Opinion
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
APPEAL from a judgment of the Superior Court of San Diego County, Charles R. Hayes, Judge, Super. Ct. No. GIC779053
HUFFMAN, Acting P. J.
Defendant and cross-complainant Quest Construction Engineering & Management, Inc. (Quest) appeals from a judgment of dismissal entered against it after a demurrer to Quest's third amended cross-complaint for express indemnity brought against plaintiff and cross-defendant Architects/Delawie Wilkes Rodrigues Barker (Delawie) was sustained without leave to amend and attorney fees were awarded to Delawie as the prevailing party. In the third amended cross-complaint, Quest, a general contractor on a project for the construction of an addition to and remodel of the Lawrence Family Jewish Community Center in La Jolla, California (the Project), alleged contractual rights of indemnity assigned to it by the Project's owner, Lawrence Family Jewish Community Center of San Diego (JCC), against Delawie, the Project's architect.
Quest contends the trial court erred in sustaining Delawie's demurrer without leave to amend on grounds it was barred by the doctrine of res judicata as the result of an earlier arbitration between JCC and Delawie because Quest's "pass-through" claims were not adjudicated in that proceeding. Quest also claims Delawie's alternative grounds for demurrer, i.e., the cause was time-barred and another action was pending, lacked merit. Finally, Quest asserts that if this court should affirm the sustaining of the demurrer and uphold the subsequent dismissal, then the trial court erred in awarding attorney fees to Delawie because there was no contractual basis to recover such fees assigned to Quest.
Based on all the circumstances, we do not consider the res judicata argument to be a valid ground of demurrer. As will be explained, additional motions and grounds of demurrer were not reached by the trial court, and remain for resolution (i.e., limitations bars, other action pending, motions to strike and consolidate, etc.). We therefore reverse the judgment of dismissal and remand to the trial court for further proceedings. Accordingly, we need not address Quest's additional arguments regarding attorney fees.
FACTUAL AND PROCEDURAL BACKGROUND
For purposes of analyzing the demurrer, the courts will accept as true the facts alleged in the cross-complaint. (See Blank v. Kirwan (1985) 39 Cal.3d 311, 318.)
In July 1997, JCC entered into a written agreement with Delawie (the "Architect Contract"), which was amended in February 1998, whereby Delawie agreed to provide all architectural services necessary for the design, addition and remodel of the Project, excluding certain design build components consisting of mechanical, electrical and plumbing. As a term and condition of the Architect Contract, Delawie agreed "to the fullest extent permitted by law, to indemnify and hold [JCC] harmless from any damages, liability or cost (including attorney's fees and costs of defense) to extent caused by [Delawie's] negligent acts, errors or omissions in the performance of professional services under this Agreement and those of his or her subconsultants or anyone for whom [Delawie] is legally liable."
Then in November 1998, JCC entered into a written contract with Quest for it to act as general contractor for the construction of the Project. During performance of work on the Project, Quest encountered numerous delays and disruptions to the performance of its work, which substantially increased the costs of construction. "Such delays and disruptions resulted from, among other things, the excessive amount of time required for Delawie and/or its agents to issue engineering and construction drawings, and numerous errors and deficiencies in such drawings, including without limitation errors in layouts and failures to accurately disclose existing conditions, as well as Delawie's failure to properly coordinate its design services with those of the design/build contractors for the mechanical, electrical and plumbing systems."
In October 2000, Quest notified JCC that it was seeking in excess of $2.5 million as a result of the delays encountered on the Project. Subsequently, on June 21, 2001, JCC filed a demand for arbitration with the American Arbitration Association against Delawie, seeking to recover damages caused by delays to the Project for which Delawie was allegedly responsible.
On October 15, 2001, Quest and JCC entered into a written agreement for prosecution of claims (the "Prosecution Agreement") under which JCC agreed to jointly prosecute its claims against Delawie as well as those of Quest against Delawie. In other words, the Prosecution Agreement "allowed for the passing-through of Quest's claims on the Project against Delawie. A pass-through claim is one advanced by a party (Quest) who has suffered damages, against a responsible party (Delawie) with which it has no contract, and presented through an intervening party (JCC) who has a contractual relationship with the damaged party as well as a cause of action directly against the responsible party. Analytically, the pass-through claims [are] derived from Delawie's alleged liability to JCC for harm caused to its general contractor, Quest." Although the Prosecution Agreement was accompanied with a payment of $235,000 by JCC to Quest, the agreement did not "assign, settle or compromise any of the claims by and between JCC and Quest" regarding the Project.
