Court Opinion

ID: 3219524
Source: CourtListenerOpinion
Date Created: 2016-07-01 21:03:40.326575+00
Date Added: 2024-06-11T07:39:49.049031
License: Public Domain

Filed 7/1/16
                          CERTIFIED FOR PUBLICATION

               IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

                           SECOND APPELLATE DISTRICT

                                      DIVISION FIVE

DAVID CHANG et al.,                              B261194

        Plaintiffs and Respondents,              (Los Angeles County
                                                 Super. Ct. No. BC479858)
        v.

COUNTY OF LOS ANGELES,

        Defendant and Appellant.

        APPEAL from a judgment of the Superior Court of Los Angeles County, Kevin
Clement Brazile, Judge. Reversed.
        Hurrell Cantrall, Thomas C. Hurrell, Melinda Cantrall, for Defendant and
Appellant.
        Green & Shinee, Elizabeth J. Gibbons, Amanda J. Waters, for Plaintiffs and
Respondents.
                               _______________________
          A public entity employer provided a defense for three employees under a
reservation of rights, then refused to pay the resulting judgment for battery and civil
rights violations on the ground that the employees acted with actual malice. The
employees sought indemnification from their employer under Government Code section
825.1 The trial court granted summary judgment in favor of the employees. On appeal,
the public entity contends that because the defense was conducted under a reservation of
rights, the employees had to satisfy the requirements of section 825.2 for indemnification.
We hold that section 825.2 applies when a public entity employer provides a defense
under a reservation of rights that includes reservation of the right not to indemnify for
acts committed with actual fraud, corruption or actual malice. An employer’s reservation
of the right to indemnity from the employee for acts committed with actual fraud,
corruption or actual malice is necessarily a reservation of the right not to indemnify the
employee for such acts. We reverse the judgment with directions.

                        FACTS AND PROCEDURAL BACKGROUND

          On November 5, 2007, Los Angeles County Sheriff’s Deputies David Chang,
Anthony Pimentel, and Kris Cordova assaulted inmate Alejandro Franco, including using
pepper spray on his anus and genital area. Franco brought an action against the deputies
for battery and civil rights violations under 42 U.S.C. § 1983. (Franco v. Gennaco, et al.,
(C.D. Cal. Aug. 11, 2015, No. LA CV 09-00893-VBF-FFMx) (Franco).)
          The deputies signed agreements with the County of Los Angeles setting forth the
terms and conditions under which the County would defend them. The first paragraph of
each agreement listed circumstances under which the County might withdraw from
defending a deputy, including if the County determined he did not act within the scope of
his employment under section 995.2, subdivision (a)(1), or he acted or failed to act

          1   All further statutory references are to the Government Code, unless otherwise
stated.

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because of actual fraud, corruption, or actual malice under section 995.2, subdivision
(a)(2).
          The second paragraph stated circumstances under which the County might not
indemnify the deputy: “In defending you, the County reserves its right not to pay any
judgment, compromise or settlement on your behalf until it is established that the injury
arose out of an act or omission occurring within the scope of your employment as an
employee or officer of the County. The County also will not pay any party of a claim or
judgment that is for punitive or exemplary damages. (Section 825(a).)”
          The third paragraph stated circumstances under which the County might seek
indemnification from the deputy: “If the County pays any claim or judgment, or any
portion thereof, for an injury arising out of your act or omissions, the County may
recover the amount of such payment from you unless you establish that the act or
omission upon which the claim or judgment is based occurred within the scope of your
employment as an employee or official of the County, and the County fails to establish
that you acted or failed to act because of actual fraud, corruption or actual malice, or that
you willfully failed or refused to reasonably cooperate in good faith in the defense
conducted by the public entity. (Section 825.6.)”
          The agreement ended with a recitation in capital letters, “I request and agree that
the County may provide for my defense in the subject action, subject to the reservations
set forth above. I agree to cooperate fully with the attorneys the County provides to me,
and keep them advised at all times of my mailing address and telephone number.”
          On September 9, 2010, following a jury trial, the jury found the deputies violated
Franco’s federal civil rights, causing injury or harm to him. The jury also found each of
the deputies acted with malice, oppression or reckless disregard in violating Franco’s
civil rights. In addition, the jury found each of the deputies committed battery on Franco
while acting within the course and scope of their employment with the Los Angeles
County Sheriff’s Department, causing Franco injury or harm. Each of the deputies acted
with malice, oppression, or fraud in committing battery on Franco.

