gno.law

Allen v. Southland Plumbing, Inc.

California Court of Appeal · D006202 · 1988-05-12 · Published · 201 Cal. App. 3d 60 · 246 Cal. Rptr. 860 · 1988 Cal. App. LEXIS 427

JACK H. ALLEN Et Al., Cross-Complainants and Appellants, v. SOUTHLAND PLUMBING, INC., Cross-Defendant and Respondent

Proceeding
appeal
Trial court
Superior Court of San Diego County
Trial judge
David B. Moon, Jr.
Outcome
other — D006202. Fourth Dist., Div. One.
Area
civil
Panel
Daniel J. Kremer (author)

Analysis

A model's reading — qwen3.8-27b, prompt v1, 2026-10-13T07:40Z · confidence high

The trial court granted Southland’s motion to quash service and dismiss Allen’s cross-complaint, ruling it lacked jurisdiction over the dissolved corporation because the indemnity claim had not yet accrued. The Court of Appeal reversed, holding that the cause of action arose from Southland’s pre-dissolution negligent activities and was properly brought under Corporations Code section 2011, subdivision (a).

Ruling reviewedStandardThe courtThe model
Order quashing service of summons and dismissing cross-complaint against dissolved corporation Southland Plumbing, Inc.
“The superior court should have denied Southland’s motion to quash service and to dismiss Allen’s cross-complaint.”
de novoerroragree with court
The appellate court correctly applied the de novo standard to the statutory interpretation of Corporations Code section 2011, subdivision (a). It properly distinguished between the accrual of a cause of action for statute of limitations purposes and the existence of a cause of action for jurisdictional purposes, relying on binding precedent that permits cross-complaints for equitable indemnity based on pre-dissolution acts.

Authorities

  • relied: People ex rel. Dept. of Transportation v. Superior Court (1980) 26 Cal.3d 744 — A tort defendant may file a cross-complaint against a third party for indemnity even if the statute of limitations for the indemnity claim has not yet begun to run.
  • relied: Valley Circle Estates v. VTN Consolidated, Inc. (1983) 33 Cal.3d 604 — General contractors should not bear the liability of their subcontractors; subcontractors remain liable for their work during the period general contractors must remain liable.
  • relied: North American Asbestos Corp. v. Superior Court (1986) 180 Cal.App.3d 902 — There is no time limitation for suing a dissolved corporation for injuries arising out of its predissolution activities other than the applicable statute of limitations.
  • relied: Rossmoor Sanitation, Inc. v. Pylon, Inc. (1975) 13 Cal.3d 622 — Indemnity is defined as the obligation resting on one party to make good a loss or damage another party has incurred.
  • relied: Postley v. Harvey (1984) 153 Cal.App.3d 280 — A cross-complaint for equitable indemnity may properly take the form of an action for declaratory relief.
  • relied: E. L. White, Inc. v. City of Huntington Beach (1978) 21 Cal.3d 497 — The statute of limitations for an indemnity action does not accrue until the indemnitee has suffered actual loss through payment.
  • relied: American Motorcycle Assn. v. Superior Court (1978) 20 Cal.3d 578 — Supports the principle that a plaintiff has no right to single out one party to bear all the loss when multiple parties are liable.

The appellate opinion: sound — The opinion is sound because it correctly distinguishes between the accrual of a claim for statute of limitations purposes and the existence of a cause of action for jurisdictional purposes under Corporations Code section 2011. It relies on binding California Supreme Court and Court of Appeal precedent to support the conclusion that pre-dissolution negligent acts create a cause of action that survives dissolution for the purpose of equitable indemnity.

How this analysis was made · dispute it

A model's reading — claude-fable-5-1, prompt v1, 2026-10-13T04:32Z · confidence high

The superior court granted dissolved subcontractor Southland Plumbing's motion to quash service and dismissed general contractor Allen's cross-complaint for equitable indemnity, equitable apportionment and declaratory relief, ruling it lacked jurisdiction under Corporations Code section 2011, subdivision (a), because the indemnity claim assertedly did not arise until after Southland's dissolution. The Court of Appeal reversed, holding the indemnity claim arose before dissolution because it is grounded on Southland's predissolution construction work and the right to cross-complain arose no later than when Allen was sued, which preceded the dissolution.