Rather than submit to the arbitration requested by JCC, Delawie filed the instant lawsuit December 3, 2001 against JCC, Quest and other defendants, including the engineering, specialty design, and food services subconsultants, as well as the mechanical, electrical and plumbing subcontractors. The complaint alleged that JCC had breached the Architect Contract by commencing arbitration proceedings without complying with the agreement's contractual notification and mediation procedures and by failing to pay Delawie for certain architectural fees on the Project. The complaint also alleged claims against Quest for breach of contract for failing to indemnify Delawie from JCC's claim under a provision of the contract between Quest and JCC, negligence, comparative indemnity, contribution and equitable apportionment, and declaratory relief.
On February 8, 2002, the trial court granted JCC's motion to compel arbitration, denied Delawie's motion to consolidate the arbitration with this court action and stayed the matter pending resolution of the arbitration proceeding.
This ruling was confirmed on March 1, 2002 after oral argument.
At the beginning of the arbitration proceeding, JCC sought, in addition to its own claims, Quest's pass-through claims in the form of indemnity from Delawie "for additional liability JCC may have to Quest pursuant to their contract in the future up to the full amount of Quest's claims" against Delawie for "damages from JCC as a result of the delays and disruptions, and other damages, caused by Delawie and/or its agents" and provided Delawie with the documents substantiating Quest's damages claims.
In March 2003, during the arbitration, the arbitrator granted Delawie's motion to exclude Quest's pass-through claims from the arbitration, finding that Delawie was not obligated by contract to arbitrate the claims JCC advanced on behalf of Quest even though those claims were appropriate for determination and their joinder with the arbitration would promote judicial economy and prevent duplicative and inconsistent rulings. Thereafter, the arbitration proceeded only as to JCC's independent claims against Delawie.
On May 29, 2003, after the arbitrator issued an interim statement of decision in JCC's favor, Quest answered Delawie's complaint in this court action and also filed a cross-complaint against JCC for, among other things, breach of the construction contract between Quest and JCC, and sought damages for the delays incurred as a result of errors and omissions in the plans and specifications and other damages caused by Delawie.
On July 24, 2003, the arbitrator filed his written opinion granting JCC a net award of approximately $780,000, which included the $235,000 in damages to JCC for its payment to Quest under the Prosecution Agreement. The award, which was finalized August 13, 2003, provided that "[t]o the extent not expressly granted herein, all other claims made in this arbitration by [JCC] and [Delawie], including but not restricted to [Delawie's] claim for fraud against [JCC], are hereby denied." In that award, the arbitrator also specifically stated:
"It should be noted that the JCC's claims against Delawie, as originally set forth in this arbitration, included claims of Quest . . . which claims were assigned and/or transferred, by virtue of a previous settlement agreement between the JCC and Quest, to the JCC for prosecution. However, during the course of the arbitration, pursuant to a motion brought by [Delawie], the undersigned Arbitrator ruled that the claims of Quest could not and would not be ruled upon in this arbitration since there was no agreement to arbitrate same between Delawie and Quest. The claims of Quest include claims for extended/additional general conditions and supervision, extended home office overhead, and miscellaneous costs regarding matters such as grading, overtime and rain damage. It is expressly ruled by the undersigned Arbitrator that nothing in this Award has any res judicata or collateral estoppel effect on any claim which Quest has against Delawie, whether or not such claim is asserted directly by Quest or through the JCC pursuant to the settlement agreement between Quest and the JCC."
In October 2003, Delawie notified the trial court that the stay in this matter should be lifted and Quest made a demand upon JCC to prosecute its claims pursuant to the Prosecution Agreement. When JCC continued to refuse to do so, Quest filed its first amended cross-complaint on July 15, 2004, alleging a ninth cause of action against JCC for breach of the Prosecution Agreement and seeking damages in excess of $1,383,000 for JCC's refusal to prosecute Quest's pass-through claims against Delawie. On August 30, 2004, Quest demanded arbitration of the claims it had asserted against JCC in the cross-complaint.
