Judge: Latrice A. G. Byrdsong, Case: 23STLC01724, Date: 2023-10-16 Tentative Ruling

Case Number: 23STLC01724    Hearing Date: November 15, 2023    Dept: 25

Hearing Date:                         Wednesday, November 15, 2023

Case Name:                             WESTERN SURETY COMPANY v. THE BIG COMPANY, INC. dba CAPO FIRESIDE, KS CONSTRUCTION AND DESIGN, INC., CB DESIGN BUILD, LLC fka CAYMUS BUILDERS, LLC, WALTER SCHILD, and DOES 1 through 75, inclusive

Case No.:                                23STLC01724

Motion:                                   Motion to Deposit by Stakeholder, for Discharge of Stakeholder, and Request for Attorney’s Fees

Moving Party:                         Plaintiff Western Surety Company

Responding Party:                   None

Notice:                                    OK

Tentative Ruling:           Plaintiff Western Surety Company’s Motion to Deposit by Stakeholder, for Discharge of Stakeholder, and Request for Attorney’s Fees is GRANTED.

Order to Show Cause RE:  Disbursement of Funds set for 01/16/2024 at 9:30 a.m. in Dept. 25 of the Spring Street Courthouse

BACKGROUND

            On March 15, 2023, Plaintiff Western Surety Company (“Plaintiff” or “Western”) filed this action against Defendants The Big Company, Inc. dba Capo Fireside, KS Construction and Design, Inc., CB Design Build, LLC fka Caymus Builders, LLC, Walter Schild, and Does 1 through 75, inclusive, asserting one cause of action for interpleader.

            The Complaint alleges the following, among other things. On or about January 2016, Defendants The Big Company, Inc. dba Capo Fireside and Does 1 through 5, inclusive, made a written application to Plaintiff for a surety bond pursuant to Business and Professions Code section 7071.6. (Compl., ¶ 6.) “In consideration of said [surety application] and the payment of a premium, [Plaintiff] issued … Bond No. 71353669 in the penal sum of $15,000, effective on or about January I, 2016.” (Compl., ¶ 7.) It is alleged by claimants to the bond that Defendants The Big Company, Inc. dba Capo Fireside and Does 1 through 5 have committed some act giving rise to liability on the bond. (Compl., ¶ 8.) However, those defendants have denied liability and have not authorized Plaintiff to pay the bond to the claimants. (Compl., ¶ 8.) Therefore, Plaintiff seeks a judgment ordering all defendants to interplead and litigate their respective rights and claims against the bond. (Compl., p. 4:17-18.)

            On May 30, 2023, Defendant KS Construction and Design, Inc. filed its Answer.

            On July 28, 2023, Plaintiff filed the instant motion to deposit by stakeholder. Also, on that day, Plaintiff dismissed Defendant Walter Schild.

            On August 16, 2023, Plaintiff amended the Complaint to substitute Steve Shpilsky for the defendant sued fictitiously as Doe 6 and Jennifer Shpilsky for the defendant sued as Doe 7 (collectively, the “Shpilsky Defendants”).

On October 16, 2023, the Court continued the hearing for the instant motion to deposit to October 16, 2023, and ordered Plaintiff to serve the moving papers on the Shpilsky Defendants.

On October 30, 2023, Plaintiff filed proofs of service, indicating that it had served the Shpilsky Defendants with the Summons, Complaint, instant motion, and other documents. That same day, Plaintiff dismissed KS Construction and Design, Inc.

            As of November 11, 2023, no opposition or reply has been filed.

MOVING PARTY’S POSITION

Plaintiff moves for an order (1) for deposit, (2) restraining order, and (3) interpleader and attorney’s fees. Specifically, Plaintiff asks the Court to make the following order:

1.      WESTERN [shall] deposit with the Court the full penalty of Bond No. 71353669 in the sum of $15,000 issued on behalf of THE BIG COMPANY, INC., dba CAPO FIRESIDE, a corporation (hereinafter referred to as ‘CAPO FIRESIDE’) in accordance with the terms and provisions of Section 7071.6 of the Business and Professions Code less those sums that the Court may award WESTERN in reasonable attorney’s fees and costs.

2.      Upon the deposit of said funds, WESTERN [shall] be discharged from all liability asserted against it with respect to said bond by the claimants designated herein and by all other persons.

