SCV-271287, Holly & Associates, Inc. v. Novich
Plaintiff Holly & Associates, Inc. (“Plaintiff”), filed the First Amended Complaint (the “FAC”) against defendants Lee Novich and Renee Novich as trustees of the Novich Family Trust (“Defendants”), as well as Does 1-20, arising out of alleged breach of contract. Defendants have in turn filed a cross complaint against Plaintiff, Janver C. Holly, Richard Holly, Justin Hunter (all together, the “Hollys”1 ), ten subcontractors, and eight surety companies and insurers, relating to breach of contract, construction defects, and negligence as to the work performed under the construction contract (the “DXC”). The Hollys have thereafter filed a cross-complaint for indemnity and breach of contract against the ten subcontractors named in the DXC, along with eleven more subcontractors not named therein (the “HXC”). The matter was subsequently consolidated with RCX, Inc. v. Novich., MCV-258894, also pending in Department 17 (the “Associated Action”). The Associated Action is filed by plaintiff RCX, Inc. (“Consolidation Plaintiff”) against Plaintiff and Defendants. This matter comes on calendar for cross-defendants Navigator’s Insurance Company’s (“Navigator”) motion to discharge Navigator as stakeholders under Code of Civil Procedure sections 386.5 and 386.6. The motion is GRANTED.
- Governing Law
Code of Civil Procedure section 386 states in relevant part as follows:
“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.
When the person, firm, corporation, association or other entity against whom such claims are made, or may be made, is a defendant in an action brought upon one or more of such claims, it may either file a verified cross-complaint in interpleader, admitting that it has no interest in the money or property claimed, or in only a portion thereof, and alleging that all or such portion is demanded by parties to such action, and apply to the court upon notice to such parties for an order to deliver such money or property or such portion thereof to such person as the court shall direct; or may bring a separate action against the claimants to compel them to interplead and litigate their several claims. The action of interpleader may be maintained although the claims have not a common origin, are not identical but are adverse to and independent of one another, or the claims are unliquidated and no liability on the part of the party bringing the action or filing the cross-complaint has arisen. The applicant or interpleading party may deny liability in whole or in part to any or all of the claimants. The applicant or interpleading party may join as a defendant in such action any other party against whom claims are made by one or more of the claimants or such other party may interplead by cross-complaint; provided, however, that such claims arise out of the same transaction or occurrence.”
(Code Civ. Proc. §386(b).)
Additionally “[w]here 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. The propriety of a motion under section 386.5 turns on whether the stakeholder is truly a disinterested party, whose discharge still leaves parties in litigation with substantial rights to be resolved with respect to the property in question.” Lincoln Nat. Life Ins. Co. v. Mitchell (1974) 41 Cal.App.3d 16, 19–20, citing, 4 Am.Jur.2d, 93, pp. 607-608. “The right to the remedy by interpleader is founded, however, not on the consideration that a [person] may be subjected to double liability, but on the fact that he is threatened with double vexation in respect to one liability.” City of Morgan Hill v. Brown (1999) 71 Cal.App.4th 1114, 1122; quoting Pfister v. Wade (1880) 56 Cal. 43, 47. The true test of suitability for a motion is the stakeholder’s disavowal of interest in the property at issue, coupled with the perceived ability of the court to resolve the entire controversy as to entitlement to that property without the need for the stakeholder to be a party to the suit.” S. California Gas Co. v. Flannery (2014) 232 Cal.App.4th 477, 486–487, citing, Pacific Loan Management Corp. v. Superior Court (1987) 196 Cal.App.3d 1485, 1489–1490. If the proof is sufficient that the moving party has no interest in the property at issue, or it is admitted by failure to object or by stipulation, the court makes an Interlocutory order and directs the stakeholder to deposit the amount or deliver the property to the Court and requires the claimants to litigate their claims among themselves. Lincoln Nat. Life Ins. Co., supra. 41 Cal.App.3d at 19–20.
“A party to an action who follows the procedure set forth in Section 386 or 386.5 may insert in his motion, petition, complaint, or cross 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. At the time of final judgment in the action the court may make such further provision for assumption of such costs and attorney fees by one or more of the adverse claimants as may appear proper.” CCP § 386.6 (a).
A bond remains in effect until “(t)he purpose for which the bond was given is satisfied” or “(a) judgment of liability on the bond that exhausts the amount of the bond is satisfied” CCP, § 995.430 (b) and (c). “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.” CCP, § 996.470(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.” CCP, § 996.490. “A surety’s liability under a contractor’s license bond is established by statute, and no burden may be imposed on the surety other than those specifically set forth by statute.” All Bay Mill & Lumber Co. v. Surety Co. (1989) 208 Cal.App.3d 11, 15.
- Analysis
Navigator has filed a motion for discharge, and intends to tender $15,000, which is the bond amount between Navigator and their insured, defendant Stewart Builders, Inc. (“Stewart”). Navigator requests that the Court allow them to tender this amount reduced by their attorney fees incurred in this matter under CCP § 386.6.
Based on the Reply, the Court is under the impression that Defendants have served Navigator with an opposition to the motion. However, there is no opposition within the Court’s record, and as such it is apparent that it was never filed. The Court will not address Navigator’s construal of Defendants’ argument. There is no timely opposition on file with the Court.
Navigator shows that the only cause of action within the Cross-Complaint asserted against the sureties are the fifth cause of action for “Action on Contractors (sic) License Bond”. Those claims are statutorily constrained to a particular amount. CCP § 386.5 allows a defendant against whom is sought “the payment of a stated amount of money alleged to be wrongfully withheld”, to move for discharge. Navigator offers to tender the entire bond amount. This appears to be a discrete form of liability properly subject to CCP § 386.5. Navigator disavows an interest in the amount, other than for fees allowed under CCP § 386.6. They request that the bond therefore be exonerated, because it is being tendered in full to the Court. Sureties may only be liable for the total amount of the bond at issue. CCP § 996.470(a). Bonds continue until the purpose of the bond has been satisfied, or the bond is subject to judgment in the full amount. CCP § 995.430 (b) and (c). Full payment of the bond amount “constitutes a full discharge of all the liability of the surety on the bond.” CCP, § 996.490 (a). The bond appears to therefore be satisfied. Discharge is appropriate. The bond is exonerated under CCP § 996.490. This will take effect upon deposit of the full amount of the bond minus any granted fees.
Fees under § 386.6 are discretionary. See CCP § 386.6 (a) (“the court may, in its discretion, award such party his costs and reasonable attorney fees…”). Navigator’s fees are reasonable and were incurred in defending the action, up to the bond being expended for the instant discharge. Navigator requests $1,740.50 in attorney’s fees and $35.82 in costs, resulting in a total award of $1,776.32. The Court finds the requested fees reasonable and appropriate, and exercises its discretion to grant those fees and costs.
III. Conclusion
Based on the foregoing, Navigator’s motion for discharge is GRANTED. Navigator will tender $13,223.68 to the Court within 10 days of notice of this order. Thereafter, they will be discharged and the bond will be exonerated.
Navigator shall submit a written order to the Court consistent with this tentative ruling and in compliance with Rule of Court 3.1312(a) and (b).
1. While the Court notes cross-defendant Justin Hunter does not have the surname Holly, his presence is inherently related to his association with Plaintiff, Holly & Associates, and therefore he is included here for ease of reference. No disrespect is intended.