## Facts

- A condominium development experienced damage, including cracked walls and slabs, misaligned doors, patios pulling away from buildings, and pool cracking and leaks.
- The owners’ association sued the developer and others for construction defects.
- The developer settled the association’s claims for more than $3 million.
- The developer then pursued contractual and equitable indemnity against subcontractors, including a grading subcontractor and a concrete subcontractor.
- Evidence indicated the damage was caused in part by soil movement potentially tied to inadequate compaction and/or inadequate soils testing, and in part by defective concrete work (including inadequate quality, excessive water content, and slabs poured too thin).
- The subcontractors defended by alleging the developer made material misrepresentations and concealed information from condominium purchasers (including alleged knowledge of expansive soils), and argued this fraud barred indemnity.
- The trial court bifurcated trial to try the fraud issue first, ruling that a fraud finding would preclude indemnity; a jury found against the developer on fraud, and judgment was entered for the subcontractors on the indemnity cross-complaint.
- The developer also sought a new trial based on claimed juror misconduct, alleging a juror conducted an independent investigation and shared extra-record information and purported technical expertise with other jurors.

## Issues

1. Whether a developer’s fraud or misrepresentation toward purchasers categorically bars the developer from obtaining contractual or equitable indemnity from subcontractors whose defective work contributed to the same damages.
2. Whether a juror’s independent investigation and introduction of extra-record information during deliberations required a new trial.

## Decision

- The Court of Appeal reversed the judgment for the subcontractors on the developer’s indemnity cross-complaint and remanded.
- The court held the trial court erred by treating the developer’s fraud as an automatic, complete bar to indemnity rather than permitting allocation of responsibility based on comparative fault and causation.
- The court also concluded juror misconduct occurred when a juror conducted an independent investigation and injected extraneous information; the misconduct was presumptively prejudicial and warranted reversal.

## Legal Principles

- A party’s fraud toward third parties does not, by itself, extinguish indemnity rights against other responsible actors; indemnity in multi-party loss contexts generally requires allocating liability according to comparative fault and causation.
- Indemnity doctrines aim to distribute loss among responsible participants rather than applying an all-or-nothing bar solely because one participant engaged in intentional wrongdoing, where others’ independent negligence may have contributed to the harm.
- Juror receipt or communication of extraneous information obtained outside the record constitutes misconduct and is presumptively prejudicial; reversal may be required when the misconduct concerns technical matters central to disputed issues.

## Conclusion

The court reversed a judgment that had barred a developer’s indemnity claims based solely on a fraud finding, holding that responsibility for construction-defect damages must be apportioned among responsible parties, and independently held that a juror’s extra-record investigation and sharing of outside information tainted the verdict and required reversal and remand.


Smoketree-Lake Murray, Ltd. v. Mills Concrete Constr. Co., 234 Cal. App. 3d 1724, 286 Cal. Rptr. 435 (Ct. App. 1991)