Filed 5/16/13 Anderson Private Investors v. Colak CA2/2 

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS 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 This opinion has not been certified for publication 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 

SECOND APPELLATE DISTRICT 

DIVISION TWO 

KAYNE ANDERSON PRIVATE 

INVESTORS et al., 

 Plaintiffs and Appellants, 

 v. 

MUSTAFA COLAK, 

 Defendant and Respondent. 

 B239111 

 (Los Angeles County 

 Super. Ct. No. BC462778) 

 APPEAL from a judgment of the Superior Court of Los Angeles County. 

Joanne B. O’Donnell, Judge. Affirmed. 

Valle Makoff, Jeffrey T. Makoff, Brandon M. Carr; Nagler & Associates, 

Lawrence Nagler and Charles Avrith for Plaintiffs and Appellants. 

 Lurie, Zepeda, Schmalz & Hogan, Andrew W. Zepeda and Shawn M. Ogle for 

Defendant and Respondent. 

* * * * * * 
2

 Plaintiffs and appellants Kayne Anderson Private Investors, L.P., Kayne Anderson 

Private Investors II, L.P. and Kayne Anderson Private Advisors, L.P. appeal from a 

judgment entered following the trial court’s order sustaining a demurrer without leave to 

amend filed by defendant and respondent Mustafa Colak (Colak). Appellants sought 

equitable indemnity, recovery of attorney fees and declaratory relief, alleging that Colak 

should bear proportionate responsibility for a multi-million dollar arbitration award 

entered against them. After the demurrer was sustained, the trial court also denied 

appellants’ motion for leave to amend to allege a breach of contract claim against Colak. 

 We affirm. The trial court properly sustained the demurrer without leave to 

amend. Appellants failed to state a cause of action for equitable indemnity because they 

were not mutually liable with Colak for the same injury. They likewise failed to state a 

claim for tort of another because they incurred attorney fees defending allegations of their 

own fraud. Finally, their declaratory relief action failed because it was merely derivative 

of their other claims. The trial court properly exercised its discretion in denying 

appellants’ motion for leave to amend and in construing the motion as an unsupported 

motion for reconsideration. 

FACTUAL AND PROCEDURAL BACKGROUND

The Arbitration. 

 In 1994, Siamak (“Mack”) Katal (Katal) and his wife Ingrid Katal founded 

Detection Logic, Inc. (Detection Logic), a life safety and security contracting company. 

Appellants are private equity fund groups that had invested over $35 million in Detection 

Logic between 2005 and 2008. Colak was Detection Logic’s president and chief 

executive officer in 2007 and 2008. 

 In 2008, after an accounting firm had conducted an internal audit and issued an 

opinion that Detection Logic’s 2007 financial statements were materially correct and 

complied with generally accepted accounting principles (GAAP), appellants and Katal 

initiated efforts to sell the company. Integrated Products and Services, Inc. (IPS) 

submitted a $150 million bid in October 2008. Because appellants and Katal required 
3

that the sale close by the end of 2008, Detection Logic’s September 2008 financial 

statements (September financials) formed the basis for the $140 million purchase price. 

The parties executed the securities purchase agreement (SPA) for the sale of the company 

on December 12, 2008. 

IPS retained Colak as Detection Logic’s president. In connection with the 

company’s sale, Colak executed a contingent payment agreement (Reimbursement 

Agreement) which entitled him to receive a pro forma percentage—specified as 

1.4173 percent in a separate agreement—of the amounts actually received by appellants 

and Katal under the SPA and correspondingly obligated him to pay back to Detection 

Logic the same pro forma percentage of any amount that appellants and Katal were 

required to pay IPS as a result of financial adjustments under the SPA.1

 Following the sale, IPS discovered that the September financials were not 

materially correct, did not comply with GAAP and overstated Detection Logic’s 

earnings. In accordance with the terms of the SPA, in September 2009 IPS filed a 

demand for arbitration, seeking damages for breach of warranty and fraud. In August 

2010, IPS filed an amended complaint in the arbitration that alleged claims for breach of 

contract, fraud and unfair competition. Appellants and Katal asserted counterclaims. 

 The arbitration was conducted in October 2010. In a July 2011 award, the 

arbitrator determined that Detection Logic misrepresented its financial position and 

thereby breached the SPA and engaged in an unfair business practice. He expressly 

found that Katal lacked credibility and that Colak was credible, despite appellants’ and 

Katal’s efforts to discredit his testimony. The arbitrator further determined that 

appellants did not engage in fraud, finding that they offered evidence they “reasonably 

relied on the Company’s senior management and accounting department with respect to 

the September Financials” and there was no evidence they participated in creating or 

knew of the manipulated financial statements. Nonetheless, it found they were liable for 

 

1 The Reimbursement Agreement gave Detection Logic the right to offset the 

payments owing by the pro forma percentage or, in the event it elected not to offset, to 

assign the right to receive such payment to appellants and Katal. 
4

Detection Logic’s breach pursuant to section 10.1(a)(i) of the SPA, which provided that 

each seller, including appellants, “shall be jointly and severally liable for ‘any breach of 

any warranty or the inaccuracy of any representation of the Company contained in this 

Agreement.’” On the basis of its establishing multiple breaches of the SPA, the arbitrator 

awarded IPS over $33 million, payable by appellants and Katal jointly and severally. 

Complaint and Demurrer. 