On October 5, 2004, the trial court stayed Quest's cross-complaint against JCC "for a period of six months to allow for the completion of their contractual arbitration process."
Subsequently in June 2005, Delawie dismissed its complaint against JCC. Also in June 2005, Quest and JCC resolved their arbitration by a written settlement agreement and mutual release (the "Settlement Agreement"), whereby JCC agreed to pay Quest $75,000 and assigned to Quest all of its "right, title and interest in any and all claims for indemnity, including, without limitation claims for contractual, equitable and implied indemnity, the [JCC] has or may have against Delawie arising from or related to (i) the Project; (ii) the Architect Contract; and (iii) Quest's claims against [JCC] asserted in the First Amended Cross-Complaint." After the trial court was advised of the Settlement Agreement, it put Quest's cross-complaint on a 21-day dismissal track and dismissed it on July 15, 2005 after receiving no objections to the dismissal.
After Delawie would not stipulate to set aside the dismissal and reinstate the cross-complaint, Quest filed a separate complaint for express indemnity against Delawie on December 2, 2005, and also filed a motion to vacate the dismissal of its cross-complaint in this action. In the motion, Quest's counsel represented that if the court granted its motion, it would move to amend the cross-complaint to name Delawie as a cross-defendant and allege a cause of action for written express indemnity and would "consolidate or otherwise not pursue" its complaint that was filed against Delawie "out of an abundance of caution, and . . . possible statute of limitation issues . . . ."
On January 10, 2006, the trial court affirmed its tentative ruling after oral argument that Quest's motion to vacate the dismissal of its cross-complaint was granted. On March 2, 2006, Quest and Delawie stipulated to the filing of Quest's second amended cross-complaint which deleted all of the claims against JCC and asserted a single claim against Delawie for express indemnity by Quest as assignee of JCC.
On June 5, 2006, after hearing oral argument, the trial court sustained Delawie's demurrer to the cross-complaint "on the ground that the action is barred by the doctrine of res judicata" with leave to amend "to plead facts and attach documentation establishing rights assigned by [JCC] to Quest that were not adjudicated by the Arbitrator and subject to adjudication by this Court." The court declined to rule upon Delawie's other grounds that the action was barred by the four-year statute of limitations and whether the action was barred by the presence of another action pending between the same parties.
The Third Amended Cross-Complaint and Demurrer
Quest filed its third amended cross-complaint for express indemnity on June 15, 2006. Again, Quest alleged its assignment of JCC's claims for indemnity under the Architect Contract and added allegations and documentation relating to JCC's demand and claims against Delawie in their arbitration, the Prosecution Agreement between Quest and JCC, the exclusion of the Quest pass-through claims in the arbitration between JCC and Delawie, including the arbitrator's ruling that the award in that arbitration would not have a res judicata or collateral estoppel effect on the Quest claims, and the Settlement Agreement between JCC and Quest concerning the pursuit of the unadjudicated Quest claims by way of assignment of JCC's rights to indemnity against Delawie arising from Quest's claims.
Quest alleged "a tolling of all applicable statutes of limitation relating to Quest's claims against JCC, and in turn, JCC's claims for indemnity against Delawie arising from the Quest claims" due to stays of this action from February 8, 2002 to July 24, 2003 for the JCC/Delawie arbitration, and again from September 14, 2004 through March 14, 2005 for the JCC/Quest arbitration.
Quest, as JCC's assignee of its rights to express contractual indemnity under the Architect Contract, essentially alleged Quest was entitled to be indemnified by Delawie in an amount in excess of $1 million for the Quest claims "against JCC asserted in the First Amended Cross-Complaint, and for such pass-through claims tolled by the Prosecution Agreement that remain unadjudicated. . . ." Quest also alleged a right to "reasonable attorney's fees and other legal costs in prosecuting this action against Delawie" based on "the terms of the contract between JCC and Delawie, of which all rights, title and interest have been assigned to Quest. . . ."
