Order: BEACON RESIDENTIAL COMMUNITY ASSOCIATION VS. CATELLUS THIRD AND KING LLC et al

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                                Steven M. Cvitanovic (Bar No. 168031)

Zachary W. Shine (Bar No, 271522)

HAIGHT BROWN & BONESTEEL LLP

Three Embarcadero Center, Suite 200 ELECTRONICALLY
San Francisco, California 94105-2981

Telephone: (415) 546-7500 sopehr IL ED mia,
Facsimile: (415) 546-7505 County of San Francisco
Attorneys for Defendants and Cross-Complainants Mission Place LLC, Mill e380. 2014
Holding LLC; Mission Place Mezzanine LLC; Mission Place Partners LLGlesmatitheneaurt
Estate Investors IV, LLC: and Centurion Real Estate Partners, LLC (sued Gee Saal and ark
erroneously sued as Centurion Partners LLC) payee

SUPERIOR COURT OF THE STATE OF CALIFORNIA

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FOR THE COUNTY OF SAN FRANCISCO

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BEACON RESIDENTIAL COMMUNITY
ASSOCIATION,

Case No. CGC 08-478453

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) REPLY TO OPPOSITIONS OF WEBCOR
) AND HKS TO MISSION PLACE’S

) MOTION TO ENFORCE COURT’S

) JANUARY 15, 2014 ORDER GRANTING
) MISSION PLACE’S MOTION FOR
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Plaintiff,

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CATELLUS THIRD AND KING LLC, et al., SUMMARY ADJUDICATION

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Defendants.

Date: August 6, 2014

Time: 10:30 a.m.

Dept: 303

Judge: Hon. Richard A. Kramer

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AND RELATED CROSS-ACTIONS

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Defendants and Cross-Complainants Mission Place LLC, Mission Place Mezz Holding

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LLC, Mission Place Mezzanine LLC, Mission Place Partners LIC, Centurion Real Estate

Investors IV, LLC, and Centurion Real Estate Partners, LLC (sued in its own name and

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erroneously sued as Centurion Partners LLC) (collectively “Mission Place”) hereby submit this

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Reply to Defendants and Cross-Defendants Webcor Construction, Inc., dba Webcor Builders,

Inc.’s (“Webcor”) and HKS Architects, Inc.’s (“HKS”) Oppositions to Mission Place’s Motion to

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Enforce the Court’s January 15, 2014 Order Granting Mission Place’s Motion for Summary

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Adjudication regarding Webcor’s and HKS’s duty to defend Mission Place.
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LAW OFFICES J
HAIGHT, BROWN & REPLY BRIEF RE MOTION TO ENFORCE COURT’S JANUARY 15, 2014 ORDER

BONESTEEL Lp 2029-0000032 GRANTING MISSION PLACE’S MOTION FOR SUMMARY ADJUDICATION
‘San Francisco 11402169.4LAW OFFICES
HAIGHT, BROWN

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BONESTEEL, LLLP.

San Francisco

L INTRODUCTION

The Webcor and HKS Oppositions simply regurgitate the same unsuccessful arguments
made two years ago in opposition to Mission Place's Motion for Summary Adjudication regarding
the Duty to Defend. The trial court ruled against them then, and should rule against them now.
Moreover, Webcor and HKS made identical arguments while seeking writ relief at the Court of
Appeal (A139795 and A139796). The Writ was also denied. Webcor and HKS even filed a
Motion for Reconsideration of the Court's Order on or about September 4, 2013 raising the same
arguments they make in opposition to the present motion, That argument too was rejected. At this
point, Mission Place and its counsel feel like Bill Murray from the movie Groundhog Day, where
they relive the same arguments over and over.

The Court’s January 14, 2014 Order (the “Order’) clearly acknowledges the existence of a

| contractual duty to defend, rules the defense obligation was triggered, and states Webcor and HKS

have had a duty to defend Mission Place immediately upon the tender of defense. This issue has
been exhaustively briefed, argued and ultimately decided in Mission Place’s favor. It is now time
for HKS and Webcor to accept the Court’s ruling, to abide by their contracts, and to defend
Mission Place.

