Judge Michael P. Linfield, Case Number: 22STLC02420, Date: 2023-09-07 Tentative Ruling

Judge: Michael P. Linfield, Case: 22STLC02420, Date: 2023-09-07 Tentative Ruling

Case Number: 22STLC02420 Hearing Date: November 28, 2023 Dept: 34

SUBJECT: Motion for Summary Judgment

Moving Party: Hudson Insurance Company

Resp. Party: David Moezinia

The Motion for Summary Judgment is GRANTED. Summary Judgment is GRANTED in favor of Hudson Insurance Company and against David Moezinia on the fourth cause of action for recovery on contractor’s license bond in David Moezinia’s Cross-Complaint.

BACKGROUND:

On April 8, 2022, Chavez General Construction, Inc. (“Chavez”) filed its Verified Complaint against David Moezinia (“Moezinia”) on causes of action of breach of contract, common counts, and mechanic’s lien foreclosure.

On May 20, 2022, Chavez filed its Amendment to Complaint.

On June 23, 2022, Moezinia filed: (1) Verified Answer to the Complaint; and (2) Verified Cross-Complaint (“Moezinia Cross-Complaint”) against Chavez, Salvador Chavez Gonzalez, and Hudson Insurance Company (“Hudson”).

On July 8, 2022, Chavez refiled its Amendment to Complaint.

On July 26, 2022, Hudson filed: (1) Answer to the Moezinia Cross-Complaint; and (2) Cross-Complaint (“Hudson Cross-Complaint”) against Chavez General Construction, Inc. and David Moezinia.

On September 20, 2022, Chavez and Salvador Chavez Gonzalez filed their Verified Answer to the Moezinia Cross-Complaint.

On August 9, 2023, by request of Hudson, the Clerk’s Office dismissed without prejudice the Hudson Cross-Complaint.

On September 6, 2023, Hudson filed its Motion for Summary Judgment. In support of its Motion for Summary Judgment, Hudson concurrently filed: (1) Declaration of Stella Dulay; (2) Declaration of Kenneth S. Humphrey; (3) Separate Statement; and (4) Request for Judicial Notice.

On November 13, 2023, Moezinia filed his Opposition to the Motion for Summary Judgment. Moezinia concurrently filed: (1) Response to Separate Statement; and (2) Proof of Service.

On November 22, 2023, Hudson filed its Reply regarding the Motion for Summary Judgment.

ANALYSIS:

I. Request for Judicial Notice

Hudson requests that the Court take judicial notice of sixteen items, including thirteen items previously filed in this matter, two state statutes, and one section of the California Code of Regulations.

The Court DENIES as superfluous judicial notice to each of these items. Any party that wishes to draw the Court’s attention to a matter filed in this action may simply cite directly to the document by execution and filing date. (See Cal. Rules of Court, rule 3.1110(d).) In addition, statutes and the California Code of Regulations may be cited in without the necessity of judicial notice.

II. Legal Standard

“A party may move for summary judgment in an action or proceeding if it is contended that the action has no merit or that there is no defense to the action or proceeding. The motion may be made at any time after 60 days have elapsed since the general appearance in the action or proceeding of each party against whom the motion is directed or at any earlier time after the general appearance that the court, with or without notice and upon good cause shown, may direct.” (Code Civ. Proc., § 437c, subd. (1)(a).)

“[T]he party moving for summary judgment bears the burden of persuasion that there is no triable issue of fact and that he is entitled to judgment as a matter of law. That is because of the general principle that a party who seeks a court’s action in his favor bears the burden of persuasion thereon. There is a triable issue of material fact if, and only if, the evidence would allow a reasonable trier of fact to find the underlying fact in favor of the party opposing the motion in accordance with the applicable standard of proof.” (Aguilar v. Atl. Richfield Co. (2001) 25 Cal.4th 826, 850, citation omitted.)

“[T]he party moving for summary judgment bears an initial burden of production to make a prima facie showing of the nonexistence of any triable issue of material fact; if he carries his burden of production, he causes a shift, and the opposing party is then subjected to a burden of production of his own to make a prima facie showing of the existence of a triable issue of material fact.” (Aguilar, supra, at p. 850; Smith v. Wells Fargo Bank, N.A. (2005) 135 Cal.App.4th 1463, 1474, [applying the summary judgment standards in Aguilar to motions for summary adjudication].)

“On a summary judgment motion, the court must therefore consider what inferences favoring the opposing party a factfinder could reasonably draw from the evidence. While viewing the evidence in this manner, the court must bear in mind that its primary function is to identify issues rather than to determine issues. Only when the inferences are indisputable may the court decide the issues as a matter of law. If the evidence is in conflict, the factual issues must be resolved by trial.” (Binder v. Aetna Life Ins. Co. (1999) 75 Cal.App.4th 832, 839, citation omitted.)

