Judge Gary Y. Tanaka, Case 21TRCV00040 2023-05-24 Tentative Ruling

Judge: Gary Y. Tanaka, Case: 21TRCV00040, Date: 2023-05-24 Tentative Ruling

Case Number: 21TRCV00040 Hearing Date: May 24, 2023 Dept: B

LOS ANGELES SUPERIOR COURT – SOUTHWEST DISTRICT

Honorable Gary Y. Tanaka Wednesday, May 24, 2023

Department B Calendar No. 4

PROCEEDINGS

Howard Simon v. LuAnn Fabien, et al.

21TRCV00040

1. American Contractors Indemnity Company’s Motion for Order of Discharge and Award of Costs and Attorneys’ Fees and Order for Deposit; and for Dismissal of American Contractors Indemnity Company from Cross-Complaint

2. Philadelphia Indemnity Insurance Company’s Motion for an Order (1) To Deposit Bond Funds with Court; (2) For Exoneration and Dismissal of Philadelphia Indemnity Insurance Company; and (3) For an Award of Attorneys’ Fees and Costs

TENTATIVE RULING

American Contractors Indemnity Company’s Motion for Order of Discharge and Award of Costs and Attorneys’ Fees and Order for Deposit; and for Dismissal of American Contractors Indemnity Company from Cross-Complaint is granted.

Philadelphia Indemnity Insurance Company’s Motion for an Order (1) To Deposit Bond Funds with Court; (2) For Exoneration and Dismissal of Philadelphia Indemnity Insurance Company; and (3) For an Award of Attorneys’ Fees and Costs is granted.

Background

Plaintiff filed his Complaint on January 19, 2021. The operative First Amended Complaint was filed on May 5, 2021. Plaintiff alleges the following facts. Plaintiff hired Defendant LuAnn Fabien dba LuAnn Development (“LuAnn”) to perform construction of the property located at 2432 Palm Drive, Hermosa Beach, CA 90254 (“Subject Property”). LuAnn was hired to act as general contractor. The contract stated that the project would be completed on November 1, 2017. LuAnn was required to provide weekly billings and all adjustments required approval from Plaintiff. LuAnn failed to perform the contract, made false representations to Plaintiff, and completed the construction of the Subject Property in a defective manner. American Contractors Indemnity Company (“ACIC”) was the surety company which issued the bond for the project. Plaintiff alleges the following causes of action: (1) Negligence; (2) Negligent Misrepresentation; (3) Breach of Express Warranties; (4) Breach of the Implied Warranty of Habitability; (5) Breach of Contract; (6) Nuisance; (7) Indemnity; (8) Violation of Business & Professions Code §§ 7107, et seq.; and (9) Claim Against Bond. Several Cross-Complaints have also been filed.

Motions for Deposit and Discharge

Code Civ. Proc., § 386(b) states:

“Any person, firm, corporation, association or other entity against whom double or multiple claims are made, or may be made, by two or more persons which are such that they may give rise to double or multiple liability, may bring an action against the claimants to compel them to interplead and litigate their several claims.

When the person, firm, corporation, association or other entity against whom such claims are made, or may be made, is a defendant in an action brought upon one or more of such claims, it may either file a verified cross-complaint in interpleader, admitting that it has no interest in the money or property claimed, or in only a portion thereof, and alleging that all or such portion is demanded by parties to such action, and apply to the court upon notice to such parties for an order to deliver such money or property or such portion thereof to such person as the court shall direct; or may bring a separate action against the claimants to compel them to interplead and litigate their several claims. The action of interpleader may be maintained although the claims have not a common origin, are not identical but are adverse to and independent of one another, or the claims are unliquidated and no liability on the part of the party bringing the action or filing the cross-complaint has arisen. The applicant or interpleading party may deny liability in whole or in part to any or all of the claimants. The applicant or interpleading party may join as a defendant in such action any other party against whom claims are made by one or more of the claimants or such other party may interplead by cross-complaint; provided, however, that such claims arise out of the same transaction or occurrence.”

Code Civ. Proc., § 386.5 states:

“Where the only relief sought against one of the defendants is the payment of a stated amount of money alleged to be wrongfully withheld, such defendant may, upon affidavit that he is a mere stakeholder with no interest in the amount or any portion thereof and that conflicting demands have been made upon him for the amount by parties to the action, upon notice to such parties, apply to the court for an order discharging him from liability and dismissing him from the action on his depositing with the clerk of the court the amount in dispute and the court may, in its discretion, make such order.”

Code Civ. Proc., § 386.6(a) states:

“A party to an action who follows the procedure set forth in Section 386 or 386.5 may insert in his motion, petition, complaint, or cross complaint a request for allowance of his costs and reasonable attorney fees incurred in such action. In ordering the discharge of such party, the court may, in its discretion, award such party his costs and reasonable attorney fees from the amount in dispute which has been deposited with the court. At the time of final judgment in the action the court may make such further provision for assumption of such costs and attorney fees by one or more of the adverse claimants as may appear proper.”

On December 13, 2021, ACIC filed its Cross-Complaint for Interpleader pursuant to CCP § 386. Cross-Complainant alleged: “On or about February 5, 2013, ACIC as surety and LUANN FABIAN dba LUANN DEVELOPMENT, as principal, made, executed, and delivered a certain Contractor’s License Bond, Bond No. 100215153 pursuant to Sections 7071.5 through 7071.11 of the California Business and Professions Code in the sum of $15,000.00, but $7,500.00 is reserved for claims made by homeowners. ACIC is informed and believes that it was in effect at the time of the occurrence of the event described herein. By the provisions of this bond, and pursuant to Sections 7071.5 and 7071.6 of the Business and Professions Code, liability to the Cross-Defendants, and each of them, is limited to the penal sum set forth in said section.” (Cross-Complaint, ¶ 4-5.) “Cross-Defendants made written demands and a lawsuit was filed against ACIC for payment of losses and/or damages claimed to have been suffered in the aggregate amount in excess of the $15,000.00 penal sum.” (Motion, page 1, lines 11-13.) Thus, ACIC seeks an order to deposit the $15,000.00 bond penal sum with the Court, less the statutorily allowed attorney fees and costs in the amount of $5,000.00 pursuant Code of Civil Procedure section 386.6.