Tl. ARGUMENT

A. Webcor’s Argument Regarding “Covered or Compensated by Insurance”
Would Render the Indemnity Agreement Meaningless.

Webcor continues to make the bizarre argument that by virtue of the wording of the
Webcor contract, and because Mission Place's attorneys and experts have been paid by Mission
Place's insurer, Webcor is somehow relieved of any duty to defend. Webcor is essentially saying
that it can breach the duty to defend for six years yet also obtain the benefit of insurance carrier
payments caused by its own failure to defend. Webcor seems to believe that Mission Place's
attorneys and experts should have worked for free for six years. Webcor must not be allowed to

benefit from the payments made by Mission Place's carriers as those payments were made because

Webcor failed to defend Mission Place in the first place. Webcor's argument is essentially that it

should yield the benefits of its own breach. California Civil Code section 3517 states, “[N]o one

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REPLY BRIEF RE MOTION TO ENFORCE COURT'S JANUARY 15, 2014 ORDER
ee. GRANTING MISSION PLACE’S MOTION FOR SUMMARY ADJUDICATIONcan take advantage of his own wrong,” yet this is exactly what Webcor (and HKS) are trying to
do. Webcor should be estopped from making this argument not only because it was raised earlier
(see, Webcor Opposition, pp. 11-12, attached as Exhibit H to Declaration of Zachary Shine
(‘Shine Dec].”)) but it is antithetical to justice.

Civil Code section 3542 also states, “[I]nterpretations must be reasonable.” Webcor is
advancing an unreasonable interpretation of the indemnity agreement when it states it is not
required to pay to defend Mission Place because Mission Place's costs have been “covered or
compensated by insurance.” Webcor's illogical reading of the defense provision turns the entire

indemnity provision inside out and would make Webcor's contribution conditioned upon the result

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of coverage litigation that might take years to resolve. Webcor's interpretation makes the defense

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obligation illusory, is manifestly unreasonable, would lead to absurd results, and should be firmly

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rejected.

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The more reasonable interpretation results from reading the entire section in context. In

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reading the entire section, it is clear the contract sets forth what Webcor must do, not what Mission

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Place must do. Read in context, the language cited by Webcor requires Webcor to pay for a

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defense, judgment, or other costs, unless those obligations are covered or compensated by

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Webcor’s insurance carrier. Webcor’s perverse interpretation would turn the indemnity provision

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on its head and effectively negate the entire purpose of the indemnity provision. Such an.

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interpretation would lead to the absurd result in which the “Indemnified Party” would have an

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incentive not to purchase insurance out of fear it would not be defended. This result is not

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supported by public policy or the express language of the contract.

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Moreover, one of Mission Place's carriers, Zurich, is suing Mission Place for declaratory

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relief claiming it has no duty to defend. Under the Fourteenth to Nineteenth causes of action,

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Zurich seeks a determination that it does not have a duty to defend and is entitled to

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reimbursement. (See Complaint by Zurich American Insurance Company, attached as Exhibit I to

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Shine Decl.)
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LAW OFFICES 3
HAIGHT, BROWN & REPLY BRIEF RE MOTION TO ENFORCE COURT'S JANUARY 15, 2014 ORDER.

BONESTERL LLP. ff 2029-0000032 GRANTING MISSION PLACE’S MOTION FOR SUMMARY ADJUDICATION

San Francisca 11402369}_

B. Regan Roofing is Still Not Applicable.

HKS continues to wrongly assert that some sort of negligence must be established before
the defense obligation is triggered and that this Court cannot determine the existence of a duty to
defend until the liability of the parties has been determined on the merits. In so doing, HKS
employs a “Regan Roofing-type” argument! that was disapproved of in Crawford.

HKS made this same argument in its original Opposition to the Crawford motion (see HKS
Opposition, pp. 13-15, attached as Exhibit J to Shine Decl.) and it was rejected by the Court.
In Crawford, the Supreme Court stated that the duty to defend “clearly connotes an

obligation of active responsibility from the outset, for the promisee’s defense against such claims.

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The duty promised is to render, or fund, the service of providing a defense on the promisee’s

behalf — a duty that necessarily arises as soon as such claims are made against the promisee.” See

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Crawford at 553-554. The Court emphasized that the duty to defend “therefore cannot depend on.

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the outcome of that litigation. It follows that, under subdivision 4 of section 2778, claims

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‘embraced by the indemnity’, as to which the duty to defend is owed, include those which, at the

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time of tender, allege facts that would give rise to a duty of indemnity. Unless the indemnity

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agreement states otherwise, the statutorily described duty ‘to defend’ the indemnitee upon tender

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of the defense thus extends to all such claims.” [Emphasis added.] Crawford, 44 Cal. 4th at 557-

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558; Civil Code section 2778(4).

