Judge Katherine Chilton, Case 21STLC05780 2022-08-24 Tentative Ruling

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Cross-Defendant Western Surety’s Motion for Deposit and Discharge of Stakeholder and for Restraining Order is GRANTED, contingent on Western Surety’s deposit of funds with the Court in the amount of $13,250.00. Interpleader funds of $13,250.00 are to be deposited within thirty (30) days of receipt of this order.

On August 5, 2021, Plaintiff Strong Builders, Inc. (“Plaintiff” or “Strong Builders”) filed an action against Defendants Leonard Calvert Sohm (“Leonard”) and Miriam E. Escobar, a.k.a. Miriam Sohm, a.k.a Miriam E. Bueno (“Miriam”), (collectively “Defendants”) for 1) breach of written contract, 2) quantum meruit, and 3) account stated. The action arose out of an agreement between Plaintiff, a general contractor, and Defendants, owners of subject property, to make construction repairs and improvements to the property. (Compl. p. 2.)

On February 4, 2022, Defendants filed an Answer denying all allegations in the Complaint and on February 7, 2022, they filed a Cross-Complaint against Cross-Defendants Strong Builders, The Western Surety Company[1], a.k.a. Western Surety Company (“Western Surety”), and Craig Anthony Lloyd (“Lloyd”), (collectively “Cross-Defendants”) for (1) breach of contract, (2) alter ego liability, (3) negligent performance of contract, (4) complaint on contractor’s license bond, and (5) money hand and received. Answers were filed by Strong Builders and Western Surety.

Western Surety also filed a Cross-Complaint in Interpleader against Strong Builders and Defendants Leonard and Miriam on April 15, 2022. Defendants Leonard and Miriam and Strong Builders each filed an answer to Western Surety’s Cross-Complaint on May 17, 2022, and June 1, 2022, respectively, admitting certain allegations and denying others.

On May 31, 2022, Western Surety filed the instant Motion re: Deposit and Discharge of Stakeholder and Request for Attorney’s Fees. No opposition was filed.

Interpleader is a procedure whereby a person holding money or personal property to which conflicting claims are being made by others, can join the adverse claimants and force them to litigate their claims among themselves. (See Code of Civ. Proc. § 386; Hancock Oil Co. v. Hopkins (1944) 24 Cal. 2d 497, 508; City of Morgan Hill v. Brown (1999) 71 Cal.App.4th 1114, 1122-23.)

Once the stakeholder’s right to interplead is established, and he or she deposits the money or personal property in court, he or she may be discharged from liability to any of the claimants. This enables the stakeholder to avoid a multiplicity of actions, and the risk of inconsistent results if each of the claimants were to sue him or her separately. (Cantu v. Resolution Trust Corp. (1992) 4 Cal.App.4th 857, 874; City of Morgan Hill, supra, 71 Cal.App.4th at 1122.)

“An interpleader action is traditionally viewed as two suits: one between the stakeholder and the claimants to determine the stakeholder's right to interplead, and the other among the claimants to determine who shall receive the funds interpleaded ... As against the stakeholder, claimants may raise only matters which go to whether the suit is properly one for interpleader; i.e., whether the elements of an interpleader action are present.” (State Farm Fire & Cas. Co. v. Pietak (2001) 90 Cal.App.4th 600, 612.)

If the defendant-stakeholder claims no interest in the funds or property held, he or she need not file an interpleader cross-complaint. He or she may simply apply to the court for permission to deposit the money or property with the court clerk, and for an order discharging him or her from further liability to the adverse claimants. Such order will also substitute the adverse claimants as parties to the action; or, if only money is involved, simply dismiss the stakeholder. (Code Civ. Proc., §§ 386(a), 386.5.) The motion must be supported by an affidavit by the stakeholder establishing the ground for interpleader. (Code Civ. Proc., § 386(a).) The supporting affidavit must also state that the moving party 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…” (Code Civ. Proc., § 386.5.) Notice of the motion must be served on each of the adverse claimants to the funds or property. (Code Civ. Proc., §§ 386(a), 386.5.) “Where a deposit has been made pursuant to Section 386, the court shall, upon the application of any party to the action, order such deposit to be invested in an insured interest-bearing account.” (Code Civ. Proc., § 386.1.)

