This case was last updated from Los Angeles County Superior Courts on 01/12/2023 at 02:21:32 (UTC).

SHANNON L. CONN, AN INDIVIDUAL VS HUDSON INSURANCE COMPANY A SURETY/ INSURANCE BUSINESS ENTITY

Case Summary

On 08/03/2022 SHANNON L CONN, AN INDIVIDUAL filed a Contract - Insurance lawsuit against HUDSON INSURANCE COMPANY A SURETY/ INSURANCE BUSINESS ENTITY. This case was filed in Los Angeles County Superior Courts, Glendale Courthouse located in Los Angeles, California. The Judge overseeing this case is RALPH C. HOFER. The case status is Pending - Other Pending.
Case Details Parties Documents Dockets

 

Case Details

  • Case Number:

    *******0480

  • Filing Date:

    08/03/2022

  • Case Status:

    Pending - Other Pending

  • Case Type:

    Contract - Insurance

  • County, State:

    Los Angeles, California

Judge Details

Presiding Judge

RALPH C. HOFER

 

Party Details

Plaintiff

CONN AN INDIVIDUAL SHANNON L.

Defendants

HUDSON INSURANCE COMPANY A SURETY/ INSURANCE BUSINESS ENTITY

HUDSON INSURANCE COMPANY A SURETY/INSURANCE BUSINESS ENTITY

Attorney/Law Firm Details

Plaintiff Attorney

WINTERS JONATHAN D

Defendant Attorney

CAMERON CLARK HOWARD

 

Court Documents

Attachment - ATTACHMENT ATTACHMENT EXHIBITS TO FIRST AMENDED COMPLAINT FOR DAMAGES

1/10/2023: Attachment - ATTACHMENT ATTACHMENT EXHIBITS TO FIRST AMENDED COMPLAINT FOR DAMAGES

Minute Order - MINUTE ORDER (HEARING ON DEMURRER - WITHOUT MOTION TO STRIKE TO FIRST AMEND...)

1/6/2023: Minute Order - MINUTE ORDER (HEARING ON DEMURRER - WITHOUT MOTION TO STRIKE TO FIRST AMEND...)

Minute Order - MINUTE ORDER (CASE MANAGEMENT CONFERENCE)

1/5/2023: Minute Order - MINUTE ORDER (CASE MANAGEMENT CONFERENCE)

Reply - REPLY REPLY TO OPPOSITION TO DEMURRER TO FIRST AMENDED COMPLAINT

12/27/2022: Reply - REPLY REPLY TO OPPOSITION TO DEMURRER TO FIRST AMENDED COMPLAINT

Request for Informal Discovery Conference - Complex - REQUEST FOR INFORMAL DISCOVERY CONFERENCE - COMPLEX - DENIED

12/14/2022: Request for Informal Discovery Conference - Complex - REQUEST FOR INFORMAL DISCOVERY CONFERENCE - COMPLEX - DENIED

Opposition - OPPOSITION TO DEFT SECOND GAL DEMURRER

12/16/2022: Opposition - OPPOSITION TO DEFT SECOND GAL DEMURRER

Case Management Statement

12/15/2022: Case Management Statement

Case Management Statement

12/13/2022: Case Management Statement

Declaration - DECLARATION DECLARATION OF CLARK CAMERON IN SUPPORT OF HUDSON INSURANCE COMPANY'S DEMURRER TO FIRST AMENDED COMPLAINT

12/8/2022: Declaration - DECLARATION DECLARATION OF CLARK CAMERON IN SUPPORT OF HUDSON INSURANCE COMPANY'S DEMURRER TO FIRST AMENDED COMPLAINT

Memorandum of Points & Authorities

12/8/2022: Memorandum of Points & Authorities

Demurrer - without Motion to Strike

12/8/2022: Demurrer - without Motion to Strike

Request for Judicial Notice

12/8/2022: Request for Judicial Notice

Amended Complaint - AMENDED COMPLAINT (1ST)

11/23/2022: Amended Complaint - AMENDED COMPLAINT (1ST)

Minute Order - MINUTE ORDER (HEARING ON DEMURRER - WITH MOTION TO STRIKE (CCP 430.10) PUNI...)