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       Against each deputy, the jury awarded compensatory damages of $85,000 and
punitive damages of $50,000. The total compensatory damage award was $255,000.
Judgment was entered on September 28, 2010, against the deputies and in favor of
Franco. The deputies were jointly and severally liable for an award of costs of $6,754.80
and attorney fees of $189,331.67. The total judgment, excluding punitive damages, was
$451,086.47. The judgment has not been paid.
       The deputies’ request for indemnification from the Los Angeles County Board of
Supervisors was denied. The deputies filed a claim for damages with the County on July
11, 2011. On February 28, 2012, the deputies filed a complaint against several
defendants, including the County, the Board of Supervisors, and the Los Angeles County
Office of the County Counsel, seeking to compel payment of the Franco judgment. On
June 17, 2013, the deputies filed the operative third amended complaint for
indemnification of the compensatory damages award. The complaint alleged Franco was
the “real party in interest” to whom the damages were owed. The deputies were seeking
indemnification for these damages. The cause of action for indemnification was based on
sections 814 and 825. The deputies alleged they were entitled to indemnification for all
economic, non-punitive damages awarded in Franco as a matter of law.
       On August 14, 2014, the county defendants filed a motion for summary judgment,
or in the alternative, summary adjudication, on grounds including that: 1) the deputies’
claim for indemnification was barred under section 825, subdivision (b), because the jury
found the deputies acted with malice; 2) the deputies were not entitled to attorney fees
under section 800; and 3) the Board of Supervisors and the County Counsel were immune
as a matter of law. The deputies opposed the motion.
       The deputies filed a motion for summary judgment, or in the alternative, summary
adjudication, on August 15, 2014. The deputies argued the County must indemnify them,
because: 1) the County was liable for their conduct in the course and scope of their
employment under section 815.2; 2) the County provided a defense under section 825,
subdivision (a), and as a result, the County required to pay the judgment based on acts
arising out of the course and scope of their employment; and 3) the County reserved the

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right not to pay the judgment only if the acts were not in the course and scope of
employment. The County opposed the motion.
       A hearing was held on the motions. At the time of the hearing, Franco had
attached the deputies’ bank accounts and was seeking to execute on the judgment in the
underlying action. On December 18, 2014, the trial court granted the deputies’ motion
for summary adjudication on the issue of indemnification based on finding the County
was required to indemnify the deputies, excluding punitive damages, pursuant to section
825, subdivision (a), and the reservation of rights. The trial court denied the county
defendants’ motion for summary adjudication of the indemnification claim, finding it was
not barred by application of section 825.2, subdivision (b), but granted summary
adjudication on the issues of attorney fees and immunity of the Board of Supervisors and
the County Counsel. The trial court entered judgment in favor of the deputies based on
the court’s rulings on the summary adjudication motion, ordering that the deputies
recover indemnification from the County of $451,086.47. The County filed a timely
notice of appeal.