Ruling reviewedStandardThe courtThe model
Order granting Southland's motion to quash service of summons and dismissing Allen's cross-complaint for lack of jurisdiction under Corporations Code section 2011, subdivision (a), on the theory that the equitable indemnity cause of action arose after Southland's dissolution.
“The fact the statute of limitations may not have commenced running on Allen’s indemnity claim against Southland does not mean Allen is seeking relief on a cause of action arising after Southland’s dissolution.”
unclearerror (statutory interpretation)agree with court
The opinion does not articulate a standard of review, but the question is one of statutory construction on undisputed dates, effectively reviewed independently. The court correctly separated two concepts: when an indemnity claim accrues for statute of limitations purposes (upon payment of a judgment or settlement, per Valley Circle, E. L. White and Dept. of Transportation) versus when a cause of action 'arises' for purposes of section 2011(a). Southland's own authorities expressly permit a declaratory cross-complaint for indemnity in the underlying tort action before accrual, and section 2011 is procedural and not intended to determine liability. The gravamen of the claim is Southland's 1978-1979 predissolution work, and even the right to cross-complain arose when Pacific Panorama sued Allen on January 24, 1983, before the February 11, 1983 dissolution. North American Asbestos supports suits against dissolved corporations for injuries arising from predissolution activities and recognizes the state's interest in codefendants not bearing dissolved corporations' shares. The reversal is well supported.

Authorities

  • relied: People ex rel. Dept. of Transportation v. Superior Court (1980) 26 Cal.3d 744 — A plaintiff has no right to single out one tortfeasor to bear all the loss; a defendant may pursue equitable indemnity against a third party and may file a declaratory cross-complaint in the original action even though, for statute of limitations purposes, the indemnity claim does not accrue until actual payment.
  • relied: American Motorcycle Assn. v. Superior Court (1978) 20 Cal.3d 578 — Establishes comparative equitable indemnity among concurrent tortfeasors and the right to cross-complain for partial indemnity.
  • relied: Rossmoor Sanitation, Inc. v. Pylon, Inc. (1975) 13 Cal.3d 622 — Indemnity is the obligation resting on one party to make good a loss or damage another party has incurred.
  • relied: Postley v. Harvey (1984) 153 Cal.App.3d 280 — A cross-complaint for equitable indemnity may take the form of declaratory relief; a tort defendant may cross-complain against a third party for indemnity should the plaintiff prevail on the original complaint.
  • relied: Valley Circle Estates v. VTN Consolidated, Inc. (1983) 33 Cal.3d 604 — The statute of limitations on an equitable indemnity claim does not run until the indemnitee pays a judgment or settlement, but a declaratory cross-complaint may be filed earlier; subcontractors should remain liable for their work as long as general contractors remain liable.
  • relied: General Brewing Corp. v. Clark (1968) 264 Cal.App.2d 518 — A defendant's right to seek indemnity by cross-complaint arises when the defendant is sued on the underlying claim.
  • relied: E. L. White, Inc. v. City of Huntington Beach (1978) 21 Cal.3d 497 — For statute of limitations purposes an indemnity claim accrues upon payment, yet the defendant may bring a cross-complaint for indemnity in the original action.
  • relied: North American Asbestos Corp. v. Superior Court (1986) 180 Cal.App.3d 902 — Under Corporations Code section 2010 there is no time limit, other than the applicable statute of limitations, for suing a dissolved corporation for injuries arising out of its predissolution activities; California has an interest in ensuring codefendants do not bear a dissolved corporation's share of damages.

The appellate opinion: sound — The court directly answered Southland's accrual argument by distinguishing statute-of-limitations accrual from the 'arising prior to dissolution' language of section 2011(a), using the very Supreme Court cases Southland cited, which themselves authorize pre-accrual declaratory cross-complaints for indemnity. It also grounded the result in the statute's procedural character, the predissolution timing of both Southland's work and the underlying suit, and the policy of North American Asbestos and Valley Circle, leaving no material argument unaddressed.

How this analysis was made · dispute it

Opinion — Kremer

Opinion

KREMER, P. J.

I

On January 24, 1983, Pacific Panorama Owners Association sued general contractor Allen for fraud, breach of implied warranty, negligence and breach of fiduciary duties involving construction defects including water and heating problems in an Allen-developed condominium project completed in 1979. Pacific Panorama did not name subcontractor Southland as a defendant.

On February 11, 1983, Southland filed its certificate of corporate dissolution with the California Secretary of State.