In June 2011, appellants filed their original complaint against Colak and others, 

alleging causes of action for comparative equitable indemnity, contribution, tort of 

another and declaratory relief. Colak demurred, and appellants filed a first amended 

complaint before the matter was heard. Alleging the same four causes of action, the 

operative complaint sought equitable indemnity and reimbursement of attorney fees from 

Colak to the extent that appellants’ liability to IPS in connection with the sale of 

Detection Logic was caused by Colak’s conduct.2 They alleged that Colak knowingly 

participated in the fraud and misconduct committed by Katal. They specifically alleged 

that “Colak’s alleged fraud is detailed in the sworn testimony he gave in the JAMS 

Arbitration and includes testimony and documents that he alleges shows he personally 

manipulated financial data, provided information he knew was incorrect to Detection 

Logic’s financial personnel charged with making disclosures to IPS and signed the SPA 

(which included financial misrepresentations and warranties).” 

 Colak again demurred, asserting that appellants failed to allege facts sufficient to 

state a cause of action. More specifically, he argued that equitable indemnity was 

unavailable because he and appellants were not joint tortfeasors, the “tort of another” 

doctrine did not apply where appellants defended themselves against allegations 

involving their own tortious conduct and declaratory relief was duplicative of their other 

claims. In support of his demurrer, he sought judicial notice of the arbitration award, the 

second amended complaint in the arbitration and the SPA. 

 

2 Appellants’ second cause of action for contribution was not alleged against Colak. 
5

 Appellants opposed the demurrer. At the conclusion of their opposition, they 

requested leave to amend and further indicated they intended to add claims to their 

complaint seeking Colak’s payment under the Reimbursement Agreement. They 

attached exhibits showing that they had previously demanded payment of Colak’s 

pro forma percentage under the Reimbursement Agreement, calculated as approximately 

$340,000. 

 At the conclusion of a December 5, 2011 hearing, the trial court sustained the 

demurrer without leave to amend for the reasons outlined in its tentative ruling. It 

determined that because appellants had been held liable only under the SPA, no 

indemnity claim arose because they were not joint tortfeasors with Colak. The trial court 

further determined that attorney fees under the “tort of another” theory could not be 

recovered by exonerated parties who incurred fees in defending themselves from a 

codefendant found liable. Finally, it found that appellants’ declaratory relief claim was 

insufficient, as it was wholly derivative of the other claims. 

Motion for Leave to Amend. 

 Though they did not submit it to the trial court at the time of the hearing, 

appellants filed a motion for leave to file a second amended complaint on the same day. 

They sought to add a cause of action for breach of contract and sought recovery of 

Colak’s pro forma percentage under the Reimbursement Agreement. Colak opposed the 

motion, characterizing it as an unsupported motion for reconsideration and arguing that 

the only reason appellants had not included the breach of contract claim in their original 

pleading was because it would have undermined their indemnity claim. In reply, 

appellants argued that the contract and indemnity claims were unrelated, and the only 

reason they delayed in asserting breach of contract was to allow time for Colak to comply 

with their demand for performance. 

 Following a January 11, 2012 hearing, the trial court denied the motion. It agreed 

with Colak that the breach of contract claim could and should have been alleged 

originally, issuing a minute order which provided in part: “[P]laintiffs chose in both the 

original complaint and the first amended complaint not to allege breach of contract 
6

against Colak, choosing instead to put all their eggs in the one basket of their equitable 

indemnity theory of recovery. This is not, therefore, a case where plaintiffs only recently 

discovered their breach of contract claim against Colak; they have known of it from the 

beginning and elected, for strategic reasons, not to allege it. When the court sustained 

Colak’s demurrer to the first amended complaint without leave to amend, plaintiffs’ 

strategy failed.” Also because of the order sustaining the demurrer without leave to 

amend, the trial court concluded that appellant’s motion was one for reconsideration, 

made without new or different facts, law or circumstances. 

 The trial court entered a judgment of dismissal in favor of Colak. Appellants 

timely appealed. Thereafter, the trial court denied Colak’s motion for sanctions.3

DISCUSSION

 Appellants maintain that the trial court erred in sustaining the demurrer without 

leave to amend and abused its discretion in denying their motion for leave to amend. We 

find no merit to their contentions. 

I. The Trial Court Properly Sustained the Demurrer Without Leave to Amend. 

A. Standard of Review. 

We review de novo a trial court’s sustaining of a demurrer, exercising our 

independent judgment as to whether the complaint alleges sufficient facts to state a cause 

of action. (Zelig v. County of Los Angeles (2002) 27 Cal.4th 1112, 1126.) We assume 

the truth of properly pleaded allegations in the complaint and give the complaint a 

reasonable interpretation, reading it as a whole and with all its parts in their context. 

(Aubry v. Tri-City Hospital Dist. (1992) 2 Cal.4th 962, 966–967.) “We do not, however, 

assume the truth of the legal contentions, deductions or conclusions; questions of law, 

 

3 After briefing, Colak moved to strike untimely arguments raised in appellants’ 

reply brief. Though we deny the motion, we need not consider arguments raised for the 

first time in a reply brief. (Mansur v. Ford Motor Co. (2011) 197 Cal.App.4th 1365, 

1387–1388; Reichardt v. Hoffman (1997) 52 Cal.App.4th 754, 764.) 
7

such as the interpretation of a statute, are reviewed de novo.” (Caliber Bodyworks, Inc. v. 

Superior Court (2005) 134 Cal.App.4th 365, 373; accord, Blank v. Kirwan (1985) 39 

Cal.3d 311, 318.) We may also disregard allegations which are contrary to law or to a 

fact of which judicial notice may be taken. (Wolfe v. State Farm Fire & Casualty Ins. 