                                      DISCUSSION

Standard of Review and Principles of Statutory Interpretation

       We review the trial court’s rulings on summary judgment motions de novo.
(MacIsaac v. Waste Management Collection & Recycling, Inc. (2005) 134 Cal. App. 4th
1076, 1081-1082 (MacIsaac).) “On appeal from the granting of a motion for summary
judgment, we examine the record de novo, liberally construing the evidence in support of
the party opposing summary judgment and resolving doubts concerning the evidence in
favor of that party.” (Miller v. Department of Corrections (2005) 36 Cal. 4th 446, 460.)
       We also review questions of statutory interpretation de novo. (MacIsaac, supra,
134 Cal.App.4th at pp. 1081-1082.) “We begin with the fundamental rule that our
primary task is to determine the lawmakers’ intent.” (Delaney v. Superior Court (1990)

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50 Cal. 3d 785, 798.) To determine legislative intent, “we first look to the plain meaning
of the statutory language, then to its legislative history and finally to the reasonableness
of a proposed construction.” (Riverview Fire Protection Dist. v. Workers’ Comp.
Appeals Bd. (1994) 23 Cal. App. 4th 1120, 1126.)
       The words of the statute are the first step in the interpretive process. (Mt. Hawley
Ins. Co. v. Lopez (2013) 215 Cal. App. 4th 1385, 1397.) “We give the words of the statute
‘a plain and commonsense meaning’ unless the statute specifically defines the words to
give them a special meaning. [Citations.] If the statutory language is clear and
unambiguous, our task is at an end, for there is no need for judicial construction.
[Citations.] In such a case, there is nothing for the court to interpret or construe.
[Citation.]” (MacIsaac, supra, 134 Cal.App.4th at p. 1083.)
       We do not interpret the words of the statute in isolation. (MacIsaac, supra, 134
Cal.App.4th at p. 1083.) “Rather, we construe the words of the statute in context,
keeping in mind the statutory purpose. [Citation.] We will not follow the plain meaning
of the statute ‘when to do so would “frustrate[ ] the manifest purposes of the legislation
as a whole or [lead] to absurd results.”‘ [Citations.] Instead, we will ‘“interpret
legislation reasonably and . . . attempt to give effect to the apparent purpose of the
statute.”‘ [Citation.]” (Ibid.)
       “When the plain meaning of the statute’s text does not resolve the interpretive
question, we must proceed to the second step of the inquiry. [Citations.] In this second
step, ‘the courts may turn to rules or maxims of construction “which serve as aids in the
sense that they express familiar insights about conventional language usage.”‘ [Citation.]
We may also look to a number of extrinsic aids, including the statute’s legislative history,
to assist us in our interpretation. [Citations.]” (MacIsaac, supra, 134 Cal.App.4th at
pp.1083-1084, fn. omitted.)
       “If ambiguity remains after resort to secondary rules of construction and to the
statute’s legislative history, then we must cautiously take the third and final step in the
interpretive process. [Citation.] In this phase of the process, we apply ‘reason,
practicality, and common sense to the language at hand.’ [Citation.] Where an

                                              6
uncertainty exists, we must consider the consequences that will flow from a particular
interpretation. [Citation.]” (MacIsaac, supra, 134 Cal.App.4th at p. 1084.)

Indemnification

       The deputies contend they are entitled to indemnification from the County under
section 825. The County asserts section 825.2 applies in this case, because the defense
was provided under a reservation of rights. We conclude that section 825.2 applies when
a public entity employer provides a defense under a reservation of rights that includes a
reservation of the right not to pay a judgment based on actual fraud, corruption or actual
malice.
       “In 1963, the Tort Claims Act was enacted in order to provide a comprehensive
codification of the law of governmental liability and immunity in California. (Los
Angeles Police Protective League v. City of Los Angeles (1994) 27 Cal. App. 4th 168,
174.) As part of its overall statutory scheme, the Tort Claims Act provides that in the
usual civil case brought against a public employee, a public entity is required to defend
the action against its employee [(§ 995 et seq.)] and to pay any claim or judgment against
the employee in favor of the third party plaintiff (§ 825 et seq.). A principal purpose of
the indemnification statutes is to assure ‘the zealous execution of official duties by public
employees.’ (Johnson v. State of California (1968) 69 Cal. 2d 782, 792.)” (Farmers Ins.
Group v. County of Santa Clara (1995) 11 Cal. 4th 992, 1001, fn. omitted.)
       A public entity’s duty to defend an employee is contained in sections 995 through
996.6. Upon an employee’s request, with certain exceptions as provided in sections
995.2 and 995.4, “a public entity shall provide for the defense of any civil action or
proceeding brought against him, in his official or individual capacity or both, on account
of an act or omission in the scope of his employment as an employee of the public
entity.” (§ 995) A public entity may refuse to provide for an employee’s defense if the
public entity determines: 1) the act or omission was not within the employee’s scope of
employment; 2) the employee acted or failed to act because of actual fraud, corruption, or