11/4/2022: Minute Order - MINUTE ORDER (HEARING ON DEMURRER - WITH MOTION TO STRIKE (CCP 430.10) PUNI...)

Minute Order - MINUTE ORDER (HEARING ON DEMURRER - WITH MOTION TO STRIKE (CCP 430.10) PUNI...)

11/4/2022: Minute Order - MINUTE ORDER (HEARING ON DEMURRER - WITH MOTION TO STRIKE (CCP 430.10) PUNI...)

Minute Order - MINUTE ORDER (NUNC PRO TUNC ORDER)

11/4/2022: Minute Order - MINUTE ORDER (NUNC PRO TUNC ORDER)

Certificate of Mailing for - CERTIFICATE OF MAILING FOR (NUNC PRO TUNC ORDER) OF 11/04/2022

11/4/2022: Certificate of Mailing for - CERTIFICATE OF MAILING FOR (NUNC PRO TUNC ORDER) OF 11/04/2022

Reply - REPLY REPLY TO OPPOSITION TO MOTION TO STRIKE PUNITIVE DAMAGES

10/27/2022: Reply - REPLY REPLY TO OPPOSITION TO MOTION TO STRIKE PUNITIVE DAMAGES

26 More Documents Available

 

Docket Entries

  • 03/16/2023
  • Hearing03/16/2023 at 08:30 AM in Department D at 600 East Broadway, Glendale, CA 91206; Case Management Conference

    [+] Read More [-] Read Less
  • 01/10/2023
  • DocketAttachment ATTACHMENT EXHIBITS TO FIRST AMENDED COMPLAINT FOR DAMAGES; Filed by: Shannon L. Conn, an individual (Plaintiff)

    [+] Read More [-] Read Less
  • 01/10/2023
  • DocketUpdated -- Attachment ATTACHMENT EXHIBITS TO FIRST AMENDED COMPLAINT FOR DAMAGES: Document changed from Request (name extension) to Attachment ; As To Parties:

    [+] Read More [-] Read Less
  • 01/06/2023
  • DocketUpdated -- Demurrer - without Motion to Strike: Filed By: Hudson Insurance Company, a surety/insurance business entity (Defendant); Result: Overruled ; Result Date: 01/06/2023 ; As To Parties:

    [+] Read More [-] Read Less
  • 01/06/2023
  • DocketCase Management Conference scheduled for 03/16/2023 at 08:30 AM in Glendale Courthouse at Department D

    [+] Read More [-] Read Less
  • 01/06/2023
  • DocketMinute Order (Hearing on Demurrer - without Motion to Strike to First Amend...)

    [+] Read More [-] Read Less
  • 01/06/2023
  • DocketHearing on Demurrer - without Motion to Strike to First Amended Complaint filed by Defendant Hudson Insurance Company scheduled for 01/06/2023 at 09:00 AM in Glendale Courthouse at Department D updated: Result Date to 01/06/2023; Result Type to Held

    [+] Read More [-] Read Less
  • 01/06/2023
  • DocketCase Management Conference scheduled for 01/06/2023 at 09:00 AM in Glendale Courthouse at Department D Held - Continued was rescheduled to 03/16/2023 08:30 AM

    [+] Read More [-] Read Less
  • 01/05/2023
  • DocketCase Management Conference scheduled for 01/06/2023 at 09:00 AM in Glendale Courthouse at Department D

    [+] Read More [-] Read Less
  • 01/05/2023
  • DocketMinute Order (Case Management Conference)

    [+] Read More [-] Read Less
41 More Docket Entries
  • 08/03/2022
  • DocketNotice of Case Assignment - Unlimited Civil Case; Filed by: Clerk

    [+] Read More [-] Read Less
  • 08/03/2022
  • DocketCase assigned to Hon. Ralph C. Hofer in Department D Glendale Courthouse

    [+] Read More [-] Read Less
  • 08/03/2022
  • DocketCase Management Conference scheduled for 01/05/2023 at 08:30 AM in Glendale Courthouse at Department D

    [+] Read More [-] Read Less
  • 08/03/2022
  • DocketOrder to Show Cause Failure to File Proof of Service; Filed by: Clerk