Co. (1996) 46 Cal.App.4th 554, 559–560.) 

We apply the abuse of discretion standard in reviewing a trial court’s denial of 

leave to amend. (Blank v. Kirwan, supra, 39 Cal.3d at p. 318.) Although leave to amend 

should be liberally granted, the trial court has discretion to sustain a demurrer without 

leave to amend where there is no reasonable probability that its defects could be cured by 

amendment. (Ibid.; Green v. Travelers Indemnity Co. (1986) 185 Cal.App.3d 544, 556.) 

It is appellants’ burden to show either that the trial court erred in sustaining the demurrer 

or abused its discretion in denying leave to amend. (Kong v. City of Hawaiian Gardens 

Redevelopment Agency (2002) 108 Cal.App.4th 1028, 1038.) 

B. Equitable Indemnity.

 In their first cause of action, appellants alleged they were entitled to “comparative 

equitable indemnity” in an amount believed to exceed $39 million.4 In support of their 

claim, they alleged on information and belief that the claims on which IPS prevailed 

“were based upon allegations/admissions of fraudulent conduct by defendant Colak, to 

the effect that he knowingly participated in the fraudulent preparation of Detection 

Logic’s Financial Documents, including the September Financials, which IPS relied upon 

to purchase Detection Logic.” They added that “Colak’s admissions, if true, render him 

liable as a joint tortfeasor along with the other defendants . . . .” On this basis, they 

alleged: “The IPS claims and any liability of plaintiffs were caused by acts and 

omissions of defendants Colak . . . (including particular acts and omissions arising out of 

and in connection with defendants’ obligations under the SPA and by law). To the extent 

 

4 This figure took into account an approximate $6.4 million accounting arbitration 

award entered against appellants in August 2010. 
8

plaintiffs’ liability to IPS in connection with the sale of Detection Logic was caused by 

the acts of Colak . . . , those defendants are responsible for any damages.” 

 “Equitable indemnity is an equitable doctrine that apportions responsibility among 

tortfeasors responsible for the same indivisible injury on a comparative fault basis. 

[Citation.] ‘[T]he equitable indemnity doctrine originated in the common sense 

proposition that when two individuals are responsible for a loss, but one of the two is 

more culpable than the other, it is only fair that the more culpable party should bear a 

greater share of the loss.’ [Citation.] A right of equitable indemnity can arise only if the 

prospective indemnitor and indemnitee are mutually liable to another person for the same 

injury. [Citation.]” (Fremont Reorganizing Corp. v. Faigin (2011) 198 Cal.App.4th 

1153, 1176–1177; accord, BFGC Architects Planners, Inc. v. Forcum/Mackey 

Construction, Inc. (2004) 119 Cal.App.4th 848, 852 [the doctrine of equitable indemnity 

“applies only among defendants who are jointly and severally liable to the plaintiff”]; 

Children’s Hospital v. Sedgwick (1996) 45 Cal.App.4th 1780, 1786 [“California common 

law recognizes a right of partial indemnity under which liability among multiple 

tortfeasors may be apportioned according to the comparative negligence of each”].) 

 Emphasizing one of the key elements necessary for equitable indemnity, the court 

in Stop Loss Ins. Brokers, Inc. v. Brown & Toland Medical Group (2006) 143 

Cal.App.4th 1036, 1040 (Stop Loss) stated: “It is well-settled in California that equitable 

indemnity is only available among tortfeasors who are jointly and severally liable for the 

plaintiff’s injury.” Amplifying that principle, the court explained that “California law 

does not permit equitable apportionment of damages for breach of contract” and declined 

to follow a New Mexico decision which adopted a contrary rule. (Id. at p. 1041, fn. 2.) 

While the concurring opinion in Stop Loss advocated for the application of indemnity 

principles on the ground that the indemnitor’s conduct could also be construed as a 

breach of duty, it acknowledged the inherent difficulties in applying equitable indemnity 

principles among parties liable in tort and for breach of contract because of the different 

measure of damages flowing from each form of liability. (Id. at p. 1054 (Pollak, J., 

concurring).) In view of those complications, the concurrence conceded that any change 
9

in the law should come from the Legislature or the Supreme Court and, absent such 

change, “we must adhere to the rule that equitable indemnity may be obtained only from 

one who is jointly and severally liable to the injured party based on the commission of a 

tort, i.e., based on the breach of a duty imposed by law.” (Id. at p. 1055 (Pollak, J., 

concurring).) 

Stop Loss affirmed an order sustaining a demurrer without leave to amend where 

the proposed indemnitor was liable, at most, for breach of contract. (Stop Loss, supra, 

143 Cal.App.4th at pp. 1042–1043.) Thereafter, the court in In re Medical Capital 

Securities Litigation (C.D. Cal. 2012) 842 F.Supp.2d 1208, 1213, relied on Stop Loss to 

affirm the dismissal of a complaint where the proposed indemnitee sought equitable 

indemnification for a breach of contract. According to the court, “California state law, as 

set forth by intermediate appellate courts, is clear. Equitable indemnity is only available 

between joint tortfeasors. Stop Loss Insurance Brokers, Inc. v. Brown & Toland Medical 

Group is exactly on point. . . . The Banks attempt to distinguish this case because the 

contractual defendant in Stop Loss was the third-party defendant, not the third-party 

plaintiff, as is the case here. This distinction does not control. As the Stop Loss court 

made clear, both the party seeking indemnification and the party from which it seeks 

indemnification must be tortfeasors. [Citation.]” (In re Medical Capital Securities 

Litigation, supra, at p. 1213; see also Travelers Casualty and Surety Co. of America v. 