Delawie again demurred to Quest's third amended cross-complaint on the ground it failed to state facts sufficient to constitute a cause of action against Delawie "in that: [¶] The claim for Express Indemnity is time-barred under Code of Civil Procedure [section] 337; [¶] The claim for Express Indemnity has already been litigated and is therefore barred by the doctrine of res judicata as a matter of law; [¶] The claim does not seek any damages that arise from [Delawie's] negligence that are not barred by res judicata or [Code of] Civil Procedure [section] 337; and [¶] [Quest] has improperly filed two pleadings in which it alleges the same cause of action, seeking the same damages against the same party." Delawie requested the trial court take judicial notice of the pleadings in this matter and in San Diego County Superior Court case no. GIC 857810, which was the case in which Quest had filed its complaint for express contractual indemnity against Delawie.
To be heard at the same time as the demurrer, Delawie filed a motion to strike "any and all allegations and/or prayers for damages in excess of $75,000 . . ." on grounds "an indemnitee cannot recover from an indemnitor anything that the indemnitee has not actually incurred liability for" and the indemnity claim is limited to the $75,000 JCC paid to Quest in the Settlement Agreement which released JCC from any further liability to Quest. In addition to filing opposition to Delawie's motions, Quest filed a motion to consolidate its pending complaint against Delawie in case no. GIC 857810 with this action.
After hearing oral argument on the matter, the trial court issued its final ruling on July 31, 2006, as follows:
"Judicial notice taken as requested. [¶] The allegations set forth in the 3rd Amended Cross-Complaint and the findings set forth by the Arbitrator in his July 24, 2003 Award establish that: [¶] a. The only claims excluded from arbitration were Quest's claims against [Delawie], and [¶] b. All claims raised by and between [JCC] and [Delawie] were in arbitration. This adjudication included JCC's alleged indemnity claims against Delawie. As for JCC's payment of $75,000 to Quest in 2005, that payment was a result of the JCC/Quest arbitration wherein Quest had demanded that JCC prosecute Quest's affirmative defenses against Delawie. The plain language of the Settlement Agreement which provided for the payment of the $75,000 and assignment of JCC's rights to Quest, shows that the payment was triggered by the dispute between JCC and Quest and was not premised upon Delawie's alleged negligence at the construction site. [¶] Accordingly, JCC had no rights against Delawie to assign to Quest for prosecution against Delawie in June of 2005. Therefore, Cross-defendant [Delawie's] demurrer on the ground that the action is barred by the doctrine of res judicata is sustained without leave to amend. [¶] Cross-Defendant's motion to strike and Cross-Complainant's motion to consolidate are moot in light of the above Ruling."
Subsequently, after a dismissal was entered, the trial court granted Delawie's motion for an award of attorney fees in the amount of $12,500 based upon Delawie being "the prevailing party under the Quest Cross-Complaint alleging a settlement agreement that incorporated by reference the attorney fee provision [contained in the Architect Contract]." The court ordered the amount of attorney fees awarded to be interlineated in the judgment entered in Delawie's favor.
Quest timely appealed from the judgment of dismissal after an order sustaining a demurrer as well as the order awarding attorney fees.
DISCUSSION
I
THE DEMURRER
For purposes of analyzing the ruling on demurrer, we give the pleading a reasonable interpretation, reading it as a whole, its parts in their context, to determine whether sufficient facts are stated to constitute a cause of action or a right to the relief requested. (Blank v. Kirwan, supra, 39 Cal.3d 311, 318.) Our consideration of facts includes those evidentiary facts found in recitals of exhibits attached to a pleading (Frantz v. Blackwell (1987) 189 Cal.App.3d 91, 94), and those facts pled in the attached documents control over any inconsistent allegations made in the pleadings. (Fundin v. Chicago Pneumatic Tool Co. (1984) 152 Cal.App.3d 951, 955.) In addition to the facts actually pleaded, we may consider facts of which we may take judicial notice. (Cantu v. Resolution Trust Corp. (1992) 4 Cal.App.4th 857, 877.) In doing so, "we do not review the validity of the trial court's reasoning but only the propriety of the ruling itself. Citations." (Rodas v. Spiegel (2001) 87 Cal.App.4th 513, 517.)
