Judge Lynne M. Hobbs, Case Number: 23STCV05130, Date: 2024-05-30 Tentative Ruling

Judge: Lynne M. Hobbs, Case: 23STCV05130, Date: 2024-05-30 Tentative Ruling

Case Number: 23STCV05130 Hearing Date: May 30, 2024 Dept: 61

CHRISTINE TURNER vs MXNXOXP, INC., et al.

TENTATIVE

Defendant and Cross-Complainant Hudson Insurance Company’s Motion for Discharge and Dismissal of Surety under License Bond is GRANTED.

Defendant to give notice.

DISCUSSION

“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 Civ. Proc. § 386, subd. (b).)

An interpleader action is an equitable proceeding. In an interpleader action, the court initially determines the right of the plaintiff to interplead the funds; if that right is sustained, an interlocutory decree is entered which requires the defendants to interplead and litigate their claims to the funds. Upon an admission of liability and deposit of monies with the court, the plaintiff then may be discharged from liability and dismissed from the interpleader action. [Citations.] The effect of such an order is to preserve the fund, discharge the stakeholder from further liability, and to keep the fund in the court's custody until the rights of the potential claimants of the monies can be adjudicated. By implementing an interpleader action and obtaining a discharge from further liability, the stakeholder avoids tort liability.

(Virtanen v. O'Connell (2006) 140 Cal.App.4th 688, 698, internal citations and quotation marks omitted.)

“After any such complaint or cross-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).)

Defendant and Cross-Complainant Hudson Insurance Company (Hudson) seeks an order to be discharged and dismissed with prejudice from the instant action against the proceeds of its motor vehicle license bond, issued on behalf of Defendant MXNXOXP, Inc. (Dealer), because payment of the bond constitutes a full discharge of its liabilities. (Code Civ. Proc. § 996.490, subd. (a) [“Payment by a surety of the amount of a bond constitutes a full discharge of all the liability of the surety on the bond.”].)

Plaintiff in opposition argues that no discharge is appropriate under Code of Civil Procedure § 386.5, which 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. § 386.5.)

Plaintiff argues that under this statute, Hudson cannot be discharged because the “relief sought” against Hudson includes not merely the amount of the bond, but also costs under Code of Civil Procedure § 1032, which includes attorney fees under the Consumer Legal Remedies Act (CLRA). (Civ. Code § 1780, subd. (e).) Plaintiff cites authority for the proposition that the issuer of a bond may be liable for costs and attorney fees under these statutes in excess of the bonded amount. (Opposition at pp. 4–7, citing Harris v. Northwestern National Ins. Co. (1992) 6 Cal.App.4th 1061, 1067 [holding that a surety could be liable for costs under Code of Civil Procedure § 1032]; Pierce v. Western Surety Co. (2012) 207 Cal.App.4th 83, 93 [“the award of attorney fees as an item of costs is not limited by the Vehicle Code section 11711 cap on damages”]; he trial court should have extended liability for attorney fees to Ari's surety, which is Wesco. Karton v. Ari Design & Construction, Inc. (2021) 61 Cal.App.5th 734, 751 [“The trial court incorrectly reasoned no statute or contract provided for fees against Wesco. The Kartons properly disagree, for their attorney fees are recoverable as costs under section 1029.8 of the Code of Civil Procedure.”].)

Plaintiff’s authorities are inapposite, for they stand only for the proposition that a surety who litigates their case to judgment may be liable for costs and attorney fees. As Hudson notes in reply, none of these cases involved a surety seeking to interplead the funds in question — indeed, the courts in Harris and Karton alike admonished the surety for challenging costs that they could have avoided by interpleading the funds. (Karton v. Ari Design & Construction, Inc. (2021) 61 Cal.App.5th 734, 751 [“Rather than interplead these funds, Wesco tendered its defense to Ari's lawyers. In other words, Wesco decided to fight the Kartons rather than pay them.”]; Harris v. Northwestern National Ins. Co. (1992) 6 Cal.App.4th 1061, 1066 [“To avoid the costs and risks of litigation, appellant could have negotiated settlements of its own liability or used interpleader procedures to deposit the amount of its bond in court.”].) Hudson followed the course prescribed by these decisions.

Hudson argues persuasively that allowing claims for litigation costs and fees to forestall a discharge from litigation under the interpleader statute would render provisions for such a discharge illusory. (Reply at pp. 5–6.) Costs are generally awarded to a prevailing party in civil litigation. (Code Civ. Proc. § 1032, subd. (b) [“Except as otherwise expressly provided by statute, a prevailing party is entitled as a matter of right to recover costs in any action or proceeding.”].) To allow a claim for litigation costs to defeat an interpleading party’s request for discharge would thus render discharge generally unavailable. Plaintiff presents no authority holding for this proposition.

Plaintiff argues that Hudson’s motion ought to be barred by laches, because her complaint was initially filed on March 8, 2023, and Hudson’s motion was filed only on April 2, 2024. (Opposition at pp. 9–10.) But laches requires a showing of “(1) delay in asserting a right or a claim; (2) the delay was not reasonable or excusable; and (3) prejudice to the party against whom laches is asserted.” (Magic Kitchen LLC v. Good Things Internat., Ltd. (2007) 153 Cal.App.4th 1144, 1157.) Here, Plaintiff has only shown delay in bringing the present motion, without any showing as to reasonableness or prejudice. Indeed, there was no delay in bringing the claim for interpleader, which Hudson filed a mere month after Plaintiff filed her own complaint. And Hudson provides a reasonable explanation for the delay: that discussions with the parties were trending toward a stipulated resolution of the interpleaded claims with Hudson “send[ing] checks directly to claimants, instead of depositing the funds with the Court.” (Gascou Decl. ¶ 13.) It was not until January 8, 2024, that Hudson was informed that Cross-Defendants had conferred regarding their own stipulated distribution of the funds, without including Hudson or making provision for dismissal of their claims. (Gascou Decl. ¶¶ 14–16, Exh. B.) Hudson did not receive notice that the stipulation had been entered until February 29, 2024. (Gascou Decl. ¶¶ 17–20.) Finally, Plaintiff articulates no prejudice resulting from the delay in bringing the present motion. There is therefore no cause to deny the motion, and Hudson is entitled to discharge upon the deposit of the bond amount.

The motion is therefore GRANTED.