Judge: Joel L. Lofton, Case: 22AHCV00473, Date: 2024-04-08 Tentative Ruling

Case Number: 22AHCV00473    Hearing Date: April 8, 2024    Dept: X

   Tentative Ruling

Judge Joel L. Lofton, Department X

HEARING DATE:      April 8, 2024                                       TRIAL DATE: No date set.

CASE:                         DAVID TSAO, an individual, v. LA IMPACT CONSTRUCTION, LP, a California limited partnership; IMPACT CONSTRUCTION COMPANY, a California corporation; HEATHER LIEN, an individual; AMERICAN CONTRACTORS INDEMNITY COMPANY, a California corporation; and DOES 1 through 100, inclusive.  

CASE NO.:                 22AHCV00473

MOTION FOR ORDER OF DISCHARGE, DEPOSIT, AND DISMISSAL

MOVING PARTY:               Cross-Complainant American Contractors Indemnity Company

RESPONDING PARTY:      No response filed.

SERVICE:                              Filed March 6, 2024

BACKGROUND

            This case arises out of Plaintiff David Tsao’s claim that Defendants failed to provide complete and adequate construction work on residential property located at 9606 Lower Azusa Road, Temple City, California (“Subject Property”). Plaintiff filed this complaint on July 19, 2022, alleging nine causes of action for (1) breach of contract, (2) breach of express and implied warranties, (3) violation of Business and Professions code, (4) negligence, (5) negligence per se, (6) fraud, (7) disgorgement, (8) claim on contractor’s bond, and (9) declaratory relief.

TENTATIVE RULING

The court will delay the ruling on this order until ACIC submits the deposit as discussed at the hearing. After ACIC has submitted the deposit, ACIC’s motion for an order discharging it from liability, dismissing it from the present suit, and restraining any party from instituting any action against it related to the bond is GRANTED.

DISCUSSION

            ACIC moves for an order to be discharged from all lability pursuant to a $7,500 contractor’s license bond. On September 9, 2022, ACIC filed a cross-complaint for interpleader regarding various claims on the bond at issue. In its cross-complaint, ACIC alleges that the penal sum of the bond is $15,000 but $7,500 is reserved for claims made by homeowners. (Cross-Complaint ¶ 5.)

            Business and Professions Code section 7071.5 provides: “The contractor's bond required by this article shall be executed by an admitted surety in favor of the State of California, in a form acceptable to the registrar and filed with the registrar by the licensee or applicant. The contractor's bond shall be for the benefit of the following: [¶] (a) A homeowner contracting for home improvement upon the homeowner's personal family residence damaged as a result of a violation of this chapter by the licensee. [¶] (b) A property owner contracting for the construction of a single-family dwelling who is damaged as a result of a violation of this chapter by the licensee. That property owner shall only recover under this subdivision if the single-family dwelling is not intended for sale or offered for sale at the time the damages were incurred. [¶] (c) A person damaged as a result of a willful and deliberate violation of this chapter by the licensee, or by the fraud of the licensee in the execution or performance of a construction contract. [¶] (d) An employee of the licensee damaged by the licensee's failure to pay wages. [¶] (e) A person or entity, including a laborer described in subdivision (b) of Section 8024 of the Civil Code, to which a portion of the compensation of an employee of a licensee is paid by agreement with that employee or the collective bargaining agent of that employee, damaged as the result of the licensee's failure to pay fringe benefits for its employees . . ..”

            Business and Professions Code section 7071.6, subdivision (b), provides: “Excluding the claims brought by the beneficiaries specified in subdivision (a) of Section 7071.5, the aggregate liability of a surety on claims brought against a bond required by this section shall not exceed the sum of seven thousand five hundred dollars ($7,500). The bond proceeds in excess of seven thousand five hundred dollars ($7,500) shall be reserved exclusively for the claims of the beneficiaries specified in subdivision (a) of Section 7071.5. However, nothing in this section shall be construed so as to prevent any beneficiary specified in subdivision (a) of Section 7071.5 from claiming or recovering the full measure of the bond required by this section.”

            ACIC provides that it is a mere stakeholder in this action. (Hayes Decl. ¶ 11.)

“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. § 386.5.)

            It appears uncontroverted that ACIC is a mere stakeholder and should be subject to dismissal once it deposits the bond amount. However, as of now, it is unclear whether the required amount is $7,500. Pursuant to Business and Professions Code section 7071.6, subdivision (b), $7,500 is the limit of recovery unless the claim is brought pursuant to Business and Professions Code section 7071.5.

Here, ACIC provides: “By operation of law, on January 1, 2016, the penal sum of the bond was increased to $15,000.00, but $7,500.00 is reserved for claims made by homeowners pursuant to Business and Professions Code section 7071.6.” (Hayes Decl. ¶ 5.) However, ACIC does not necessarily establish that the $7,500 limit of section 7071.6 applies, or stated another way, that the claims present are not made pursuant to section 7071.5. The issue appears to be whether the required payment should be $7,500 or $15,000. The court recognizes that ACIC brought a cross-complaint for interpleader, at least in part, because there are various potential claims against it. However, it appears that there is a possibility, at least, that Plaintiff’s claims as alleged could fall under section 7071.5.

            Thus, at the hearing on this motion, ACIC is ordered to explain why the deposit total should be $7,500 rather than $15,000 to account for any claims applicable under section 7071.5.

CONCLUSION

The court will delay the ruling on this order until ACIC submits the deposit as discussed at the hearing. After ACIC has submitted the deposit, ACIC’s motion for an order discharging it from liability, dismissing it from the present suit, and restraining any party from instituting any action against it related to the bond is GRANTED.

Dated:   April 8, 2024                                     ___________________________________

                                                                                    Joel L. Lofton

                                                                                    Judge of the Superior Court