On April 27, 2022, Philadelphia Indemnity Insurance Company filed its Cross-Complaint for Interpleader. Cross-Complainant alleged: “On or about January 10, 2018, Philadelphia issued a Contractor’s Disciplinary Bond No. PB11511002592 (“Bond”) to “LUANN DEVELOPMENT” as principal and the People of the State of California as obligee pursuant to the provisions of Business & Professions Code § 7071.6, et seq. The Bond has a penal limit of $30,000. On January 19, 2021, Simon filed the subject action naming Philadelphia as a Defendant and asserting a cause of action for Claim Against Bond against Philadelphia. Simon asserts a claim against Philadelphia’s Bond based on the allegations that Philadelphia’s Bond principal, Luann Development, breached the construction contract between the parties. Simon’s claim is in excess of the penal sum of the Bond.” (Cross-Complaint, ¶¶ 7-8.) Similar to ACIC, Philadelphia requests an order to deposit the Bond funds with the Court and for attorneys’ fees and costs.

Plaintiff/Cross-Defendant Simon filed written oppositions to the motions. Simon argued that the right to interpleader and to deposit funds are only available when there are multiple claims to the bond funds. Simon states he is the sole claimant to the funds, and, therefore, there are no multiple claims. In addition, Simon argued that moving parties have attempted to attack Simon’s Complaint through a demurrer and the filing of an Answer asserting affirmative defenses. Therefore, Simon states that interpleader is no longer available to moving parties. See, Karton v. Ari Design & Construction, Inc. (2021) 61 Cal.App.5th 734. Thus, Simon maintains that the motions must be denied.

Both moving parties filed replies contending that an individual or entity other than Simon is also making a claim to the bond funds – an individual named Robert Nickell. Apparently, this assertion stems from the fact that both moving parties were named as cross-defendants in an action titled Fabian v. Nickell, Case No. 20TRCV00742. Beyond this, however, both moving parties filed amendments to their Cross-Complaints in Interpleader substituting Robert Nickell as “JOE 1” and “ZOE 1,” respectively. In addition, both moving parties attacked Plaintiff’s argument regarding interpleader not being available to them and distinguished Karton.

The motions were continued to allow Plaintiff the opportunity to address new evidence submitted with the Replies. The evidence essentially consisted of showing Nickell’s status as additional claimant.

Plaintiff filed a supplemental opposition again requesting that the Court deny the motions. As the grounds for denial, Plaintiff speculates that Nickell may be asserting a claim to a different bond. In addition, Plaintiff repeats the authority listed above with respect to moving parties’ potential for being imposed attorneys’ fees based on their attempt to challenge Plaintiff’s Complaint.

Plaintiff’s arguments in opposition are not meritorious. Therefore, the Court grants both motions.

Here, the only Bonds that are the subject of the relevant Cross-Complaints in Interpleader are the Bonds identified above. Nickell was recently named as a party to the Cross-Complaints. Thus, the allegations of the Cross-Complaints with respect to the right to interpleader are only addressed to the Bonds at issue in this motion, and not to any other Bond or Bonds. Moving parties have met their burden to identify potential claimants to the Bond funds. Whether Nickell’s claim is or is not meritorious is not at issue with these motions. “There is nothing in Code of Civil Procedure section 386, however, that imposes an obligation on an interpleading party to monitor the action and dismiss parties who assert no claim to a stake.” Cantu v. Resolution Trust Corp. (1992) 4 Cal.App.4th 857, 874–875. Plaintiff’s sheer speculation that Nickell is asserting a claim on a different bond does not defeat this motion.

Karton v. Ari Design & Construction, Inc. (2021) 61 Cal.App.5th 734 is distinguishable. In Karton, the Court held that, following bench trial, the surety company which secured the bond for the unlicensed contractor was also responsible for attorneys’ fees along with the contractor. The following passage is instructive: “[T]o avoid the costs and risks of litigation, Wesco could have negotiated settlement of its own liability or used interpleader procedures to deposit the amount of its bond in court. Instead, Wesco elected to gamble that it and Ari could avoid liability altogether on the merits. Having lost that gamble, [Wesco] is not in a position to complain about liability for court costs ....” Karton v. Ari Design & Construction, Inc. (2021) 61 Cal.App.5th 734, 753 (internal citations and quotations omitted). Here, however, moving parties did not similarly “gamble.” They did not litigate the action on the merits to completion with a trial. Instead, they have properly filed Cross-Complaints in Interpleader and promptly moved to deposit funds. It is true that both parties filed Answers to the Complaint, but this action cannot be deemed the type of activity that Wesco engaged in. The Answers were required to be filed and ensured that Plaintiff would not take their defaults. In addition, a review of ACIC’s Demurrer to Complaint shows that it was completely meritorious resulting in a dismissal of numerous inappropriate causes of action alleged against the surety leaving the only appropriate cause of action for “Claim Against Bond.”

For the foregoing reasons, moving parties’ respective motions are granted. The terms of the moving parties’ respective proposed orders are incorporated into this Court’s minute order.

Moving parties are ordered to give notice of this ruling.