Pursuant to § 386(f), the court may also “enter may enter its order restraining all parties to the action from instituting or further prosecuting any other proceeding in any court in this state affecting the rights and obligations as between the parties to the interpleader until further order of the court.” (Cal. Civ. Proc. § 386(f).)

The stakeholder may seek reimbursement for its costs and reasonable attorneys’ fees incurred. (Code Civ. Proc., § 386.6; UAP-Columbus JV 326132 v. Nesbitt (1991) 234 Cal.App.3d 1028, 1036.) The court may order payment thereof out of the funds deposited by the stakeholder. (Code Civ. Proc., § 386.6.)

The subject matter of the instant Motion is a $15,000 Contractor’s State License Bond issued to Strong Builders as principal. (Sosa Decl. ¶ 2.)

Western Surety has filed a Cross-Complaint in Interpleader naming the following claimants to the bond: Strong Builders, Leonard Calvert Sohm, and Miriam E. Escobar. (Ibid. at ¶¶ 3-4; 4-15-22 Cross-Complaint.) It contends that “it does not know and cannot determine the respective merits of the remaining claimants which are conflicting claims against the subject bond” and finds that the interpleader is a “safe, expedient, or economical remedy.” (Sosa Decl. at ¶ 8.) Western Surety “has no interest in the proceeds of Bond No. 64950466 and is a mere stakeholder with respect thereto pursuant to CCP § 386.5.” (Ibid.) Western Surety has filed the instant Motion, requesting permission from the Court to deposit the $15,000 bond with the Court, less attorney’s fees and costs, and to be discharged from further liability to claimants in regard to this bond. It also requests the Court to issue a restraining order against claimants and all other persons from instituting further legal action against Western Surety with respect to this bond, pursuant to Code of Civil Procedure § 386(f). (Mot. p. 2.) No oppositions to this Motion were filed.

Western Surety is entitled to be dismissed and discharged from liability once it deposits the funds with the clerk of the Court. Furthermore, Western Surety is entitled to an order restraining all parties “from instituting or further prosecuting any other proceeding” related to Western Surety’s rights and obligations under the bond.

The stakeholder may seek reimbursement for its costs and reasonable attorneys’ fees incurred. (Code Civ. Proc. § 386.6; UAP-Columbus JV 326132 v. Nesbitt (1991) 234 Cal.App.3d 1028, 1036.) The court may order payment thereof out of the funds deposited by the stakeholder. (Code Civ. Proc. § 386.6.)

Cross-Defendant Western Surety states that it incurred $765 in attorney’s fees for services provided since April 2022, related to the interpleader, $510 in attorney’s fees for filing the instant Motion, and $509.53 for filing fees and photocopy charges, for a total of $1,784.53. (Mot. p. 3, Sosa Decl. ¶ 6; Ex. 1.) Western Surety requests $1,750.00 in attorney’s fees and costs. (Ibid.) The Court finds the request to be reasonable and awards costs of $1,750.00, to be deducted from the interpleader funds prior to their deposit with the Court, resulting in a net deposit of $13,250.00.

For the foregoing reasons, Cross-Defendant Western Surety’s Motion for Deposit and Discharge of Stakeholder and for Restraining Order is GRANTED, contingent on Western Surety’s deposit of funds with the Court in the amount of $13,250.00. Interpleader funds of $13,250.00 are to be deposited within thirty (30) days of receipt of this order. Western Surety is awarded $1,750.00 in attorney’s fees and costs, to be retained from the $15,000.00 in interpleader funds currently held by Western Surety. Western Surety is entitled to an order restraining all parties “from instituting or further prosecuting any other proceeding” related to Western Surety’s rights and obligations under the bond.

[1] In its General Denial, filed on April 15, 2022, Cross-Defendant notes that it was erroneously sued as “The Western Surety Company,” instead of Western Surety Company. (4-15-22 General Denial, p. 2.)