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John Hancock Mutual Life Ins. Co. v. Setser2/28/1996
PHELAN, J.
John Hancock Mutual Life Insurance Company (hereinafter John Hancock or appellant) timely appeals from an order of the San Mateo County Superior Court denying its application for attorney fees (Code Civ. Proc., § 1021.6) on the grounds that a fee award was barred by a good faith settlement (§ 877.6) between the plaintiff, Ruby Waldron (hereinafter Waldron or plaintiff), and the remaining defendants, Robert Setser, Sofian Susantio and Net Equity Associates (collectively, hereinafter, the Setser defendants or respondents). We conclude that John Hancock's statutory claim for attorney fees, which is an aspect of a claim for implied indemnity on which it had prevailed prior to confirmation of the good faith settlement, is not barred by section 877.6. Accordingly, we reverse.
I. FACTUAL AND PROCEDURAL BACKGROUND
This case arises from the sale to Waldron of a "reverse mortgage" program by the Setser defendants in January 1990. In June 1991, Waldron sued the Setser defendants, John Hancock and others, alleging breach of contract, fraud, negligent infliction of emotional distress, and breach of fiduciary duty. Although Waldron amended her complaint several times, at all relevant times the allegations against John Hancock were that the Setser defendants were its agents and used its letterhead to solicit Waldron for the reverse mortgage program and in subsequent correspondence encouraging her to participate. In August 1991, John Hancock cross-complained for indemnity against the Setser defendants, claiming that it did not know about, authorize or participate in their tortious conduct.
In September 1991, counsel for John Hancock tendered its defense to the lead attorney for the Setser defendants, Richard McNeely, asserting its belief that it had a valid claim for implied indemnity and would ultimately be entitled to recover its attorney fees and costs pursuant to section 1021.6. As far as this record discloses, Mr. McNeely never committed in writing to assume the defense of John Hancock, but did repeatedly assure John Hancock's counsel, Janine Bloch, that all settlement offers made by the Setser defendants would be made on behalf of John Hancock as well. In exchange, Ms. Bloch agreed that John Hancock would waive its statutory claim for attorney fees if the Setser defendants successfully concluded a settlement including John Hancock. Accordingly, throughout pretrial settlement negotiations in November 1993, all offers made by the Setser defendants were made on behalf of John Hancock, too. However, settlement was not reached at that time.
By order dated November 16, 1993, the trial court granted both John Hancock's and Home Savings's motions for summary judgment. In its order on John Hancock's motion, the trial court concluded that: the Setser defendants were not acting as agents of John Hancock in connection with the reverse mortgage transaction; John Hancock did not ratify the transaction; the Setser defendants had no ostensible authority to sell their reverse mortgage package as John Hancock's; John Hancock had no knowledge of any unlawful purpose on the part of the Setser defendants or their use of its stationery and business cards to solicit Waldron; and John Hancock had not agreed to participate with the Setser defendants in any scheme to defraud Waldron. By stipulation filed December 1, 1993, John Hancock's cross-complaint was severed from the trial of Waldron's claims against the Setser defendants.
Because Waldron immediately appealed from the summary judgment, Ms. Bloch wrote to Mr. McNeely asking him to continue conducting settlement negotiations on behalf of John Hancock. According to the undisputed testimony of Ms. Bloch, M
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