    [+] Read More [-] Read Less
  • 08/03/2022
  • DocketOrder to Show Cause Re: Failure to File Proof of Service scheduled for 10/18/2022 at 08:30 AM in Glendale Courthouse at Department D

    [+] Read More [-] Read Less
  • 08/03/2022
  • DocketUpdated -- Request to Waive Court Fees: Filed By: SHANNON L. CONN, an individual (Plaintiff); Result: Granted; As To Parties: removed

    [+] Read More [-] Read Less
  • 08/03/2022
  • DocketOrder on Court Fee Waiver (Superior Court); Signed and Filed by: Clerk; As to: SHANNON L. CONN, an individual (Plaintiff)

    [+] Read More [-] Read Less
  • 08/03/2022
  • DocketCertificate of Mailing for [Order on Court Fee Waiver (Superior Court)]; Filed by: Clerk

    [+] Read More [-] Read Less
  • 08/03/2022
  • DocketComplaint; Filed by: SHANNON L. CONN, an individual (Plaintiff); As to: HUDSON INSURANCE COMPANY a surety/ insurance business entity (Defendant)

    [+] Read More [-] Read Less
  • 08/03/2022
  • DocketCivil Case Cover Sheet; Filed by: SHANNON L. CONN, an individual (Plaintiff); As to: HUDSON INSURANCE COMPANY a surety/ insurance business entity (Defendant)