On April 15, 1983, Allen cross-complained against Southland for equitable indemnity, equitable apportionment and declaratory relief, alleging any *63 damages suffered by Pacific Panorama were caused by Southland’s negligence in providing professional services for the project.

II

Southland moved to quash service of summons and to dismiss Allen’s cross-complaint. Southland contended the court lacked jurisdiction because Allen’s causes of action assertedly did not accrue until after Southland’s dissolution. Allen opposed Southland’s motion, contending the causes of action against Southland arose before Southland’s dissolution. Allen asserted Southland’s work at the Pacific Panorama project was completed in 1979 before Southland’s dissolution. Allen also asserted the defects in South-land’s work arose and were evident more than two years before Southland’s dissolution.

After hearing, the court granted Southland’s motion to quash service and dismissed Allen’s cross-complaint against Southland. Allen appeals.

III

Except for the purpose of winding up, Southland’s corporate existence ceased upon filing of its certificate of dissolution. (§ 1905, subd. (b).) Nevertheless, dissolved corporation Southland continued to exist for purposes of defending actions against it and enabling it to discharge obligations. (§ 2010, subd. (a).) After Southland filed its certificate of dissolution, Allen cross-complained against Southland. We find Allen’s cross-complaint was proper because its causes of action against Southland arose before South-land’s dissolution. (§2011, subd. (a).) 2

For purposes of section 2011, subdivision (a), Allen’s indemnity claim against Southland constitutes a cause of action arising before South-land’s dissolution. The fact Allen’s claim is framed in terms of indemnity instead of negligence does not insulate Southland from Allen’s cross-complaint. Allen’s claim against Southland arises out of the same construction transaction as Pacific Panorama’s complaint’s causes of action against Allen. (Code Civ. Proc., § 428.10, subd. (b).) Allen seeks reimbursement from Southland for damages Pacific Panorama may recover from Allen for defects resulting from Southland’s allegedly negligent predissolution activities. Southland concedes it could be sued by Pacific Panorama for those defects because Pacific Panorama’s negligence cause of action would have arisen *64 before Southland dissolved. The policies underlying the principles of equitable indemnity support construing section 2011, subdivision (a), to permit Allen to cross-complain against dissolved corporation Southland for indemnity based upon those same defects allegedly resulting from Southland’s negligent predissolution activities.

The happenstance Pacific Panorama has not sued Southland does not preclude Allen’s cross-complaint. Pacific Panorama had “no right to single out” Allen to bear all the loss. (People ex rel. Dept. of Transportation v. Superior Court (1980) 26 Cal.3d 744, 747 [163 Cal.Rptr. 585, 608 P.2d 673], citing American Motorcycle Assn. v. Superior Court (1978) 20 Cal.3d 578 [146 Cal.Rptr. 182, 578 P.2d 899].) Allen has the right to pursue an equitable indemnity action against Southland to obtain indemnity for any liability Southland should properly bear. (Ibid.) Indemnity is “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 [119 Cal.Rptr. 449, 532 P.2d 97].) Thus, the purpose of Allen’s cross-complaint is to shift the burden to Southland for any damages Pacific Panorama may recover from Allen resulting from Southland’s negligent predissolution activities.

Code of Civil Procedure section 1060 authorizes the court in cases of actual controversy to declare a party’s rights or duties “before there has been any breach of the obligation in respect to which said declaration is sought.” A cross-complaint for equitable indemnity may properly take the form of an action for declaratory relief. (Postley v. Harvey (1984) 153 Cal.App.3d 280, 285 [200 Cal.Rptr. 354].) “[A] tort defendant may file a cross-complaint against a third party when the defendant properly alleges entitlement to indemnity from such a party, should the plaintiff prevail on the original complaint.” (Ibid., italics added.) Thus, Allen’s right to cross-complain against Southland arose no later than the time Pacific Panorama sued Allen. (Valley Circle Estates v. VTN Consolidated, Inc. (1983) 33 Cal.3d 604, 612-623 [189 Cal.Rptr. 871, 659 P.2d 1160], citing General Brewing Corp. v. Clark (1968) 264 Cal.App.2d 518-519 [70 Cal.Rptr. 907].)