Before applying these rules to the factual context as alleged in the third amended cross-complaint, we outline the general requirements for express contractual indemnity, assignment and the principles of res judicata.
A. The Pertinent Law
1. Express Indemnity
Generally, "[i]ndemnity is a contract by which one engages to save another from a legal consequence of the conduct of one of the parties, or of some other person." (Civ. Code, § 2772.) Such has been characterized as "the obligation resting on one party to make good a loss or damage another party has incurred." (Rossmoor Sanitation, Inc. v. Pylon, Inc. (1975) 13 Cal.3d 622, 628.) "An express indemnity obligation is contractual in nature, 'permitting great freedom of action to the parties in the establishment of the indemnity arrangements while at the same time subjecting the resulting contractual language to established rules of construction.' [Citation.]" (Heppler v. J.M. Peters Co. (1999) 73 Cal.App.4th 1265, 1276.) "[T]he question whether an indemnity agreement covers a given case turns primarily on contractual interpretation, and it is the intent of the parties as expressed in the agreement that should control. When the parties knowingly bargain for the protection at issue, the protection should be afforded. This requires an inquiry into the circumstances of the damage or injury and the language of the contract; of necessity, each case will turn on its own facts." (Rossmoor, supra, 13 Cal.3d at p. 633.)
2. Assignment
It is well established that "[c]hoses in action are assignable when they arise out of an obligation . . . . [Citations.]" (Casa Eva I Homeowners Assn. v. Ani Construction & Tile, Inc. (2005) 134 Cal.App.4th 771, 782.) " 'An assignment carries with it all the rights of the assignor. [Citations.] "The assignment merely transfers the interest of the assignor. The assignee 'stands in the shoes' of the assignor, taking [its] rights and remedies, subject to any defenses which the obligor has against the assignor prior to notice of the assignment." ' [Citation.]" (Id. at p. 783.) Rights to indemnity and subrogation have been held assignable. (See Bush v. Superior Court (1992) 10 Cal.App.4th 1374, 1380-1381.)
3. Res Judicata
In Mycogen Corporation v. Monsanto Company (2002) 28 Cal.4th 888, 897 (Mycogen) the policy of res judicata is simply stated: "A clear and predictable res judicata doctrine promotes judicial economy. Under this doctrine, all claims based on the same cause of action must be decided in a single suit; if not brought initially, they may not be raised at a later date. ' "Res judicata precludes piecemeal litigation by splitting a single cause of action or relitigation of the same cause of action on a different legal theory or for different relief." ' [Citation.]" To further define the two aspects of this doctrine: " 'Res judicata' describes the preclusive effect of a final judgment on the merits. Res judicata, or claim preclusion, prevents relitigation of the same cause of action in a second suit between the same parties or parties in privity with them. Collateral estoppel, or issue preclusion, 'precludes relitigation of issues argued and decided in prior proceedings.' " (Id. at p. 896, citing Lucido v. Superior Court (1990) 51 Cal.3d 335, 341.)
In Levy v. Cohen (1977)19 Cal.3d 165, our Supreme Court set out criteria for identifying when the doctrine should be applied. (Id. at pp. 171-172.) It "precludes parties or their privies from relitigating an issue that has been finally determined by a court of competent jurisdiction. [Citation.] 'Any issue necessarily decided in such litigation is conclusively determined as to the parties or their privies if it is involved in a subsequent lawsuit on a different cause of action.' [Citation.] The application of the doctrine in a given case depends upon an affirmative answer to these three questions: (1) Was the issue decided in the prior adjudication identical with the one presented in the action in question? (2) Was there a final judgment on the merits? (3) Was the party against whom the plea is asserted a party to or in privity with a party to the prior adjudication? [Citations.]" (Ibid.)