    [+] Read More [-] Read Less

Tentative Rulings

Case Number: *******0480 Hearing Date: January 6, 2023 Dept: D

TENTATIVE RULING
Calendar: 7
Date: 1/6/2023
Case No: 22 GDCV00480 Trial Date: None Set
Case Name: Conn v. Hudson Insurance Company
DEMURRER
Moving Party: Defendant Hudson Insurance Company
Responding Party: Plaintiff Shannon L. Conn
Meet and Confer? Yes
RELIEF REQUESTED:
Sustain demurrer to First Amended Complaint
CAUSES OF ACTION: from First Amended Complaint
1) Recovery Against a Contractor’s License Bond
2) Breach of Covenant of Good Faith and Fair Dealing
3) Intentional Interference with Contract
4) Declaratory Relief
SUMMARY OF FACTS:
Plaintiff Shannon Conn alleges that in January of 2016, plaintiff entered into a Residential Purchase/Sale Agreement for the purchase of real property in Magalia, California, and that in February of 2016, the sellers agreed to make repairs to the subject property, including repairing the sinks and windows. Plaintiff was assured that no leaks were found in the master bathroom, but in April of 2016, shortly after plaintiff moved into the subject property, plaintiff discovered leaks and water intrusion.
Plaintiff alleges that in May of 2016 she hired Jim E. Hale dba Jim E. Hale B General Contractor and Plumbing Contractor to inspect and resolve the defects in the subject property. Hale represented that he had repaired the leak, but the leak in fact remained unrepaired, and caused water intrusion and mold growth.
Plaintiff alleges that plaintiff hired numerous contractors to repair and abate the leaks and became ill.
In May of 2017, plaintiff filed a complaint for damages against Hale in the Superior Court of California, County of Butte. On May 23, 2022, the court entered judgment against Hall and in favor of plaintiff in the sum of $15,000.00.
The FAC alleges that at all times mentioned, Hale, as a licensed contractor, was required to be bonded, and was bonded through defendant Hudson Insurance Company. Plaintiff alleges that in July of 2022 plaintiff contacted defendant Hudson Insurance to recover against Hale’s contractor bond, but on July 20, 2022, defendant denied any claim by plaintiff. Plaintiff alleges that she has been harmed by defendant’s unjustified refusal to recognize and pay plaintiff’s asserted claim.
Defendant Hudson Insurance filed a demurrer and motion to strike in response to the initial complaint, which was heard on November 4, 2022. The motion to strike punitive damages was sustained without leave to amend. The demurrer was sustained with leave to amend as to the first cause of action for recovery on a contractor’s license bond and second cause of action for breach of the covenant of good faith and fair dealing. The demurrer was overruled to the third cause of action for intentional interference with contract and fourth cause of action for declaratory relief. Plaintiff was permitted twenty days leave to amend.
Defendant Hudson Insurance now challenges the sufficiency of the First Amended Complaint.
ANALYSIS:
Demurrer
First Cause of Action—Recovery Against a Contractor’s License Bond
The demurrer to this cause of action was previously sustained as follows:
“Demurrer to the first cause of action for recovery on a contractor’s license bond is SUSTAINED WITH LEAVE TO AMEND
(1) On the ground the cause of action appears to be barred by the statutory statute of limitations included in Business & Professions Code section 7071.11. On any further amendment and challenge on this ground, the Court will expect plaintiff to fully meet and confer and brief to this Court the grounds pursuant to which this cause of action is timely under the applicable statutory provisions in connection with contractor’s bonds.
(2) On the ground plaintiff has not included as a party to the cause of action the principal, as required under CCP section 996.430.”
Statute of Limitations
Defendant Hudson Insurance again argues that the action against the contractor’s bond is barred by the statute of limitations. Defendant argues that the court in its previous minute order stated:
“Plaintiff has failed to establish that there is some act or omission other than those alleged of Hale occurring in 2016 which would have triggered the statutory statute of limitations included in Business & Professions Code section 7071.11, or that there was some delay in accrual recognized by cited legal authority. The demurrer accordingly is sustained with one opportunity to amend to more clearly plead around the bar of the statute of limitations.”
[Minute Order 11/4/2022, p. 5 of 12].
Defendant again relies on Business and Professions Code section 7071.11(c), which appears in the Licensing Article on the Chapter pertaining to Contractors, and provides, in connection with actions against a bond:
“(c) Except for claims covered by subdivision (d), any action against a bond required under this article, excluding the judgment bond specified under Section 7071.17, shall be brought in accordance with the following:
(1) Within two years after the expiration of the license period during which the act or omission occurred. The provisions of this paragraph shall be applicable only if the license has not been inactivated, canceled, or revoked during the license period for which the bond was posted and accepted by the registrar as specified under Section 7071.7.
(2) If the license has been inactivated, canceled, or revoked, an action shall be brought within two years of the date the license of the active licensee would have expired had the license not been inactivated, canceled, or revoked. For the provisions of this paragraph to be applicable, the act or omission for which the action is filed must have occurred prior to the date the license was inactivated, canceled, or revoked….