“The trial court may not weigh the evidence in the manner of a fact finder to determine whose version is more likely true. Nor may the trial court grant summary judgment based on the court's evaluation of credibility.” (Binder, supra, at p. 840, citations omitted; see also Weiss v. People ex rel. Dep’t of Transp. (2020) 9 Cal.5th 840, 864 [“Courts deciding motions for summary judgment or summary adjudication may not weigh the evidence but must instead view it in the light most favorable to the opposing party and draw all reasonable inferences in favor of that party”].)

“On a motion for summary adjudication, the trial court has no discretion to exercise. If a triable issue of material fact exists as to the challenged causes of action, the motion must be denied. If there is no triable issue of fact, the motion must be granted.” (Fisherman's Wharf Bay Cruise Corp. v. Super. Ct. (2003) 114 Cal.App.4th 309, 320, citation omitted.)

III. Discussion

A. The Parties’ Arguments

In Moezinia’s Cross-Complaint, Moezinia only pleads one cause of action against Hudson: recovery on contractor’s license bond. (Moezinia Cross-Complaint, p. 7:10–11.)

Hudson moves for summary judgment on this cause of action. (Motion for Summary Judgment, pp. 17:25–28, 18:1–3.)

Hudson argues: (1) that the liability of a surety is limited to the penal sum of the bond; (2) that payment of the amount of the bond constitutes a full discharge of all liability of the surety on the bond; (3) that Hudson’s fifteenth affirmative defense acts as a complete bar to the cause of action; and (4) that Karton v. Ari Design & Construction, Inc. (2021) 61 Cal.App.5th 734 does not apply here. (Motion for Summary Judgment, pp. 11:11–13, 12:18–19, 14:8–11.)

Moezinia disagrees, arguing: (1) that if the Court determines that if Chavez is liable, then Chavez and Hudson would be jointly liable for attorney’s fees and costs under Code of Civil Procedure section 1029.8 and Karton; (2) that there is no distinction between this case and Karton; (3) that the surety’s liability is not limited to the penal sum of the bond; and (4) that Hudson can be liable for these costs because it litigated this matter. (Opposition, pp. 5:13–21, 7:3–5, 9:17–19, 10:2–4.)

In its Reply, Hudson argues: (1) that the distinctions between this case and Karton are many and material; (2) that the liability of a surety is limited to the penal sum of the bond; (3) that payment of the amount of the bond constitutes a full discharge of all liability of the surety on the bond; (4) that Moezinia admits the claim against Hudson is not for damages; (5) that Hudson took no action to prejudice the rights of Moezinia in response to Moezinia’s own motion for summary judgment against Chavez; and (6) that Moezinia focuses on dicta in Karon that is not binding and cannot be used as precedent in this case. (Reply, pp. 2:16–17, 4:2–4, 4:16, 5:4–5, 5:17–18.)

B. Relevant Statutes

“Unless exempted from this chapter, it is a misdemeanor for a person to engage in the business of, or act in the capacity of, a contractor within this state under either of the following conditions: (1) The person is not licensed in accordance with this chapter. (2) The person performs acts covered by this chapter under a license that is under suspension for failure to pay a civil penalty or to comply with an order of correction, pursuant to Section 7090.1, or for failure to resolve all outstanding final liabilities, pursuant to Section 7145.5.” (Bus. & Prof. Code, § 7028, subd. (a).)

“Any unlicensed person who causes injury or damage to another person as a result of providing goods or performing services for which a license is required under Division 2 (commencing with Section 500) or any initiative act referred to therein, Division 3 (commencing with Section 5000), or Chapter 2 (commencing with Section 18600) or Chapter 3 (commencing with Section 19000) of Division 8, of the Business and Professions Code, or Chapter 2 (commencing with Section 25210) or Chapter 3 (commencing with Section 25230) of Part 3 of Division 1 of Title 4 of the Corporations Code, shall be liable to the injured person for treble the amount of damages assessed in a civil action in any court having proper jurisdiction. The court may, in its discretion, award all costs and attorney’s fees to the injured person if that person prevails in the action.” (Code Civ. Proc., § 1029.8, subd. (a).)

“The board shall require as a condition precedent to the issuance, reinstatement, reactivation, renewal, or continued maintenance of a license, that the applicant or licensee file or have on file a contractor’s bond in the sum of twenty-five thousand dollars ($25,000).” (Bus. & Prof. Code, § 7071.6, subd. (a) [current].)

“The board shall require as a condition precedent to the issuance, reinstatement, reactivation, renewal, or continued maintenance of a license, that the applicant or licensee file or have on file a contractor’s bond in the sum of fifteen thousand dollars ($15,000).” (Bus. & Prof. Code, § 7071.6, subd. (a) [effective Jan. 1, 2020 to Dec. 31, 2021].)

“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.” (Bus. & Prof. Code, § 7071.6, subd. (b).)

“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.” (Bus. & Prof. Code, § 7071.5, subd. (a).)

“A judgment of liability on a bond may be enforced in the same manner and to the same extent as other money judgments.” (Code Civ. Proc., § 996.495.)