Desert Gold Ventures, LLC (C.D. Cal. 2010) 2010 WL 5017798 at *15 [holding, as a 

matter of law, defendants could not seek equitable indemnity from cross-defendants 

because the claim against defendants was one for breach of contract and “whatever losses 

[defendants] incur as a result of their breach of the [contract] are theirs alone, not subject 

to apportionment”].) 

 Here, appellants’ liability was based on breach of contract. In its order sustaining 

Colak’s demurrer without leave to amend, the trial court took judicial notice of the 

arbitration award. In that award, the arbitrator expressly determined that appellants did 

not engage in fraud with respect to the preparation of the September financials, nor did 

they fraudulently induce IPS to enter into the SPA. Instead, they were contractually 
10

liable for Detection Logic’s breach of the SPA: “Section 10.1(a)(i) of the SPA provides 

that each Seller, which includes each of the Respondent Sellers herein, shall be jointly 

and severally liable for ‘any breach of any warranty or the inaccuracy of any 

representation of the Company contained in this Agreement.’” As the trial court 

explained, “the arbitrator found plaintiffs liable for breaching a contract term in the sales 

agreement in which the defendants affirmed that financial representations in the 

agreement were correct when in fact they were not and so plaintiffs became liable for the 

damage that was caused by the breach.” According to Stop Loss and its progeny, 

appellants cannot seek equitable indemnification from Colak because their liability was 

premised on their breach of contract, and the parties therefore were not joint tortfeasors 

responsible for a single injury.5

 We are unpersuaded that the authorities on which appellants rely require a 

different result. The discussion in Prince v. Pacific Gas & Electric Co. (2009) 45 Cal.4th 

1151 does not support appellants’ suggestion that the case eliminated the joint tortfeasor 

element of equitable indemnity. There, in order “to provide context to [the plaintiff’s] 

claim of a right to implied contractual indemnity,” (id. at p. 1158) the court described the 

three historical forms of indemnity: “(1) indemnity expressly provided for by contract 

(express indemnity); (2) indemnity implied from a contract not specifically mentioning 

 

5 The arbitrator also found that Detection Logic’s breach of the SPA was sufficient 

to support a claim for unfair business practices under Business and Professions Code 

section 17200, and determined that IPS’s damage were recoverable as restitution under 

this theory as well. The trial court ruled that the arbitrator’s finding appellants liable 

under this quasi-contract theory could not be the basis for an equitable indemnity claim 

because it did not render them joint tortfeasors with Colak. In their opening brief, 

appellants did not address the trial court’s unfair competition ruling and we therefore 

deem any challenge to that ruling waived. (E.g., Paulus v. Bob Lynch Ford, Inc. (2006) 

139 Cal.App.4th 659, 685 [“Courts will ordinarily treat the appellant’s failure to raise an 

issue in his or her opening brief as a waiver of that challenge”]; Christoff v. Union Pacific 

Railroad Co. (2005) 134 Cal.App.4th 118, 125 [“an appellant’s failure to discuss an issue 

in its opening brief forfeits the issue on appeal”]; Reyes v. Kosha (1998) 65 Cal.App.4th 

451, 466 [issues not properly raised in appellant’s brief are deemed forfeited or 

abandoned].) 
11

indemnity (implied contractual indemnity); and (3) indemnity arising from the equities of 

particular circumstances (traditional equitable indemnity). [Citation.]” (Id. at p. 1157, 

fn. omitted.) It explained that while “not extinguished, implied contractual indemnity is 

now viewed simply as ‘a form of equitable indemnity.’” (Id. at p. 1157.) Nonetheless, 

the court acknowledged that both types of indemnity retained distinct characteristics, as 

“‘traditional equitable indemnity’ . . . [was] not based on the existence of a contractual 

relationship between the indemnitor and the indemnitee,” while implied contractual 

indemnity continued to require that the indemnitor and indemnitee be in a contractual 

relationship with one another. (Id. at pp. 1157, fn. 2 & 1159.) In the context of resolving 

whether the plaintiff’s claim for implied contractual indemnity could be subject to 

statutory immunities, the Prince court reaffirmed the principle that traditional equitable 

indemnity is available only between joint tortfeasors. (Id. at p. 1160 [“traditional 

equitable indemnity differs significantly from express contractual indemnity, in that the 

former is not available in the absence of a joint legal obligation to the injured party”].) 

 The other two cases on which appellants principally rely, Considine Co. v. Shadle, 

Hunt & Hager (1986) 187 Cal.App.3d 760 (Considine) and Card Constr. Co. v. Ledbetter 

(1971) 16 Cal.App.3d 472 (Card), likewise addressed indemnity between parties in a 

contractual relationship. In Considine, a tenant sued his landlord for breach of contract 

and misrepresentation, and the landlord sought indemnity from counsel who had 

previously represented the landlord and tenant jointly. (Considine, supra, at pp. 763–

764.) Addressing whether the landlord could seek indemnity in the event he was found 

liable only for breach of contract, the court distinguished between implied contractual 

indemnity and traditional equitable indemnity. It explained: “A defendant sued for 

breach of contract may have a right of implied indemnity against a third person whose 

wrong caused the defendant’s breach. [Citations.] This implied right of indemnity, 

however, is distinct from the equitable indemnity among tortfeasors which was the 
12

subject of AMA.” (Id. at pp. 769–770.)6 Confirming that its reference to “implied 

indemnity” did not involve traditional equitable indemnity, the court cited County of Los 

Angeles v. Superior Court (1984) 155 Cal.App.3d 798, 803, disapproved by Bay 

Development, Ltd. v. Superior Court (1990) 50 Cal.3d 1012, 1032, fn. 12, and Nomellini 

Construction Co. v. Harris (1969) 272 Cal.App.2d 352, 359, both of which involved 

issues related to implied contractual indemnity. (Considine, supra, at pp. 769–770.) The 

balance of the discussion concerned the application of implied contractual indemnity 

principles to a breach of contract and the application of traditional equitable indemnity to 

an alleged breach of the duty of care. (Id. at pp. 770–771.) Contrary to appellants’ 

position, Considine did not apply traditional equitable indemnity to a breach of contract. 

