Toland Medical Group (2006) 143 Cal.App.4th 1036, 1040–

1041 & fn. 2 [so holding].) Here, the $1.3 million arbitration award against CMSS was 

based solely upon breach of written warranties in the contract between CMSS and 

A-American. No damages were awarded on A-American’s tort claims against CMSS. 

On its face, this would appear to rule out any basis for CMSS’s cause of action for 

equitable indemnity against Tony & Sons.23 The joint reply brief filed herein by Tony & 

Sons and CMSS has no answer to this argument that the equitable indemnity cause of 

action fails.

As to CMSS’s cause of action for express indemnity, CastlePoint points out that 

CMSS has never alleged any specific terms of such an agreement, and no contract 

between CMSS and Tony & Sons has ever been produced and no express indemnity 

language has ever been quoted. The failure to produce such a contract between CMSS 

and Tony & Sons was one of the reasons the trial court had denied CMSS’s request for a 

default judgment. It certainly appears that CMSS will not be able to prove its express 

indemnity cause of action, at least under the current state of the evidence. (See 

Smoketree-Lake Murray, Ltd. v. Mills Concrete Construction Co. (1991) 234 Cal.App.3d

1724, 1737 [express indemnity rests solely on the contract of the parties; “it is the 

language of the contract, rather than the equities of the situation which govern”].) In 

reply to this argument, CMSS and Tony & Sons argue that the inability to locate a copy 

of the contract at the time of the pleading motion below does not establish that the parties 

will not be able to locate it, or prove its terms, subsequently. In other words, it would go 

 

23 Another form of equitable indemnity is referred to as implied contractual indemnity, 

which is based on contractual language not specifically dealing with indemnification. (See Bay 

Development, Ltd. v. Superior Court (1990) 50 Cal.3d 1012, 1029.) Of course, a lack of any 

contract between Tony & Sons and CMSS would be fatal to such a claim, as it would be to the 

claim of express indemnity.
42.

beyond the purview of a motion for judgment on the pleadings to resolve such an 

evidentiary issue.

To the above argument, CastlePoint adds the following in support of its position: 

“Despite all of the dramatic and feverish charges tossed about in [Tony & Sons’] brief, 

we must step back and realize that cross-appellants have suffered no harm, and there is no 

judgment against them. They were sued by A-American in the main complaint, but those 

claims were dismissed in a binding arbitration award [citation] that was reduced to a 

judgment. [Tony & Sons] was also sued by CMSS in a cross-complaint, but that crosscomplaint was stricken by the court sua sponte. Nothing remains pending against them. 

In the event CMSS were to attempt to file an independent action, CastlePoint would 

defend on the grounds set forth above, and CMSS’s action would surely fail.”

We find it to be unnecessary to reach the merits of CastlePoint’s contentions that 

no prejudice has been suffered, or that the causes of action in the cross-complaint fail on 

the merits as a matter of law, since the trial court’s sua sponte ruling to strike the crosscomplaint is sustainable apart from consideration of those contentions.

To recapitulate, the trial court here was confronted with an unauthorized crosscomplaint filed by a nonparty without leave and in violation of the court’s order staying 

the action. The trial court struck the cross-complaint on its own motion on the ground 

that it was improperly filed in disregard of the stay order. In doing so, the trial court 

indicated that, in light of the order staying the action, neither the cross-complaint nor the 

answer should ever have been filed. Implicitly, the trial court appears to have concluded 

that CMSS should not have been able to take advantage of the fallout of its improper and 

unauthorized pleading. We have concluded herein that the trial court’s order striking the 

cross-complaint on its own motion was within its broad and inherent discretion under 

section 436. Furthermore, because the order was properly entered on the court’s own 

motion, it was not dependent on the validity of the intervention order. But, even 

assuming hypothetically that the order striking the cross-complaint did depend on the 
43.

validity of the intervention order, we have held that under the unique facts before the trial 

court, it was within its discretion to strike the cross-complaint.

DISPOSITION

The orders granting CastlePoint’s motion to intervene and motion to strike the 

cross-complaint are affirmed. Costs on appeal are awarded to CastlePoint.

_____________________

KANE, J.

WE CONCUR:

_____________________

HILL, P.J.

_____________________

LEVY, J.