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actual malice; or 3) the defense would create a specific conflict of interest between the
public entity and employee, as defined by the statute. (§ 995.2, subd. (a).)
       A public entity’s duty to indemnify an employee is contained in sections 825
through 825.6. Under section 825, subdivision (a), if an employee makes a timely
request in writing that a public entity provide a defense in a civil action for an injury
arising out of an act or omission occurring within the scope of his or her employment,
and the public entity conducts the defense with the employee’s reasonable good-faith
cooperation, “the public entity shall pay any judgment based thereon or any compromise
or settlement of the claim or action to which the public entity has agreed.” 2 If the public
entity conducted the defense pursuant to an agreement reserving the right not to pay the
judgment until it is established that the injury occurred from an act or omission within the
scope of employment, then the public entity is required to pay the judgment only if it is
established that the injury occurred from an act or omission within the scope of

       2 Section 825, subdivision (a), provides: “Except as otherwise provided in this
section, if an employee or former employee of a public entity requests the public entity to
defend him or her against any claim or action against him or her for an injury arising out
of an act or omission occurring within the scope of his or her employment as an
employee of the public entity and the request is made in writing not less than 10 days
before the day of trial, and the employee or former employee reasonably cooperates in
good faith in the defense of the claim or action, the public entity shall pay any judgment
based thereon or any compromise or settlement of the claim or action to which the public
entity has agreed. [¶] If the public entity conducts the defense of an employee or former
employee against any claim or action with his or her reasonable good-faith cooperation,
the public entity shall pay any judgment based thereon or any compromise or settlement
of the claim or action to which the public entity has agreed. However, where the public
entity conducted the defense pursuant to an agreement with the employee or former
employee reserving the rights of the public entity not to pay the judgment, compromise,
or settlement until it is established that the injury arose out of an act or omission
occurring within the scope of his or her employment as an employee of the public entity,
the public entity is required to pay the judgment, compromise, or settlement only if it is
established that the injury arose out of an act or omission occurring in the scope of his or
her employment as an employee of the public entity. [¶] Nothing in this section
authorizes a public entity to pay that part of a claim or judgment that is for punitive or
exemplary damages.”

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employment. (§ 825, subd. (a).) The public entity is not authorized under this section to
pay punitive or exemplary damages. (§ 825, subd. (a).)
       It is clear that under the provisions of section 825 alone, the County would be
required to pay the non-punitive damages awarded against the deputies. The County
conducted the defense. It reserved the right not to pay the judgment until it was
established that the acts occurred within the scope of employment, but the jury found the
acts causing Franco’s injuries occurred within the scope of the deputies’ employment.
       The County contends, however, that section 825.2 applies when an employee
seeks indemnification and the public entity conducted the employee’s defense under a
reservation of rights. Section 825.2, subdivision (a), states that, except as provided in
subdivision (b), if an employee pays a judgment, or any portion of a judgment, that the
public entity is required to pay under section 825, he is entitled to recover the amount of
the payment from the public entity. Section 825.2, subdivision (b), provides: “If the
public entity did not conduct his defense against the action or claim, or if the public entity
conducted such defense pursuant to an agreement with him reserving the rights of the
public entity against him, an employee or former employee of a public entity may recover
from the public entity under subdivision (a) only if he establishes that the act or omission
upon which the claim or judgment is based occurred within the scope of his employment
as an employee of the public entity and the public entity fails to establish that he acted or
failed to act because of actual fraud, corruption or actual malice or that he willfully failed
or refused to conduct the defense of the claim or action in good faith or to reasonably
cooperate in good faith in the defense conducted by the public entity.”
       Although section 825.2 states that it applies when an employee pays a judgment
and seeks to recover those payments, the terms “pays” and “recover” have been
interpreted broadly and do not require literal payment. (Rivas v. City of Kerman (1992)
10 Cal. App. 4th 1110, 1120.) Section 825.2 has been interpreted to apply when a
judgment is entered against the employee. (Ibid.) “A literal interpretation of section
825.2, subdivision (a) would also lead to great injustice for potentially innocent
employees, denied a defense by their public entity employer, who nonetheless become