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Cc. Webcor and HKS Misread Bramalea.

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Webcor and HKS incorrectly argue that pursuant to Bramalea California, Inc. v.

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Reliable Interiors Inc., (2004) 119 Cal. App. 4th 468, Mission Place must prove it incurred

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defense costs that have not, and are not, being paid. The fact that Webcor and HKS rely on

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Bramalea is strange because the indemnitors in Bramalea actually accepied the indemnitee’s

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defense tenders. Here, neither HKS nor Webcor have accepted Mission Place’s defense, which

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' In Regan Roofing Company, Inc. v. The Superior Court of San Diego (1994) 24
Cal.App.4"" 425, the court held that a defense obligation cannot be triggered until there is a finding
of liability and the summary adjudication cannot completely dispose of a declaratory relief cause
of action relating to the duty to defend. This is no longer good law as it was overruled by
Crawford.

LAW OFFICES 4
HAIGHT, BROWN & REPLY BRIEF RE MOTION TO ENFORCE COURT'S JANUARY 15, 2014 ORDER
RONESTEEL LLP | Oe GRANTING MISSION PLACE’S MOTION FOR SUMMARY ADJUDICATION

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necessitated the filing of the summary adjudication motion. By failing to defend, Webcor and
HKS have been in breach of contract for over six years. Nevertheless, while continuing to refuse
to acknowledge the defense obligation, HKS and Webcor want safe harbor from their breach by
arguing that Mission Place's carriers have paid. The inequity of such a result is plain to see and
Webcor and HKS should not benefit from their wrongful conduct.
D. The Defense Obligation Was Triggered.

HKS and Webcor would have the Court believe its own broadly worded Order is merely a
limited declaration that “the duty to defend exists “pursuant to the terms of the respective

contracts...,” and nothing more. They spend a great dea! of time again focusing on the language

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of the contracts and “conditions precedent” and triggers for the duty to defend as if such issues

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have not already been addressed. However, HKS and Webcor conveniently ignore the rest of the

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Court’s Order in which the Court expressly declares not only is a defense “owed pursuant to the

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terms of the respective contracts,” but after considering the allegations and the terms of the

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contracts, the Court states further, “the defense obligation was in fact triggered by the tender of

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defense by Mission Place and that Webcor and HKS had this duty immediately upon the tender of

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defense.” The Court’s Order clearly goes beyond simply acknowledging the existence of a

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contractual duty, and emphatically states the plaintiff's allegations actually triggered the duty to

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defend, and HKS and Webcor should have been defending Mission Place from the time of tender.

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Contrary to HKS’s and Webcor’s assertions, factual questions concerning a “condition precedent”

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or trigger for the duty to defend have already been addressed by the Court in the affirmative, and

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HKS and Webcor have been expressly ordered to provide an immediate defense. HKS’s and

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Webcor’s failure to do so is not only a breach of their agreements but also a direct violation of the

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Court’s express Order.

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E. Mission Place's Fees,

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Mission Place has been involved in this litigation for over six years and has incurred

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substantial fees and costs. Mission Place is willing to provide redacted invoices under protective

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order to Webcor’s and HKS’s carriers for payment. It has not done so because neither Webcor nor

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LAW OFFICES 5
HAIGHT, BROWN & REPLY BRIEF RE MOTION TO ENFORCE COURT'S JANUARY 15, 2014 ORDER
BONESTRL, iL.P | 7U28.0000052 GRANTING MISSION PLACE’S MOTION FOR SUMMARY ADJUDICATION

San FranciscoHKS has offered to comply with the Court's order and redacting six years worth of invoices is a
considerable undertaking.
Mission Place does not believe that Webcor's and HKS's counsel need to be involved in
this process unless their clients will be paying the fees directly. If Webcor and HKS, or their
carriers, have issues with the invoicing, they can explain it in writing to the Court at a future
hearing. While Mission Place is open to a framework for resolving the past due amounts, it

respectfully requests that the Court enter an order requiring HKS and Webcor to make a

substantial good faith payment of 75% of the incurred costs within the next twenty one days.

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Mission Place's counsel will hold this money in trust pending further order of the Court.