 Similarly, Card, supra, 16 Cal.App.3d 472 involved a series of subcontractors in 

contractual relationships. The lowest level subcontractors submitted false invoices, 

causing mid-level subcontractor Card to pay a lower level subcontractor, who in turn 

never paid the lowest level subcontractors. (Id. at p. 475.) They successfully sued the 

general contractor and were paid by its bonding company. Pursuant to a bonding 

indemnity agreement, Card was required to satisfy the bonding company’s judgment. 

(Id. at p. 476.) Card then sought indemnity from the lowest level subcontractors on the 

ground that their conduct had forced it to pay twice—first when it paid the lower level 

subcontractor and again when it satisfied the judgment. (Id. at pp. 476–477.) Reversing 

an order sustaining a demurrer without leave to amend, the Card court characterized the 

claim as one for “implied indemnity,” explaining that because Card’s responsibility to 

pay was contractual and the subcontractor’s alleged responsibility was based on tortious 

misrepresentations, “we think appellant Card stated a cause of action against respondents 

in implied indemnity. [Citations.]” (Id. at p. 478.) 

“The right to implied indemnity may arise from contract or from equitable 

considerations. [Citations.]” (Standard Oil Co. v. Oil, Chemical etc. Internat. Union 

 

6 The court’s reference to “AMA” is an abbreviation for American Motorcycle Assn. 

v. Superior Court (1978) 20 Cal.3d 578, a case which first applied comparative fault 

principles to equitable indemnity. 
13

(1972) 23 Cal.App.3d 585, 588.) The Card court emphasized that the indemnity claim 

involved two distinct forms of liability—breach of contract and tortious 

misrepresentation. (Card, supra, 16 Cal.App.3d at p. 478.) Because there was no 

indication in Card that the court intended to dispense with joint tortfeasor requirement 

necessary for a claim of equitable indemnity, we conclude that the “implied indemnity” 

referenced in Card arose from contract. Accordingly, we do not construe the case to 

support appellants’ argument that they stated a valid cause of action for equitable 

indemnity against Colak. 

Finally, appellants’ belated citation in their reply brief to County of San Mateo v. 

Berney (1988) 199 Cal.App.3d 1489 does not assist them. In that case, the court held that 

a public entity sued for inverse condemnation may bring a cross-complaint for equitable 

indemnity against “third parties whose negligent or fraudulent acts were causative factors 

in the damaging or taking of private property.” (Id. at p. 1494.) But a cause of action for 

inverse condemnation is unlike one for breach of contract, as “when the government 

takes or damages property, it is strictly liable to pay compensation therefor, unless an 

exception to strict liability applies. [Citation.]” (Paterno v. State of California (1999) 74 

Cal.App.4th 68, 82.) Thus, the case was an application of the general principle “that 

equitable indemnity may also be used to apportion liability where ‘“one or more 

tortfeasors’ liability rests on the principle of strict liability.”’ [Citations.]” (Greystone 

Homes, Inc. v. Midtec, Inc. (2008) 168 Cal.App.4th 1194, 1208–1209.) 

C. Tort of Another.

In their third cause of action, appellants sought attorney fees and costs, alleging: 

“Due to the torts of the defendants, plaintiffs have been forced to protect their interests by 

defending litigation brought by IPS and by filing this action against defendants. To 

protect their interests, plaintiffs have incurred, and continue to incur, attorneys’ fees, 

costs and statutory prejudgment interest owed to IPS.” The trial court ruled that the 

doctrine did not apply here, where appellants incurred fees in defending themselves 

against allegations for which Detection Logic was found liable. 
14

The “tort of another” doctrine is one of several equitable exceptions to the general 

rule that each party bears the cost of employing an attorney unless a statute or agreement 

provides otherwise. (See Prentice v. North Amer. Title Guar. Corp. (1963) 59 Cal.2d 

618, 620 (Prentice); Heckert v. McDonald (1989) 208 Cal.App.3d 832, 837.) The 

doctrine provides: “A person who through the tort of another has been required to act in 

the protection of his interests by bringing or defending an action against a third person is 

entitled to recover compensation for the reasonably necessary loss of time, attorney’s 

fees, and other expenditures thereby suffered or incurred. [Citations.]” (Prentice, supra, 

at p. 620.) In Davis v. Air Technical Industries, Inc. (1978) 22 Cal.3d 1, our Supreme 

Court cautioned that “the Prentice exception was not meant to apply in every case in 

which one party’s wrongdoing causes another to be involved in litigation with a third 

party. If applied so broadly, the judicial exception would eventually swallow the 

legislative rule that each party must pay for its own attorney. [Citations.]” (Id. at p. 7, 

fn. omitted; see also David v. Hermann (2005) 129 Cal.App.4th 672, 689 [“The courts 

have refrained from expanding the rule in a way that would undermine the general rule 

that a party bears his own attorney fees”].) 