(d) A claim to recover wages or fringe benefits shall be brought within six months from the date that the wage or fringe benefit delinquencies were discovered, but in no event shall a civil action thereon be brought later than two years from the date the wage or fringe benefit contributions were due.”
Defendant argues that in this case, plaintiff has filed the action more than six years after the act or omission occurred that gave rise to the violation of the license laws.
Defendant argues that the FAC has added a number of superfluous paragraphs, but the substance has not changed, and that the only act or omission by the contractor in this matter occurred in May of 2016, and plaintiff cannot plead around that date.
Defendant argues that according to paragraphs 19-24 of the complaint, the act/omission occurred on May 25, 2016, and that the license period at issue was from January 1, 2016 to December 31, 2017. Defendant references a Request for Judicial Notice, Ex. A, which is a copy of a license history page from the California Contractors State Licensing Board relating to Hale, which shows a Bond History with Hudson Insurance Company issuing a bond from January 1, 2016 through a cancellation date of August 12, 2017. [RFJN, Ex. A]. Defendant also relies on this same bond history which is purportedly attached to the FAC as exhibit 3. The FAC which was filed with the court, however, does not include any of the exhibits referenced, just tabs with exhibit numbers. Plaintiff will be ordered to file with the court the copies of the exhibits which were evidently in the copy of the FAC which was served.
Defendant argues that a contractor’s license is valid for two-year increments, as reflected in Business & Professions Code section 7140, which provides, in pertinent part, “All licenses issued under the provisions of this chapter shall expire two years from the last day of the month in which the license is issued, or two years from the date on which the renewed license last expired.” Defendant argues that the contractor’s acts or omissions, alleged to have occurred in May of 2016, occurred during the two-year period from license renewal in January of 2016, which license period expired on December 31, 2017. The two-year statute of limitations accordingly expired two years from the end of the two-year license period ending December 31, 2017, which would have been on December 31, 2019. This action was filed on August 3, 2022, long after the expiration of the two-year statute of limitations.
As noted above, the bond history shows that the bond covering the act or omissions in May of 2016 appears to be a bond issued with an effective date of 01/01/2016, which was cancelled on 08/12/17. [RFJN, Ex. A, Complaint, Ex. 3]. This bond was issued by defendant. [Id.]. However, according to the statute, and as indicated in the moving papers, it appears that the two-year licensing period applies regardless of any cancellation, so that a license renewed in January of 2016, although cancelled in August 2017, would have expired according to statute two years later, in December 2017 or January of 2018, with two years from that date being in 2019 or 2020, well before this action was filed in 2022.
Plaintiff in opposition argues that the FAC, in compliance with the court’s previous order, specifically pleads facts which would take this action out of any asserted bar of the statute of limitations, based on equitable tolling.
Plaintiff argues that the FAC, at paragraphs 39 to 59, now alleges that plaintiff contacted Jim Hale numerous times to repair the leaking and water intrusion, to no avail, and so, on May 25, 2017, within the time frame of any statute of limitations, plaintiff filed a complaint for damages against Hale, in the Superior Court of California, County of Butte. [FAC, paras. 31-33]. The FAC alleges that on May 23, 2022, the court entered judgment against Jim Hale, and in favor of plaintiff, in the sum of $15,000. [FAC, para. 35]. The FAC alleges that at all relevant times Jim Hale was bonded through defendant Hudson Insurance. [FAC, para. 35, 45]. It is also alleged that Jim Hale was required to and did notify defendant Hudson Insurance of the claim back in 2017, so that Hudson Insurance had actual notice of the pending claim against the bond. [FAC, paras. 47-52].
Plaintiff argues that the demurrer does not address those facts in the demurrer, and that equitable tolling applies to any asserted statute of limitations.
The doctrine of equitable tolling has developed primarily to avoid the harsh results of the rule that statutes of limitations are considered mandatory where an injured person has several legal remedies and reasonably and in good faith pursues one, and the defendant is not prejudiced thereby. Nichols v. Canoga Industries (1978) 83 Cal.App.3d 956, 962. In Nichols, the Second District reversed the dismissal of a complaint on statute of limitations ground where the complaint had alleged the filing of a complaint within the statute of limitations in another forum, in that case, the federal courts.
Plaintiff relies on McDonald v. Antelope Valley Community College Dist. (2008) 45 Cal.4th 88, in which the California Supreme Court determined that equitable tolling applied to public defendants as well as private defendants and noted that the judicially created equitable tolling rule required “a showing of three elements: “timely notice, and lack of prejudice, to the defendant, and reasonable and good faith conduct on the part of the plaintiff.” McDonald, at 102, quoting Addison v. State of California (1978) 21 Cal.3d 313, 319.
