Procedural Posture

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Procedural Posture

Appellant insurer sought review of a judgment from the Superior Court of Sacramento County (California), which sustained, without leave to amend, respondent home builder's demurrer to a complaint for breach of contract and declaratory relief filed by the insurer to enforce settlement agreements regarding stucco work done by an insured subcontractor. The trial court awarded attorney fees to the builder as the prevailing party.

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After the subcontractor was suspended as a corporation, the builder and the subcontractor entered into two settlement agreements regarding allegedly defective stucco work, and the builder and the insurer entered into another settlement agreement. The builder sued the subcontractor, and the insurer then sued the builder, alleging that the builder violated the settlement agreements by filing suit against the subcontractor. The court held that the insurer had standing to sue because it was a party to one of the settlement agreements and was a third party beneficiary of the other two agreements. Although the insurer did not allege that it was a third party beneficiary in the trial court, Code Civ. Proc., § 472c, subd. (a), allowed the insurer to make such a showing for the first time on appeal. The settlement agreements with the subcontractor were voidable as provided in Rev. & Tax. Code, §§ 23304.1, subd. (a), 23304.5, because of the subcontractor's status as a suspended corporation; however, the builder had not sought rescission or offered to return the money. The litigation privilege of Civ. Code, § 47, subd. (b), did not apply because the insurer's action was not a tort action.


The court reversed and remanded to the trial court with instructions to vacate its order and to enter a new order overruling the demurrer as to the causes of action relating to the settlement agreement to which the insurer was a party and sustaining the demurrer with leave to amend as to the causes of action relating to the settlement agreements to which the insurer was not a party. The court also reversed the award of attorney fees.

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