Accordingly, the tort of another doctrine has not been extended to enable a 

defendant to recover fees and expenses incurred in defending against allegations of his or 

her own wrongdoing. (Davis v. Air Technical Industries, Inc., supra, 22 Cal.3d at p. 6 

[“Since Davis defended exclusively against allegations of his own negligence, he is not 

entitled to recover attorney’s fees” under Prentice or any other doctrine]; accord, Santa 

Clara Valley Water Dist. v. Olin Corp. (2009) 655 F.Supp.2d 1048, 1063 [“Under Davis

. . . , the ‘tort of another’ doctrine of damages recognized in Prentice does not extend to 

allow recovery of legal expenses by a defendant who was defending against allegations 

of its own negligence”].) Nor is it of any consequence that the party seeking fees 

ultimately prevails in the underlying litigation. As the court in Watson v. Department of 

Transportation (1998) 68 Cal.App.4th 885, 894, explained: “The extension of the 

Prentice rule to the commonplace case of an exonerated alleged tortfeasor would go a 

long way toward abrogation of the American rule that each party to a lawsuit must 
15

ordinarily pay his or her own attorney’s fees. It would substantially expand the notion of 

duty under the law of torts to compensation of the litigation expenses incurred by all 

persons, however connected to any tortious event, whom the injured plaintiff elects to sue 

who succeed in establishing lack of liability.” 

Here, the judicially-noticed second amended complaint filed in the arbitration 

established that IPS’s allegations were directed against Katal and appellants collectively 

as the “sellers” of Detection Logic. The arbitration award confirmed that appellants 

defended against allegations of their own fraud and fraudulent inducement. The record 

fails to demonstrate the “‘exceptional circumstances’” found to be present in Manning v. 

Sifford (1980) 111 Cal.App.3d 7, 12, a case relied on by appellants. There, buyers sued 

an adjacent property owner and their real estate brokers when the property owner, 

Sifford, blocked an easement that the brokers had represented permitted access. (Id. at 

p. 9.) After the trial court confirmed the existence of the easement, the brokers sought 

recovery of attorney fees from Sifford, and the appellate court reversed the denial of fees, 

reasoning: “In this instance, brokers’ litigation expenses were incurred solely on behalf 

of the innocent prevailing parties who were the victims of Sifford’s wrongful conduct. 

Brokers were innocent of any wrongdoing but were compelled to prove the [buyers’] case 

against Sifford to protect themselves from liability. Under such circumstances, it is only 

fair that Sifford be required to compensate the brokers for their reasonable litigation 

expenses, including attorney’s fees.” (Id. at p. 12.) 

Though appellants now attempt to cast themselves in the role of the innocent 

brokers forced to help IPS prove its case against Katal, the arbitration award belies their 

position. (See Martinez v. Socoma Companies, Inc. (1974) 11 Cal.3d 394, 399 

[allegations constituting conclusions of law or contrary to matters subject to judicial 

notice not deemed true for purposes of demurrer]; Interinsurance Exchange v. Narula 

(1995) 33 Cal.App.4th 1140, 1143 [same].) According to the arbitrator, IPS’s evidence 

of fraud involved Katal’s acts and omissions that were established, in part, by Colak’s 

testimony. Unlike the brokers who helped prove the buyers’ case, appellants instead 

“presented evidence designed to discredit Colak.” The arbitrator found such evidence 
16

unpersuasive, noting that “the evidence showed that Katal often used threats and 

intimidation with the Company’s employees” and that Colak had reason to fear Katal 

would withhold a promised stock payment. Thus, appellants tried to protect themselves 

from liability by assailing Colak’s credibility. To apply the tort of another doctrine under 

these circumstances would essentially turn the doctrine on its head. The trial court 

properly ruled that “[a] tort of another claim cannot be brought by an exonerated party 

against a codefendant who is found liable for the fees that the party incurred in defending 

itself.” 

D. Declaratory Relief.

In their fourth cause of action, appellants sought a declaration concerning the 

proportionate fault of all parties involved in the arbitration. The trial court sustained 

Colak’s demurrer without leave to amend on the ground the claim was wholly derivative 

and duplicative of appellants’ other claims. 

“Generally, an action in declaratory relief will not lie to determine an issue which 

can be determined in the underlying tort action. ‘The declaratory relief statute should not 

be used for the purpose of anticipating and determining an issue which can be determined 

in the main action. The object of the statute is to afford a new form of relief where 

needed and not to furnish a litigant with a second cause of action for the determination of 

identical issues.’ [Citation.]” (California Ins. Guarantee Assn. v. Superior Court (1991) 

231 Cal.App.3d 1617, 1623–1624.) Here, the language of appellants’ declaratory relief 

cause of action shows that it was wholly derivative of the other causes of action and 

therefore the demurrer was properly sustained as to this claim. (See Ochs v. PacifiCare 

of California (2004) 115 Cal.App.4th 782, 794.) Specifically, appellants alleged they 

were entitled to comparative equitable indemnity and attorney fees and costs under the 

tort of another doctrine, and sought “a determination of defendant Colak’s liability and 

proportionate fault with respect to the IPS claims.” The declaration they sought was thus 

no different than what would have been determined in their underlying claims. 