Plaintiff also relies on Long v. Forty Niners Football Co., LLC (2019) 33 Cal.App.5th 550, 555, in which the court of appeal, quoting McDonald, quoted the elements above, and also observed,
“The purpose of equitable tolling is to “ease[ ] the pressure on parties ‘concurrently to seek redress in two separate forums with the attendant danger of conflicting decisions on the same issue.’ ” It is intended to benefit the court system “by reducing the costs associated with a duplicative filing requirement, in many instances rendering later court proceedings either easier and cheaper to resolve or wholly unnecessary.””
Long, quoting McDonald, at 100.
The FAC now alleges that plaintiff pursued an alternate remedy by timely pursuing the contractor directly, that defendant Hudson Insurance was notified of the claim in 2017, so had actual knowledge of the pending claim against the bond, and was not prejudiced, and that plaintiff’s conduct was reasonable. [FAC, paras. 31, 32, 34, 35, 45, 47-58]. It is alleged, in fact that Hudson Insurance’s actual identity was affirmatively concealed from plaintiff, suggesting a remedy in equity would be appropriate. [FAC, para.55].
Defendant argues in the meet and confer correspondence that the cases cited by plaintiff relate to the judicially created concept of equitable tolling, and that neither case arose in a surety bond context with the statutory mandates of the Business & Professions Code at issue.
Defendant does not cite a case in which the doctrine of equitable tolling is held not to apply in the surety bond context.
Plaintiff cites to CACI 457, which sets forth the elements for equitable tolling, and provides, in the “Directions for Use,” that “Equitable tolling, including any disputed issue of fact, is to be decided by the court, even if there are disputed issues of fact. This instruction is for use if the court submits the issue to the jury for advisory findings.” CACI 457, Directions for Use, citations omitted.
The Directions also indicate, by citation to specific case law, that equitable tolling is not available for legal malpractice, nor for medical malpractice with regard to the three-year limitation period (although the one-year period may be tolled on other grounds). CACI 457, Directions for Use, citations omitted. There is no indication that any other statutory period is not subject to an equitable tolling argument.
Moreover, it is generally held with respect to a statute of limitations defense that a demurrer on the ground a cause of action is barred by the statute of limitations should be sustained only where the facts alleged on the face of the complaint “clearly and affirmatively” show that the cause of action is barred. It is not enough that the complaint might be barred. Marshall v. Gibson, Dunn & Crutcher (1995) 37 Cal.App.4th 1397, 1403.
Accordingly, given that the matter is at the pleading stage, and plaintiff has now sufficiently alleged facts which could support a claim that the statute of limitations should be subject to equitable tolling, the demurrer on statute of limitations grounds now is overruled.
Second Cause of Action—Breach of Covenant of Good Faith and Fair Dealing, Third Cause of Action—Intentional Interference with Contract, and Fourth Cause of Action—Declaratory Relief
The demurrer does not demur to the pleading on grounds other than statute of limitations grounds, either in the notice or in the memorandum of points and authorities. The demurrer accordingly is overruled as to all causes of action in its entirety.
In addition, to the extent the demurrer is directed to the third and fourth causes of action, as noted above, the court had previously overruled defendant’s demurrer to those causes of action.
The demurrer is overruled.
RULING:
Demurrer to First Amended Complaint by Hudson Insurance Company is OVERRULED.
Ten days to answer.
UNOPPOSED Request for Judicial Notice by Hudson Insurance Company is GRANTED.
The Court notes that the copy of the First Amended Complaint filed with the Court on eCourt does not include copies of the Exhibits referenced, Exhibits 1-3. Plaintiff is ordered to file with the Court the exhibits by close of business this date.
GIVEN THE CORONAVIRUS CRISIS, AND TO ADHERE TO HEALTH GUIDANCE THAT DICTATES SAFETY MEASURES, DEPARTMENT D IS ENCOURAGING AUDIO OR VIDEO APPEARANCES
Please make arrangement in advance if you wish to appear via LACourtConnect/Microsoft Teams by visiting www.lacourt.org to schedule a remote appearance. Please note that LACourtConnect/Microsoft Teams offers free audio and video appearance. Counsel and parties (including self-represented litigants) are encouraged not to personally appear. With respect to the wearing of face masks, Department D recognizes that currently, the Los Angeles Department of Public Health strongly recommends masks indoors, especially when interacting with individuals whose vaccination status is unknown; for individuals who have a health condition that puts them at higher risk for severe illness; individuals who live with someone who is at higher risk; and for individuals who are around children who are not yet eligible for vaccines. In accordance with this guidance, it is strongly recommended that anyone personally appearing in Department D wear a face mask. The Department D Judge and court staff will continue to wear face masks. If no appearance is set up through LACourtConnect/Microsoft Teams, or otherwise, then the Court will assume the parties are submitting on the tentative.


