Appellant electric company challenged the decision of the Superior Court of Sacramento County (California), which dismissed appellant’s contract action against respondent construction company as precluded by the collateral estoppel effect of default judgments in a prior case.
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Overview
A subcontract between respondent construction company and appellant electric company contained an indemnification clause that included coverage of claims and liens for supplies. Actions were brought against appellant and respondent when appellant failed to pay suppliers. Respondent cross-complained for indemnification and obtained default judgments against appellant. Appellant then filed suit and alleged that it had fully performed but that respondent had paid only a portion of the compensation due. The trial court dismissed the action as precluded by the collateral estoppel effect of the default judgments. Upon review, the court reversed the dismissal and agreed with appellant that allegations that respondent had fully performed the subcontract were not entitled to collateral estoppel effect because they were neither material nor necessary to the default indemnification judgments.
Outcome
The trial court’s judgment, which dismissed appellant electric company’s contract action against respondent construction company as precluded by the collateral estoppel, was reversed. The court found that the allegations in respondent’s prior indemnification cross-complaint that respondent had fully performed and paid appellant were immaterial and unnecessary to the default judgments. Thus, they were not entitled to collateral estoppel effect.