Contrary to appellants’ assertion, Ball v. FleetBoston Financial Corp. (2008) 164 

Cal.App.4th 794 supports the trial court’s determination. There, the court held that the 
17

plaintiff’s declaratory relief cause of action was wholly derivative of its failed statutory 

claim where “[t]he only declaration sought by the cause of action is a judicial declaration 

that the arbitration provisions of the credit card agreement are illegal and unconscionable, 

and violate public policy,” and the statutory cause of action “requests that the 

enforcement of the arbitration provisions of the credit card agreement be enjoined, 

because they are unlawful and/or unconscionable.” (Id. at p. 800.) Here, similarly, 

appellants’ cause of action for comparative equitable indemnity sought a judgment 

against Colak “in an amount proportionate” to his fault and their cause of action for tort 

of another sought to hold Colak responsible for their attorney fees and costs. The 

determination sought by appellant’s declaratory relief claim was no different. 

Accordingly, the trial court properly sustained Colak’s demurrer to the fourth cause of 

action. 

II. The Trial Court Properly Exercised Its Discretion in Denying Leave to 

Amend.

 Appellants challenge the trial court’s denial of leave to amend in two contexts. 

First, they argue that, at a minimum, the demurrer should have been sustained with leave 

to amend. Second, they argue that their separate motion for leave to file a second 

amended complaint should have been granted. We address each claim in turn. 

A. Amendment to Complaint. 

In their opposition to the demurrer and at the hearing, appellants requested leave to 

amend. They bore the burden of showing that an amendment would cure the defects in 

their pleading. (Arce v. Childrens Hospital Los Angeles (2012) 211 Cal.App.4th 1455, 

1497, fn. 19.) A plaintiff seeking to satisfy that burden “‘“must show in what manner he 

can amend his complaint and how that amendment will change the legal effect of his 

pleading.” [Citation.] The assertion of an abstract right to amend does not satisfy this 

burden.’ [Citation.] The plaintiff must clearly and specifically state ‘the legal basis for 

amendment, i.e., the elements of the cause of action,’ as well as the ‘factual allegations 
18

that sufficiently state all required elements of that cause of action.’ [Citation.]” (Maxton 

v. Western States Metals (2012) 203 Cal.App.4th 81, 95.) 

Beyond mentioning the proposed addition of facts relating to the Reimbursement 

Agreement, appellants have not articulated either any factual allegations or legal bases 

for leave to amend. On appeal, though appellants have renewed their request for leave to 

amend, they have similarly failed to show how an amendment would cure the multiple 

defects in their complaint. “Where the appellant offers no allegations to support the 

possibility of amendment and no legal authority showing the viability of new causes of 

action, there is no basis for finding the trial court abused its discretion when it sustained 

the demurrer without leave to amend. [Citations.]” (Rakestraw v. California Physicians’ 

Service (2000) 81 Cal.App.4th 39, 44.) The trial court properly exercised its discretion in 

denying leave to amend in connection with its order sustaining the demurrer. 

B. Motion for Leave to Amend. 

On the same day that the trial court sustained Colak’s demurrer without leave to 

amend, appellants filed a motion for leave to file a second amended complaint. For the 

first time, they alleged a breach of contract cause of action, seeking recovery from Colak 

under the Reimbursement Agreement. They alleged that the total amount due under the 

Reimbursement Agreement became final on October 24, 2011 after the parties reached a 

stipulation concerning costs, they immediately made a demand on Colak that he pay his 

pro forma percentage, and he rejected the demand on November 17, 2011. 

In its order denying appellants’ motion, the trial court described at length how the 

record established appellants were aware of their breach of contract claim at the time they 

filed their earlier pleadings, but for strategic reasons elected to omit it. The trial court 

further explained that because appellants had filed their motion after it had already 

sustained Colak’s demurrer without leave to amend, the motion must be treated as one for 

reconsideration. So construed, the trial court found the motion had no merit: “Plaintiffs 

were plainly aware of their potential breach of contract against Colak when they filed 

their opposition to Colak’s demurrer—they were aware of it when they filed their original 

and first amended complaints. Because plaintiffs had knowledge of the breach of 
19

contract theory at the time they opposed the Colak demurrer, they have failed to offer 

new or different facts, circumstances or law that they could not with reasonable diligence 

have discovered and produced at the time of the hearing on Colak’s demurrer and 

reconsideration under CCP Section 1008 is thus improper.” The trial court concluded its 

order by declining to reconsider the order sustaining Colak’s demurrer on its own motion, 

“because it wishes to discourage the kind of gamesmanship that plaintiffs have engaged 

in.” 

We review the denial of a motion for reconsideration for an abuse of discretion. 

(California Correctional Peace Officers Assn. v. Virga (2010) 181 Cal.App.4th 30, 42; 

New York Times Co. v. Superior Court (2005) 135 Cal.App.4th 206, 212.) “Where a 

demurrer has been sustained without leave to amend, it is proper to seek reconsideration 

based on a proposed amended complaint alleging different facts than the complaint to 

which the demurrer was sustained. The amended pleading itself constitutes a ‘different 

state of facts’ to permit reconsideration under CCP § 1008(a).” (Weil & Brown, Cal. 