“The beneficiary may enforce the liability on a bond against both the principal and sureties.” (Code Civ. Proc., § 996.410, subd. (a).)

“A suretyship obligation is to be deemed unconditional unless its terms import some condition precedent to the liability of the surety.” (Civ. Code, § 2806.)

“Where one assumes liability as surety upon a conditional obligation, his liability is commensurate with that of the principal, and he is not entitled to notice of the default of the principal, unless he is unable, by the exercise of reasonable diligence, to acquire information of such default, and the creditor has actual notice thereof.” (Civ. Code, § 2808.)

“Notwithstanding any other statute other than Section 996.480, the aggregate liability of a surety to all persons for all breaches of the condition of a bond is limited to the amount of the bond. Except as otherwise provided by statute, the liability of the principal is not limited to the amount of the bond.” (Code Civ. Proc., § 996.470, 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.” (Code Civ. Proc., § 996.490, subd. (a).)

C. The Court of Appeal’s Decision in Karton

In Karton, two plaintiffs (homeowners) sued various defendants (including a contractor and the contractor’ insurance company) on five causes of action. (Karton, supra, 61 Cal.App.5th at pp. 738–739.) Among other things, the plaintiffs sought to recover on a license bond against the insurance company. (Ibid.)

Instead of interpleading these funds, the insurance company tendered its defense. (Karton, supra, at p. 751.) Eventually, the trial court entered judgment against the contractor, and the insurance company sent the plaintiffs a check that included the sum of the surety amount, certain litigation costs, and post-judgment interest, but not attorney’s fees. (Ibid.) Although the trial court awarded attorney’s fees, the trial court exempted the insurance company from liability over the attorney’s fee award. (Ibid.)

The Court of Appeal determined held that the trial court’s ruling “was error that ran contrary to precedent” and reversed the trial court’s exemption of the insurance company from liability for the attorney’s fees as costs. (Karton, supra, at pp. 751–754.) Specifically, pursuant to Civil Code section 2808 (a surety’s liability is commensurate with that of the principal within the express terms of the bond and of pertinent statutes), Code of Civil Procedure section 1029.8 (allowing attorney’s fees and costs for plaintiffs who prevail against unlicensed contractors), and various cases in common law, the insurance company was required to pay both the amount of the bond and costs — including attorney’s fees authorized as costs, as were the facts in that case. (Ibid.)

As part of its reasoning for its holding, the Court of Appeal wrote that “[w]hen a surety decides to fight a lawsuit, it can make itself liable for the costs of that litigation in excess of the face value of its bond”. (Karton, supra at p. 753.) The Court of Appeal further wrote that the insurance company “could have negotiated settlement of its own liability or used interpleader procedures to deposit the amount of its bond in court” in order to avoid the costs and risks of litigation. (Ibid.)

D. Discussion

Moezinia’s Cross-Complaint was filed on June 23, 2022. Moezinia alleges, inter alia, that unlicensed contractors engaged in construction work. Instead of negotiating a settlement or using interpleader procedures, Hudson filed its Answer to Moezinia’s Cross-Complaint on July 21, 2022. Despite Hudson’s arguments to the contrary, this case is akin to Karton.

Hudson claims that it made payment to Moezinia on July 17, 2023 in the amount of $15,000.00, which is the amount of the bond. (Motion for Summary Judgment, p. 6:24–25.) Hudson provides a copy of this check. (Decl. Humphrey, Exh. C.) Hudson further claims that it has since requested the Moezinia dismiss it from Moezinia’s Cross-Complaint, but that Moezinia refuses to do so on the basis that Moezinia is entitled to recover attorney’s fees from Hudson. (Motion for Summary Judgment, pp. 6:26–27, 7:1.)

Moezinia does not dispute that Hudson has a penal limit of $15,000.00 or that the full $15,000.00 penal sum was paid to Moezinia by Hudson. (Response to Separate Statement, Items 3, 17.)

Thus, both Moezinia and Hudson make arguments that are partly correct and partly incorrect.

As to Moezinia’s fourth cause of action for recovery on contractor’s license bond, Hudson could only be liable for $15,000.00. As Hudson has already accepted and paid that liability, there are no triable issues of material fact. Thus, Hudson has met its initial burden, Moezinia has not met his subsequent burden, and summary judgment is appropriate.

However, at the outset of this case, Hudson did not settle or pursue procedures in interpleader. Rather, Hudson litigated. Approximately one year after it began litigating, Hudson conceded and paid the full amount it was liable for on the bond. At the end of this litigation, Moezinia may be entitled to certain costs and attorney’s fees from Hudson. (See Karton, supra, 61 Cal.App.5th at pp. 751–754; see also Code Civ. Proc., § 1029.8, subd. (a).)

Trial is scheduled in this matter for approximately four months from now. Questions about the amount of attorney’s fees and costs can be addressed at the appropriate time.

IV. Conclusion