We are required to identify exactly what substantive claims, in terms of the primary rights asserted, may or must be deemed barred as a result of the prior dismissal. As set out in Mycogen, supra, 28 Cal.4th 888, 904, and Crowley v. Katleman (1994)8 Cal.4th 666, 681-682, the content of a " 'primary right is simply the plaintiff's right to be free from the particular injury suffered. [Citation.] It must therefore be distinguished from the legal theory on which liability for that injury is premised: "Even where there are multiple legal theories upon which recovery might be predicated, one injury gives rise to only one claim for relief." [Citation.] The primary right must also be distinguished from the remedy sought: "The violation of one primary right constitutes a single cause of action, though it may entitle the injured party to many forms of relief, and the relief is not to be confounded with the cause of action, one not being determinative of the other." [Citation.]' "
In determining whether a later proceeding is based on the same primary right as in an earlier action, courts will "compare the two actions, looking at the rights which are sought to be vindicated and the harm for which redress is claimed. [Citations.] 'Reference must be made to the pleadings and proof in each case. [Citation.]' [Citation.]" (Citizens for Open Access to Sand and Tide, Inc. v. Seadrift Association (1998) 60 Cal.App.4th 1053, 1067; also see Gamble v. General Foods Corp. (1991) 229 Cal.App.3d 893, 898.)
In addition, in Kopp v. Fair Political Practices Com. (1995) 11 Cal.4th 607 (Kopp), the Supreme Court applied an established rule that in the context of res judicata, a "prior legal determination is not conclusive either if injustice would result or if the public interest requires that relitigation not be foreclosed. [Citation.]" (Id. at p. 623, fn. 16.)
II
APPLICATION OF RULES
As noted above, the facts alleged in the third amended complaint showed that JCC assigned its rights to all claims for indemnity it had or "may have" against Delawie arising from the Project, the Architect Contract and Quest's claims against JCC asserted in the first amended cross-complaint. The latter claim based on the first amended cross-complaint, included damages caused by delays incurred by Quest as a result of errors and omissions in the plans and specifications and other damages caused by Delawie on the Project. There is no assertion on appeal that the assignment of such rights to claims for indemnity was improper.
Rather, Delawie contends that even though the assignment was proper, JCC possessed no remaining rights or obligations against it at the time of assignment to transfer or assign to Quest. Delawie argues that because of the binding arbitration between it and JCC, all rights, including those for express indemnity that JCC possessed under the Architect Contract, were already resolved and that Quest cannot allege any facts showing that JCC has or will incur any further damages that it is entitled to recover from Delawie due to such res judicata bar.
Delawie's res judicata assertion is essentially based on the premise that only Quest's affirmative claims against the Delawie firm were precluded from the arbitration and the wording of the arbitration award stating that "all other claims made in this arbitration by [the parties] are hereby denied." The award by the arbitrator, however, clearly notes that "nothing in [the award] has any res judicata or collateral estoppel effect on any claim which Quest has against Delawie, whether or not such claim is asserted directly by Quest or through the JCC pursuant to the settlement agreement between Quest and the JCC."
In the Prosecution Agreement between Quest and JCC, JCC had the duty to prosecute Quest's claims against Delawie. Although JCC later settled with Quest when Quest eventually sued it for refusing to prosecute those claims that were specifically excluded from the arbitration, it appears the intent of that Settlement Agreement was to assign to Quest any right to express indemnity JCC had or would have for Delawie's negligence based on pursuing its assumed duty under the Prosecution Agreement to prosecute Quest's claims against Delawie. These were the identified pass-through claims JCC had originally sought in the arbitration in the form of indemnity from Delawie "for additional liability JCC may have to Quest pursuant to their contract in the future up to the full amount of Quest's claims" against Delawie for "damages from JCC as a result of the delays and disruptions, and other damages, caused by Delawie and/or its agents." Because the arbitration specifically excluded this so-called "primary right" to prosecute Quest's claims against Delawie, which could result in additional liability to JCC, the arbitration award's general language regarding the resolution of all claims submitted as being denied, does not, as Delawie argues, show that the pass-through claims or JCC's claim for indemnity from those claims were resolved in that forum. Consequently, res judicata principles do not bar Quest's third amended cross-complaint for express indemnity as pleaded with the attached agreements and arbitration award. Nothing in those documents expressly shows that JCC's indemnity claims were actually litigated in the arbitration. To hold otherwise at this point would result in an injustice to Quest. (See Kopp, supra, 11 Cal.4th at p. 623, fn. 16.)