Case Number: *******0480 Hearing Date: November 4, 2022 Dept: D

TENTATIVE RULING
Calendar: 8
Date: 11/4/2022
Case No: 22 GDCV00480 Trial Date: None Set
Case Name: Conn v. Hudson Insurance Company
DEMURRER
MOTION TO STRIKE
Moving Party: Defendant Hudson Insurance Company
Responding Party: Plaintiff Shannon L. Conn
RELIEF REQUESTED:
Sustain demurrer to Complaint
Strike punitive damages
CAUSES OF ACTION: from Complaint
1) Recovery Against a Contractor’s License Bond
2) Breach of Covenant of Good Faith and Fair Dealing
3) Intentional Interference with Contract
4) Declaratory Relief
SUMMARY OF FACTS:
Plaintiff Shannon Conn alleges that in January of 2016, plaintiff entered into a Residential Purchase/Sale Agreement for the purchase of real property in Magalia, California, and that in February of 2016, the sellers agreed to make repairs to the subject property, including repairing the sinks and windows. Plaintiff was assured that no leaks were found in the master bathroom, but in April of 2016, shortly after plaintiff moved into the subject property, plaintiff discovered leaks and water intrusion.
Plaintiff alleges that in May of 2016 she hired Jim E. Hale dba Jim E. Hale B General Contractor and Plumbing Contractor to inspect and resolve the defects in the subject property. Hale represented that he had repaired the leak, but the leak in fact remained unrepaired, and caused water intrusion and mold growth.
Plaintiff alleges that plaintiff hired numerous contractors to repair and abate the leaks and became ill.
In May of 2017, plaintiff filed a complaint for damages against Hale in the Superior Court of California, County of Butte. On May 23, 2022, the court entered judgment against Hall and in favor of plaintiff in the sum of $15,000.00.
The complaint alleges that at all times mentioned, Hale, as a licensed contractor, was required to be bonded, and was bonded through defendant Hudson Insurance Company. Plaintiff alleges that in July of 2022 plaintiff contacted defendant Hudson Insurance to recover against Hale’s contractor bond, but on July 20, 2022, defendant denied any claim by plaintiff. Plaintiff alleges that she has been harmed by defendant’s unjustified refusal to recognize and pay plaintiff’s asserted claim.
ANALYSIS:
Demurrer
First Cause of Action—Recovery Against a Contractor’s License Bond
Statute of Limitations
Defendant Hudson Insurance argues that the action against the contractor’s bond is barred by the statute of limitations. Defendant relies on Business and Professions Code section 7071.11(c), which appears in the Licensing Article on the Chapter pertaining to Contractors, and provides, in connection with actions against a bond:
“(c) Except for claims covered by subdivision (d), any action against a bond required under this article, excluding the judgment bond specified under Section 7071.17, shall be brought in accordance with the following:
(1) Within two years after the expiration of the license period during which the act or omission occurred. The provisions of this paragraph shall be applicable only if the license has not been inactivated, canceled, or revoked during the license period for which the bond was posted and accepted by the registrar as specified under Section 7071.7.
(2) If the license has been inactivated, canceled, or revoked, an action shall be brought within two years of the date the license of the active licensee would have expired had the license not been inactivated, canceled, or revoked. For the provisions of this paragraph to be applicable, the act or omission for which the action is filed must have occurred prior to the date the license was inactivated, canceled, or revoked….
(d) A claim to recover wages or fringe benefits shall be brought within six months from the date that the wage or fringe benefit delinquencies were discovered, but in no event shall a civil action thereon be brought later than two years from the date the wage or fringe benefit contributions were due.”
Defendant argues that in this case, plaintiff has filed the action more than six years after the act or omission occurred that gave rise to the violation of the license laws.
Defendant argues that the act or omission in this matter occurred on May 25, 2016, according to paragraphs 19-23 of the complaint, and that the license period at issue was from December 31, 2015 to December 31, 2017. Defendant references a Request for Judicial Notice, Ex. A, which is a copy of a license history page from the California Contractors State Licensing Board relating to Hale, which shows a Bond History with Hudson Insurance Company issuing a bond from January 1, 2016 through a cancellation date of August 12, 2016. [RFJN, Ex. A]. Defendant also relies on this same bond history which is attached to the complaint as exhibit 3. There is reference to Exhibit 3 to the complaint as a license history, but the document is a bond history, not a license history.
Defendant argues that a contractor’s license is valid for two-year increments, as reflected in Business & Professions Code section 7140, which provides, in pertinent part, “All licenses issued under the provisions of this chapter shall expire two years from the last day of the month in which the license is issued, or two years from the date on which the renewed license last expired.” Defendant argues that the contractor’s acts or omissions, alleged to have occurred in May of 2016, occurred during the two-year period from December 30, 2015 through December 31, 2017, so the two years licensing period ended on that date. The two-year statute of limitations accordingly expired two years from the end of the two-year license period ending December 31, 2017, which would have been on December 31, 2019. This action was filed on August 3, 2022, so was over two and a half years late.