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Mission Place also requests an order that HKS and Webcor, and/or their respective

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| carriers, pay Mission Place's costs and fees on an ongoing basis and that all such payments must

12 | be made within thirty days of the presentation of the invoice.
13 Ill. CONCLUSION
14 Simply stated, by refusing to defend Mission Place, Webcor and HKS have acted, and
15 } continue to act, in clear violation of the Court’s January 15, 2014 Order. Asa result, Mission
16 | Place respectfully requests that the Court grant Mission Place’s present motion and compel HKS
17 | and Webcor to comply with the Court’s express Order to defend Mission Place.
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19 | Dated: July 30, 2014 HAIGHT BROWN & BONESTEEL LLP
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21 By:
en M. Cvitanovic

22 Zachary W. Shine

Attorneys for Defendants
23 Mission Place LLC, et al.
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sure aeowne REPLY BRIEF RE MOTION TO SRPGRCE COURT'S JANUARY 15, 2014 ORDER

BONESTEEL LP ol GRANTING MISSION PLACE’S MOTION FOR SUMMARY ADJUDICATIONme

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LAW OFFICES
HAIGHT, BROWN &
BONESTEEL, L.LP.
San Francisco

PROOF OF SERVICE

STATE OF CALIFORNIA
SS.
COUNTY OF SAN FRANCISCO
BEACON RESIDENTIAL COMMUNITY ASSOCIATION v. CATELLUS THIRD AND
KING LLC, et al.
San Francisco Superior Court Case No.: CGC 08-478453
Iam employed in the County of San Francisco, State of California. I am over the
age of 18 and not a party to the within action. My business address is Three Embarcadero
Center, Suite 200, San Francisco, California 94111.
On July 30, 2014, I served the within document described as:
REPLY TO WEBCOR AND HKS OPPOSITIONS TO MOTION TO ENFORCE COURT’S
JANUARY 15, 2014 ORDER GRANTING MISSION PLACE’S MOTION FOR
SUMMARY ADJUDICATION
| on the interested parties in this action as stated below:
Kenneth Katzoff Randel J. Campbell
Robert Riggs Lynch Gilardi & Grummer
Sung Shim 170 Columbus Ave., 5th Floor
Katzoff & Riggs San Francisco, CA 94133
1500 Park, No. 300
Emeryville, CA 94608 Phone: 415. 397.2800
Fax: 415.397.0937
Phone: 510.597.1990
Fax: 510.597.0295 rcampbell@|gelaw.com
kkatzoff@katzoffriggs.com Attorneys for Architectural Glass and
rriggs@katzoffriggs.com Aluminum Co., Inc.
sshim@katzoffriggs.com
Co-counsel for Plaintiff Beacon Residential
| | Community Association
1
(ZU29-0000032,

10100148.1 Proof of ServiceoOo eo SN DO BF WD NY

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ond A A BF WH K&§ SG OBO we ADH KH F&F YW NH K*

‘LAW OFFICES

HAIGHT, BROWN &

BONESTEEL, LLP.
San Francisco

Kevin P. McCarthy
McCarthy & McCarthy
The Arlington Building
492 Ninth Street, Suite 220
Oakland, CA 94607

Phone: (510) 839-8100
Fax: (510) 839-8109
Email: kmearthy@mcarthyllp.com

Attorneys for Cross-Defendant Window
Solutions, Inc.

John A. Koeppel

Kathleen Strickland

Devin C. Courteau

Ropers, Majeski, Kohn & Bentley
150 Spear Street, Suite 850

San Francisco, CA 94105

Phone: (415) 643-4800

Fax: (5) 972-6301
Email: jkoeppel@rmkb.com
kstrickland@rmkb.com
dcourteau@rmkb.com

Attorneys for Catellus Development

Corporation, Catellus Commercial

Development Corp., Catellus Operating Limited

Partnership, Successor to Catellus Development

Corp., Catellus Third and King LLC, and Third
i ProLogis

Steven H. Schwartz

Noel E, Macaulay

Schwartz & Janzen, LLP

12100 Wilshire Boulevard, Suite 1125
Los Angeles, CA 90025

Phone: (310) 979-4090

Fax: (310) 207-3344

E-mail:sschwartz@sj-law.com
nmacaulay@sj-law.com

Attorneys for HKS, Inc. individually and
dba HKS Architects, Inc.