3.      Upon deposit of said funds, all claimants designated herein, and all persons [are] ordered to interplead their claims in this action; and [are] further restrained from instituting or prosecuting in any other court, any proceedings affecting the rights and obligations of WESTERN with respect to all claimants under Bond No. 71353669 issued on behalf of CAPO FIRESIDE.

4.      Any legal actions pending against the proceeds of said bond on behalf of any claimant referenced herein to be dismissed as to WESTERN.

5.      WESTERN be awarded its reasonable attorney's fees and court costs in the sum of $1,800 as allowance for its expenses incurred in this proceeding by the filing of its Complaint in Interpleader and in preserving the penalty of said bond for all claimants on an equal basis.

Motion, p. 2:3-18.

The requested order is based on the fact that (1) Plaintiff has no interest in the $15,000 bond it issued to The Big Company Inc. dba Capo Fireside, (2) the defendant claimants have asserted conflicting demands on Plaintiff for the bond and Plaintiff cannot determine which demand is valid, (3) Plaintiff is entitled to a permanent restraining order pursuant to Code of Civil Procedure section 386, subdivision (f), and (4) Plaintiff is entitled to an allowance for its reasonable attorney’s fees and court costs in accordance with the provisions of Code of Civil Procedure section 386.6.

OPPOSITION

            None.

REPLY

            None.

ANALYSIS

I.          MOTION TO DEPOSIT BY STAKEHOLDER

A.        Legal Standard

“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.” State Farm Fire & Cas. Co. v. Pietak (2001) 90 Cal.App.4th 600, 612; see Code Civ. Proc., § 386, subd. (a) (“Section 386”) (“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”). 

“Code of Civil Procedure section 386.5 (section 386.5) governs discharge of a stakeholder.” Hood v. Gonzales (2019) 43 Cal.App.5th 57, 81 (“Hood”).

“It provides: ‘Where the only relief sought against one of the [parties] is the payment of a stated amount of money alleged to be wrongfully withheld, such [party] may, upon affidavit that … [1] [it] is a mere stakeholder with no interest in the amount or any portion thereof and [2] that conflicting demands have been made upon … [it] for the amount by parties to the action, upon notice to such parties, apply to the court for an order discharging …[it] from liability and dismissing … [it] from the action … [upon] depositing with the clerk of the court the amount in dispute and the court may, in its discretion, make such order.’ (§ 386.5.)” Hood, supra, 43 Cal.App.5th at p. 81 (emphasis added).

B.        Discussion

            Plaintiff’s counsel has submitted an affidavit in support of the instant motion, attesting to the following facts.

“The subject matter of this Motion is a $15,000 Contractor’s State License Bond issued to THE BIG COMPANY, INC., da CAPO FIRESIDE, a corporation (hereinafter ‘CAPO FIRESIDE’), as principal. The bond was issued pursuant to Business and Professions Code Section 7071.6 and is in the penal sum of $15,000. The penal sum of the bond was increased from $7,500 to $10,000 in accordance with California law on or about January 1, 2004 for the benefit of homeowner/claimants who qualify to be paid under Business & Professions Code Section 7071.5 (a). The penal sum of the bond was increased from $10,000 to $12,500 in accordance with California law on or about January 1, 2007 for the benefit of homeowners/claimants who qualify to be paid under Business & Professions Code Section 7071.5(a). The penal sum of the bond was increased from $12,500 to $15,000 in accordance with California law on or about January 1, 2016 for the benefit of homeowners/claimants who qualify to be paid under Business & Professions Code Section 7071.5(a). In view of the homeowner claims, the maximum liability for all claims is $15,000 as provided for by the bond and by the Code.” Motion, declaration of Carlos E. Sosa (“Sosa Decl.”), ¶ 2.

“A verified Complaint in Interpleader was filed by WESTERN naming various claimants.” Sosa Decl., ¶ 3.

The following claimants have been served with the Summons and Complaint in this action: (1) the Big Company dba Capo Fireside, (2) KS Construction and Design, Inc., (3) CB Design Build, LLC fka Caymus Builders, LLC, and (4) Walter Schild. Sosa Decl., ¶ 4. As stated above in the background section of this tentative, Plaintiff also served the Shpilsky Defendants with the Summons and Complaint.