Citing Valley Circle Estates v. VTN Consolidated, Inc., supra, 33 Cal.3d 604, People ex rel. Dept, of Transportation v. Superior Court, supra, 26 Cal.3d 744, and E. L. White, Inc. v. City of Huntington Beach (1978) 21 Cal.3d 497 [146 Cal.Rptr. 614, 579 P.2d 505], Southland contends the court properly granted its motion to quash because Allen’s asserted cause of action for indemnity will accrue only when Allen becomes liable to Pacific Panorama under a settlement or judgment. However, Southland’s reliance on those cases is misplaced. The cases simply hold the statute of limitations does not begin to run on a cause of action for equitable indemnity until a *65 settlement or judgment has been paid by the potential indemnitee. The fact the statute of limitations may not have commenced running on Allen’s indemnity claim against Southland does not mean Allen is seeking relief on a cause of action arising after Southland’s dissolution. A defendant may properly bring a declaratory cross-complaint for indemnity in the original tort action even though “for statute of limitations purposes, the defendant’s indemnity action does not accrue until he has suffered actual loss through payment.” (People ex rel. Dept. of Transportation v. Superior Court, supra, 26 Cal.3d at p. 759, italics added; also Valley Circle Estates v. VTN Consolidated, Inc., supra, 33 Cal.3d at p. 612; E. L. White, Inc. v. City of Huntington Beach, supra, 21 Cal.3d at p. 506.) 3

Our decision Allen may properly cross-complain against dissolved corporation Southland is buttressed by North American Asbestos Corp. v. Superior Court (1986) 180 Cal.App.3d 902 [225 Cal.Rptr. 877]. In North American Asbestos the court stated under section 2010 “. . . there is no time limitation for suing a dissolved corporation for injuries arising out of its predissolution activities [citation], other than the time prescribed by the applicable statute of limitations.” (Id. at p. 904, italics added.) No issue involving the statute of limitations is apparent here. Allen’s cross-complaint is based upon Southland’s allegedly negligent predissolution acts occurring in 1978 and 1979. Construction defects allegedly resulting from Southland’s negligence were evident as early as 1980. In North American Asbestos the court also noted: “. . . California has an interest in allowing injured residents to recover for injuries incurred within the state prior to dissolution which, in some cases, have not manifested themselves before dissolution. California also has an interest in assuring that codefendants jointly liable for the damages are not required to pay the share of damages attributable to dissolved corporations.” (Id. at p. 906.)

Permitting subcontractor Southland to escape suit by general contractor Allen under the circumstances here would be inequitable. The gravamen of Allen’s claim is Southland’s allegedly negligent predissolution activities. Southland’s dissolving before Allen was held liable to Pacific Panorama and before Allen filed its cross-complaint grounded on Southland’s *66 predissolution activities should not insulate Southland from Allen’s claim. “To impose on general contractors the liability of their subcontractors would not only be unfair, but could eifectively deter the activities of the construction industry. On the other hand, to require that subcontractors remain liable for their work for the period of time during which general contractors must remain liable, should not only promote responsibility in the construction industry generally, but provide an additional incentive on the part of subcontractors to be certain of their work.” (Valley Circle Estates v. VTN Consolidated, Inc., supra, 33 Cal.3d at p. 614.)

The superior court should have denied Southland’s motion to quash service and to dismiss Allen’s cross-complaint.

Disposition

The order quashing service of summons and dismissing the cross-complaint is reversed. Appellants to have costs on appeal.

Work, J., and Benke, J., concurred.

1

All statutory references are to the Corporations Code unless otherwise specified.

2

Section 2011, subdivision (a), provides: “In all cases where a corporation has been dissolved, the shareholders may be sued in the corporate name of such corporation upon any cause of action against the corporation arising prior to its dissolution. This section is procedural in nature and is not intended to determine liability.”

3

We note with respect to claims against public entities, Government Code section 901 provides: “For the purpose of computing the time limits prescribed by [Government Code] Sections 911.2, 911.4, 912, and 945.6, the date of the accrual of a cause of action to which a claim relates is the date upon which the cause of action would be deemed to have accrued within the meaning of the statute of limitations which would be applicable thereto if there were no requirement that a claim be presented to and be acted upon by the public entity before an action could be commenced thereon. However, the date upon which a cause of action for equitable indemnity or partial equitable indemnity accrues shall be the date upon which a defendant is served with the complaint giving rise to the defendant’s claim for equitable indemnity or partial equitable indemnity against the public entity.” (Italics added.)

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