James P. Castles

Richard C. Young

Robles Castles & Meredith
492 Ninth Street, Suite 200
Oakland, CA 94607

Phone: (415) 743-9300
Fax: (415) 743-9305
E-mail:jim@rcmlawgroup.com

tick@remlawgroup.com

Attorneys for Skidmore Owings & Merrill
LLP

Christian P. Lucia

Denae M. Olivieri

Sellar Hazard Manning Ficenec & Lucia
1800 Sutter Street, Suite 460

Concord, CA 94520

Phone: (925) 938-1430

Fax: (925) 256-7508
Email: clucia@sellarlaw.com
dolivieri@sellarlaw.com

Attorneys for Critchfield Mechanical, Inc.;
Cupertino Electric, Inc.; Creative Masonry, Inc.;
Carefree Toland Pools, Inc; IW. McClenahan, Inc;
West Coast Protective Coatings, Inc.; Western
Roofing Services Blue’s Roofing Company; Allied
Fire Protection; Van-Mulder Sheet Metal, Inc.; N.V.
Heathorn, Inc.; F. Rodgers Corporation fk.a. F.
Rodgers Insulation Interior

David 8. Webster

Mark J. D’Argenio

Wood, Smith, Henning & Berman, LLP
1401 Willow Pass Road, Suite 700
Concord, CA 94520

Phone: (925) 356-8200
Fax: (925) 356-8250
Email: dwebster@wshblaw.com

Attorneys for Catellus Development
Corporation, Catellus Commercial
Development Corp., Catellus Operating
Limited Partnership, Successor to Catellus
Development Corp., Catellus Third and
King LLC, and Third and King Investors,
LLC, ProLogis

| 2U29-0000032

10100148.)

2

Proof of ServiceCc Mm TDD HW FW DY

MN NY NY BY NY NY DD
eI A A F&F BY Fe SOHO we HHH BF WN KF SO

LAW OFFICES

HAIGHT, BROWN &

BONESTEEL, LLLP.
San Francisco

8. Mitchell Kaplan

Gregory Hanson

Gordon & Rees LLP

275 Battery Street, Suite 2000
San Francisco, CA 94111

Phone: (415) 986-5900

Fax: (415) 986-8054

Email: skaplan@gordonrees.com
ghanson@gordonrees.com

Webcor Construction, Inc. dba Webcor
Builders

William H. Staples

Dana Duncan

Archer Norris PLC

2033 North Main Street, Suite 800
Walnut Creek, CA 94596

Phone: (925) 930-6600

Fax: (925) 930-6620

Email: wstaples@archernorris.com
dduncan@archernorris.com

Attorneys for Anning-Johnson Company

Chris Olsen

Mark Brueggemann

Scott Cloud

Clinton & Clinton

100 Oceangate, 14th Floor
Long Beach, CA 90802

Phone: (562) 216-5000

Fax: (562) 216-5001

Email: colsen@clinton-clinton.com
scloud@clinton-clinton.com
mbrueggemann@clinton-clinton.com

Attorneys for Thyssendrupp Elevator
| Corporation

Samuel J. Muir

Erin R. Dunkerly

Collins Collins Muir & Stewart LLP
1100 El Centro Street

South Pasadena, CA 91030

Phone: (626) 243-1100

Fax: 626.243.1111

Email: smuir@ccmslaw.com
edunkerly@ccmslaw.com

Co-counsel for Webcor Construction dba
Webcor Builders

Steven E. McDonald

James L, Shea

Bledsoe Cathcart Diestel
Pedersen & Treppa

601 California Street, 16th Floor

San Francisco, CA 94108

Phone: (415) 981-5411

Fax: (415) 981-0352

Email: smedonald@bledsoelaw.com
ksjea@bledsoclaw.com

Attorneys for Shooter & Butts, Inc.
L

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(File & ServeXpress) I Electronically Served the above-named document throu;

File & ServeXpress for the above-entitled matter. This service complies with Code

of Civil Pro

lure section 1010, The file transmission was reported as complete

and a copy of the “File & ServeXpress Transaction Receipt” page will be
maintained with the original documents in our office.

I declare under penalty of perjury under the laws of the State of California that the

foregoing is true and correct.

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Z1029-0000032
10100148.1

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LAW OFFICES

HAIGHT, BROWN &
BONESTEEL, LLLP.
‘San Francisco

Executed on July 30, 2014, at San Francisco, California.
4)
( otte-
Catherine Schmitz v
(Type or print name) (Signature)
2U29-0000032 4
| 10100148. Proof of Service