                                              9
liable for a judgment arising out of the course and scope of their employment with the
public entity. Such employees would be required to pay the judgment, in many cases
bankrupting themselves, before triggering any duty on the part of the public entity
employer to reimburse them for their losses. To the extent the judgment exceeds the
employee’s assets, the injured plaintiff would also be irreparably injured as he or she
would have no ability to collect on the judgment for any amount in excess of the
employee’s ability to pay.” (Id. at pp. 1120-1121.)
       In cases where the public entity has defended an action under a reservation of
rights, it would lead to an absurd result to require literal payment before applying section
825.2. If literal payment were required to satisfy section 825.2, then the right to
indemnification when a defense has been conducted under a reservation of rights would
depend on the speed and success of a third party’s enforcement procedures. In this case,
for example, the deputies would have the right to indemnification under section 825 as
long as no payment has been made, but as soon as Franco attached their bank accounts
and obtained a payment on the judgment, the deputies would have been required satisfy
the provisions of section 825.2 to receive indemnification. This would lead to injustice.
The terms “pays” and “recover” must be interpreted broadly to include situations where a
judgment is entered against an employee in order to harmonize the provisions of sections
825 and 825.2.
       Section 825.2, subdivision (b), applies when a public entity conducts a defense
pursuant to an agreement “reserving the rights of the public entity against him,” but it is
not clear from the statute which rights the public entity must reserve to trigger the
protections of section 825.2. A literal interpretation of section 825.2 would allow the
public entity to reserve any right and invoke the protections of section 825.2. Under this
interpretation, the rights reserved in the agreement could have no connection to the rights
enforced in section 825.2, which would not effect the purpose of the statutory scheme.
The agreement referred to in section 825.2 could be the same as the agreement referred to
in section 825 reserving the right not to pay any judgment until it is established that the
injury occurred from an act or omission within the scope of employment. Although this

                                             10
interpretation would harmonize the statutory provisions, it would not provide any notice
that the public entity would have the right not to pay a judgment arising from an act or
omission within the scope of employment because of actual malice, corruption or actual
fraud. The most sensible interpretation is that the agreement must reserve the right not to
pay a judgment arising from an act or omission within the scope of employment because
of actual malice, corruption or actual fraud in order for the public entity to rely on the
protection of that right under section 825.2.
       Our interpretation is supported by the legislative history. The California Law
Revision Commission issued several recommendations in 1963 which formed the basis of
the Tort Claims Act, including the following: “11. Whenever a public entity is held
liable for acts of an employee committed with actual fraud, corruption or actual malice,
the public entity should have the right to indemnity from the employee. This right to
indemnity, however, should not exist in any case where the public entity has undertaken
the defense of the employee, unless the public entity has reserved a right of indemnity by
agreement with the employee. In conducting an employee’s defense, the entity’s interest
might be adverse to the interest of the employee. For example, if both the employee and
the entity were joined as defendants, the public entity’s interest might be best served by
showing malice on the part of the employee; for if the employee acted with malice the
public entity could recover indemnity from the employee for any amounts the entity was
required to pay. Hence, the undertaking of an employee’s defense should constitute a
waiver of the public entity’s right to indemnity unless, by agreement between the entity
and the employee, the public entity’s right of indemnity is reserved.” (Recommendation
Relating to Sovereign Immunity, Tort Liability of Public Entities and Public Employees
(Jan. 1963) 1 Cal. Law Revision Com. Rep. (1963) p. 819.)
       We hold that when a public entity defends an employee under a reservation of
rights which includes reserving the right of indemnity for acts or omissions because of
actual malice, corruption or actual fraud, then the requirements of section 825.2 must be
satisfied to be entitled to indemnification.