Practice Guide: Civil Procedure Before Trial (The Rutter Group 2012) ¶ 7:155.6, 

p. 7(1)-65 (rev. # 1, 2012), citing Rains v. Superior Court (1984) 150 Cal.App.3d 933, 

944 (Rains).) Also relying on Rains, the court in Careau & Co. v. Security Pacific 

Business Credit, Inc. (1990) 222 Cal.App.3d 1371, 1386, seemed to suggest that the trial 

court abused its discretion in the event it denied such a motion: “Under Rains v. Superior 

Court (1984) 150 Cal.App.3d 933, 943–944, plaintiffs were entitled to submit proposed 

second amended complaints by way of a motion for reconsideration. If those second 

amended complaints stated any causes of action, then the trial court was obligated to 

(1) vacate its order which sustained the demurrers without leave to amend and (2) make a 

different order granting plaintiffs leave to file an amended complaint, which would 

include the causes of action which the trial court, in deciding the merits of the motion for 

reconsideration, determined were valid. [Citation.]” 

In Rains, psychiatric patients brought several causes of action against psychiatrists 

in a residential treatment program. In connection with their claim for battery, the 

plaintiffs alleged that although they had consented to certain types of physical violence 
20

for treatment purposes, the assaults were used to control their behavior under the guise of 

treatment. (Rains, supra, 150 Cal.App.3d at pp. 936–937.) On demurrer, the defendants 

argued that the plaintiffs’ admission of consent barred their battery claim, and the trial 

court sustained the demurrer without leave to amend. (Id. at p. 937.) The plaintiffs 

moved for reconsideration and submitted a proposed complaint that contained additional 

allegations showing that the defendants had withheld information concerning the purpose 

of the assaults and batteries, and the appellate court concluded that the plaintiffs stated a 

valid claim. (Id. at p. 938.) 

In connection with its determination that sanctions were not warranted for the 

plaintiffs’ procedural use of a motion for reconsideration, the Rains court determined that 

the “different facts” alleged in the proposed pleading sufficed as the “new or different 

facts” required under Code of Civil Procedure 1008, subdivision (a). (Rains, supra, 150 

Cal.App.3d at p. 944.) Finding that the plaintiffs satisfied the statutory requirements, the 

court held there was no basis for the imposition of sanctions; it did not, however, 

mandate that a motion for reconsideration must be granted in every instance where a 

proposed amended pleading sets forth different facts. (Id. at pp. 944–945.) 

Importantly, more recent cases construing Code of Civil Procedure section 1008 

have held that “[a] motion for reconsideration must be based on new or different facts, 

circumstances or law [citation], and facts of which the party seeking reconsideration was 

aware at the time of the original ruling are not ‘new or different.’ [Citation.]” (In re 

Marriage of Herr (2009) 174 Cal.App.4th 1463, 1468; see Hennigan v. White (2011) 199 

Cal.App.4th 395, 405–406 [motion for reconsideration of summary judgment properly 

denied where, at the time of the original ruling, the plaintiff was aware of the information 

in the new declarations she sought to offer]; Garcia v. Hejmadi (1997) 58 Cal.App.4th 

674, 688–690 [same].) Here, the record unambiguously shows that—at the latest—

appellants were aware of all facts necessary to allege their breach of contract claim at the 

time of the hearing on the demurrer. Thus, their breach of contract allegations were 

insufficient to serve as new or different facts necessary for reconsideration. 
21

We find it equally significant that the Rains court observed it was “not apparent 

that plaintiffs sought such reconsideration in bad faith or that the contentions there 

advanced were believed by them to be frivolous.” (Rains, supra, 150 Cal.App.3d at 

p. 944.) Here, in contrast, the trial court expressly found that appellants had engaged in 

“gamesmanship” by deliberately omitting the breach of contract cause of action from 

their first two complaints and electing “to put all their eggs in the one basket of their 

equitable indemnity theory of recovery.” As Colak pointed out in his opposition to the 

motion for leave to amend, appellants’ strategy was obvious: They sought over 

$39 million in their comparative equitable indemnity claim as compared to the $340,000 

dictated by the Reimbursement Agreement. But, their claim under the Reimbursement 

Agreement would potentially bar their comparative equitable indemnity claim. (See 

Markley v. Beagle (1967) 66 Cal.2d 951, 961 [“Since the parties expressly contracted 

with respect to the contractors’ duty to indemnify the owners, the extent of that duty must 

be determined from the contract and not from the independent doctrine of equitable 

indemnity”].) The trial court therefore determined that appellants “elected, for strategic 

reasons, not to allege” their breach of contract claim, even though they were aware of it 

from the beginning. 

The trial court properly exercised its discretion to conclude that appellants’ tactics 

rendered them unable to offer a valid basis for failing to raise the breach of contract claim 

before the demurrer had been sustained without leave to amend. (See Forrest v. 

Department of Corporations (2007) 150 Cal.App.4th 183, 202 [a motion for 

reconsideration requires a strong showing of diligence] disapproved on another point in 

Shalant v. Girardi (2011) 51 Cal.4th 1164, 1172, fn. 3; Mink v. Superior Court (1992) 2 

Cal.App.4th 1338, 1342 [the party seeking reconsideration must offer a satisfactory 

explanation for the failure to produce the new or different facts at an earlier time].) 

Likewise, on appeal appellants have failed to offer a satisfactory explanation for failing to 

bring the breach of contract claim earlier, instead asserting that their motion should not 

have been characterized as one for reconsideration. We conclude they have failed to 

meet their burden to show an abuse of discretion. 
22

DISPOSITION

 The judgment is affirmed. Colak is entitled to his costs on appeal. 

 NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS. 

_____________________, J. *

 FERNS 

We concur: 

____________________________, Acting P. J. 

 ASHMANN-GERST 

____________________________, J. 

 CHAVEZ 

 

* Judge of the Los Angeles Superior Court, assigned by the Chief Justice pursuant to 

article VI, section 6 of the California Constitution.