Regarding Delawie's argument that Quest cannot state a cause of action for express indemnity because it cannot show that JCC has or will incur any further damages that it is entitled to recover from Delawie, as Quest points out, a close reading of CC-California Plaza Associates v. Paller & Goldstein (1996) 51 Cal.App.4th 1042 (CC-Cal. Plaza) and Culley v. Superior Court (1992) 10 Cal.App.4th 1484 reveals that although assigned indemnity rights may technically have no set value amount at the pleading stage, depending on the circumstances and the type of indemnity clause at issue, the assignee might have the right to prove its assigned indemnity claim at trial. (CC-Cal. Plaza, supra, 51 Cal.App.4th at pp. 1052-1054, citing Culley, supra, 10 Cal.App.4th at pp. 1489-1490, 1497.) Somewhat analogous to the situation in CC-Cal. Plaza, the indemnity clause in the Architect Contract at issue here expressly provided for indemnity against both liabilities and damages which "properly falls under Civil Code section 2778, subdivision 1 [and] as a consequence, 'payment' was not required prior to seeking indemnification." (CC-Cal. Plaza, supra, at pp. 1053-1054, fn. omitted.)
II
ADDITIONAL GROUNDS FOR DEMURRER AND MOTIONS
Nonetheless, as Quest recognizes, this court generally must affirm the judgment of dismissal entered after a demurrer has been sustained without leave to amend if it is correct on any theory advanced on demurrer even though the court's stated reason is invalid. (Hendy v. Losse (1991) 54 Cal.3d 723, 742 (Hendy); Fremont Indemnity Co. v. Fremont General Corp. (2007) 148 Cal.App.4th 97, 111.) Delawie also challenged the filing of the third amended cross-complaint on grounds it was barred by the four-year statute of limitations under Code of Civil Procedure section 337 and on the grounds that Quest had another action pending, which asserted the same express indemnity claim as the third amended cross-complaint. The court did not rule on these grounds.
Nor did the court rule upon Delawie's motion to strike certain allegations and prayers for damages in that third amended cross-complaint or on Quest's motion to consolidate the pending complaint in the later filed action with the third amended cross-complaint in this action.
Although we believe the statute of limitations question in this case is so factually based due to the various agreements and the positions of parties that it is not appropriate for demurrer, as noted above, the relevant indemnity provision covered both liability and damages under Code of Civil Procedure section 2778. As pleaded, Quest alleged two periods of tolling for any claim based on such liability under subdivision 1 of that section, which on its face appear to satisfy the condition that a claim based on liability be timely filed within four years, i.e., from the time the Quest claims were determined not to be properly prosecuted by JCC in the arbitration in May 2003. In addition, as Quest notes, the time to commence a claim for indemnification against damages under subdivision 2 of Civil Code section 2778 does not begin to run until payment of a claim. (Fidelity & Deposit Co. of Maryland v. Whitson (1960) 187 Cal.App.2d 751, 758.) As the parties agree, the pass-through claims have not yet been adjudicated and an amount of damages set and paid on those claims.
Moreover, even though a demurrer in this case could properly be sustained on grounds of another pending action on the same cause, because of Quest's concession and motion to consolidate that action with this one, the failure of the trial court to grant leave to amend on such ground would have been an abuse of discretion. (See Hendy, supra, 54 Cal.3d at p. 742.)
Regardless, because each of these additional issues involve factual determinations which are not fully developed on the face of the pleadings, the record or this appeal, we believe the better position is to reverse the judgment of dismissal and order sustaining the demurrer without leave to amend and remand the matter to the trial court for further proceedings. At that time, the court is directed to reconsider the demurrer to the third amended cross-complaint on the grounds not originally reached and address the companion motions by Delawie to strike and Quest to consolidate.
DISPOSITION
The judgment is reversed and remanded, and the trial court is directed to set aside the order sustaining the demurrer without leave to amend and to hold further proceedings consistent with this opinion. Quest is awarded costs on appeal.
WE CONCUR: McDONALD, J., AARON, J.