“WESTERN has no interest in the proceeds of Bond No. 71353669 and is a mere stakeholder with respect thereto pursuant to CCP 386.5. WESTERN denies liability to all claimants.” Sosa Decl., ¶ 8.

The Court finds that Plaintiff has satisfied the requirements of Code of Civil Procedure section 386.5 for discharge by (1) providing an affidavit stating that (a) Plaintiff is merely a stakeholder with no interest in the amount or any portion of the bond at issue and (b) that conflicting demands have been made upon it for the amount by parties to the action, and (2) providing notice of the moving papers to the other parties. See Motion, the second to the last page – Proof of Service by Mail (showing that on July 28, 2023, Plaintiff served the moving papers on all named defendants in this action, except Walter Schild, who was dismissed on the day of service). No opposition has been filed disputing that Plaintiff is merely a stakeholder and that conflicting demands for the bond have been made upon it.

Accordingly, the Court grants Plaintiff’s request “for an order discharging [it] from liability and dismissing [it] from [this] action on [its] depositing with the clerk of the court the amount in dispute ….” Code Civ. Proc., § 386.5.

“After … [a] complaint … in interpleader has been filed, the court in which it is filed 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.” Code Civ. Proc., § 386, subd. (f).

Here, Plaintiff seeks an order restraining all claimants in this action from instituting or prosecuting in any court proceedings affecting Plaintiff’s rights and obligations to the claimants with respect to the bond. Plaintiff’s counsel testifies that a permanent restraining order of further litigation relating to the bond is necessary to protect Plaintiff from further expense and potential harassment. Sosa Decl., ¶ 9.

The Court grants Plaintiff’s request for a restraining order.

Finally, Plaintiff seeks attorney’s fees and costs of only $1,800 even though counsel testifies (and has attached itemized statements showing) that Plaintiff incurred fees and costs exceeding that amount. Sosa Decl., ¶ 6; Exhibit 1 – copies of the itemized billing statements.

“To obtain attorney fees under section 386.6, an interpleader plaintiff … must follow all the requirements of section 386 and 386.5, including [1] disavowing any interest in the amount or property being interpleaded; [2] depositing that amount with, or delivering said property to, the court; and [3] seeking and obtaining a discharge from liability.” Hood, supra, 43 Cal.App.5th at pp. 81-82; see also UAP-Columbus JV 326132 v. Nesbitt (1991) 234 Cal.App.3d 1028, 1036 (Under “[s]ection 386.6 subdivision (a) … ‘A party to an action who follows the procedure set forth in Section 386 or 386.5 may insert in his ... 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’” (emphasis added)).

Here, Plaintiff has followed the requirements of Sections 386 and 386.5 of the Code of Civil Procedure. The Court also finds the requested attorney’s fees and costs reasonable.

Accordingly, the Court grants Plaintiff’s request for attorney’s fees and costs of $1,800.  

II.        CONCLUSION

            Plaintiff Western Surety Company’s Motion to Deposit by Stakeholder, for Discharge of Stakeholder, and Request for Attorney’s Fees is GRANTED. The Court makes the following order:

1.      Plaintiff shall deposit with the Court the full penalty of Bond No. 71353669 in the sum of $15,000 issued on behalf of The Big Company, Inc., dba Capo Fireside, a corporation (hereinafter referred to as “Capo Fireside”) in accordance with the terms and provisions of Section 7071.6 of the Business and Professions Code less $1,800 that the Court has awarded the Plaintiff as attorney’s fees and costs.

2.      Upon depositing said funds and filing and serving a proof of service showing that it has deposited such funds, Plaintiff shall be discharged from all liability asserted against it with respect to said bond by the claimants designated in this case and by all other persons.

3.      Upon Plaintiff’s depositing said funds and filing and serving a proof of service showing that it has deposited such funds, all claimants designated in this case, and all other persons are ordered to interplead their claims in this action; and are further restrained from instituting or prosecuting in any other court, any proceedings affecting Plaintiff’s rights and obligations with respect to all claimants under Bond No. 71353669 issued on behalf of Capo Fireside.

4.      Any legal actions pending against the proceeds of said bond on behalf of any claimant referenced herein to be dismissed as to Plaintiff.

 
The Court sets an Order to Show Cause Re:  Disbursement of Funds for 01/16/2024 at 9:30 a.m. in Department 25 of the Spring Street Courthouse.