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       The agreement reserving the public entity’s rights in this case included a
reservation of the right to indemnity from the deputies for acts or omissions taken
because of actual malice, corruption or actual fraud, as authorized under section 825.6.3
By necessary implication, the County reserved the right not to indemnify the deputies for
acts within the course and scope of their employment that were taken with actual malice.
Having reserved that right, the County could invoke section 825.2. The County showed
the jury found the deputies acted with actual malice, or at the very least, a triable issue of
fact existed as to whether the deputies acted with malice. Therefore, the deputies’ motion
for summary adjudication of the issue of indemnification should have been denied.

       3 Section 825.6 provides, “(a)(1) Except as provided in subdivision (b), if a public
entity pays any claim or judgment, or any portion thereof, either against itself or against
an employee or former employee of the public entity, for an injury arising out of an act or
omission of the employee or former employee of the public entity, the public entity may
recover from the employee or former employee the amount of that payment if he or she
acted or failed to act because of actual fraud, corruption, or actual malice, or willfully
failed or refused to conduct the defense of the claim or action in good faith. Except as
provided in paragraph (2) or (3), a public entity may not recover any payments made
upon a judgment or claim against an employee or former employee if the public entity
conducted his or her defense against the action or claim. [¶] (2) If a public entity pays
any claim or judgment, or any portion thereof, against an employee or former employee
of the public entity for an injury arising out of his or her act or omission, and if the public
entity conducted his or her defense against the claim or action pursuant to an agreement
with him or her reserving the rights of the public entity against him or her, the public
entity may recover the amount of the payment from him or her unless he or she
establishes that the act or omission upon which the claim or judgment is based occurred
within the scope of his or her employment as an employee of the public entity and the
public entity fails to establish that he or she acted or failed to act because of actual fraud,
corruption, or actual malice or that he or she willfully failed or refused to reasonably
cooperate in good faith in the defense conducted by the public entity. [¶] (3) If a public
entity pays any claim or judgment, or any portion thereof, against an employee or former
employee of the public entity for an injury arising out of his or her act or omission, and if
the public entity conducted the defense against the claim or action in the absence of an
agreement with him or her reserving the rights of the public entity against him or her, the
public entity may recover the amount of that payment from him or her if he or she
willfully failed or refused to reasonably cooperate in good faith in the defense conducted
by the public entity.”

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       The judgment in favor of the deputies and the portion of the order granting the
deputies’ motion for summary adjudication of the indemnification claim are reversed.
The portion of the order denying the county defendants’ motion for summary
adjudication based on the application of section 825.2 must also be reversed. The matter
is remanded for further proceedings consistent with this opinion.

                                      DISPOSITION

       The judgment and the portion of the order granting summary adjudication in favor
of David Chang, Anthony Pimentel, and Kris Cordova are reversed. The portion of the
order denying the County’s motion for summary adjudication of the indemnification
claim is also reversed. The trial court is directed to enter a new and different order
denying the motion for summary adjudication brought by Chang, Pimentel, and Cordova,
and to conduct further proceedings on the County’s motion for summary adjudication in
accordance with this opinion. The County is awarded its costs on appeal.

              KRIEGLER, J.

We concur:

              TURNER, P.J.

              BAKER, J.

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