A review of the Bond History does not exactly track these dates. The applicable bond for acts in May of 2016 appears to be a bond issued with an effective date of 01/01/2016, which was cancelled on 08/12/17. [RFJN, Ex. A, Complaint, Ex. 3]. This bond was issued by defendant. [Id.].
It is not clear when the two-year licensing period expired after the May of 2016 date, or why defendant is arguing a December 30, 2015 through December 31, 2017 licensing period. In any case, it would appear from the Contractor’s Bond History attached to the complaint that the first bond was issued to Hale effective 01/01/1995. [Complaint Ex. 3]. It appears that the Contractor’s License Detail submitted with the RFJN shows that a license was issued to Hale on 01/18/1995. [RFJN, Ex. A]. This showing would suggest that a license renewed in January of 2016, although cancelled in 2017, would have expired according to statute two years later, in January of 2018, well before this action was filed in 2022.
Plaintiff in opposition does not address the statutory scheme applicable to Contractors or Contractor’s bonds, as discussed above, but argues that the act or omission giving rise to the surety’s liability in this matter occurred when the judgment was entered against the contractor Hale in the Butte County case, which was on May 23, 2022. [Complaint para. 34, Ex. 2]. Plaintiff argues that a surety’s obligation is not extinguished even though the action against the principle was barred by the statute of limitations under the Labor Code, without addressing the Business & Professions code sections applicable here.
Defendant argues that this argument that the act or omission was the judgment entered in the other case is not the correct analysis of when the act or omission occurred, but even if it were, then plaintiff has sued the wrong entity, as according to plaintiff’s Exhibit 3 to the complaint, during the license period which included the May 23, 2022 date, the contractor’s license bond was held by Western Surety Company from December 22, 2021, not defendant Hudson Insurance. [See RFJN, Ex. A; Complaint, Ex. 3].
As defendant argues in reply, it is held that a contractor’s license bond is a statutory bond, under which liability is established by statute, with the burdens imposed limited to those under the statute, Business and Professions Code sections 7000, et seq. All Bay Mill & Lumber Co. v. Surety Co. (1989) 208 Cal.App.3d 11, 15 (“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.”).
Plaintiff has failed to establish that there is some act or omission other than those alleged of Hale occurring in 2016 which would have triggered the statutory statute of limitations included in Business & Professions Code section 7071.11, or that there was some delay in accrual recognized by cited legal authority. The demurrer accordingly is sustained with one opportunity to amend to more clearly plead around the bar of the statute of limitations. The court will expect that on any further amendment, and challenge on this ground, plaintiff will fully meet and confer and brief to this court the grounds pursuant to which this case is timely under the applicable statutory provisions in connection with contractor’s bonds.
Second Cause of Action—Breach of Covenant of Good Faith and Fair Dealing
Defendant argues that this cause of action is barred by the statute of limitations, as discussed above, and by Cates Construction, Inc. v. Talbot Partners (1999) 21 Cal.4th 28. In Cates Construction, the California Supreme Court reversed a judgment of the court of appeal affirming an underlying award of tort damages and punitive damages by the trial court against a surety under a construction bond, holding, “as a matter of law, the developer may not recover in tort for the surety’s breach of the covenant of good faith and fair dealing implied in the performance bond.” [Cates, at 34-35].
The Court in Cates acknowledged that “it is well established that a covenant of good faith and fair dealing is implicit in every contract,” and that compensation for the breach of the covenant, “has almost always been limited to contract rather than tort remedies.” Cates, at 43. The Court then reviewed the policies underlying the exception recognized to the general rule in cases involving insurance policies. The Court then observed, “Significantly, this court has never recognized the availability of tort remedies for breaches occurring in the context of a construction performance bond or any other so called ‘contract of suretyship.’” Cates, at 44, citation omitted. The Court also reviewed in great detail the recognized distinctions between surety bonds and insurance policies in statutory and regulatory law and determined that although suretyship is listed in the Insurance Code as a class of insurance, the policies underlying considering tort recovery appropriate in the insurance policy setting do not apply with the same force to surety bonds.
The Court concluded:
“A construction performance bond is not an insurance policy. Nor is it a contract otherwise marked by elements of adhesion, public interest or fiduciary responsibility, such that an extracontractual remedy is necessitated in the interests of social policy. Obligees have ample power to protect their interests through negotiation, and sureties, for the most part, are deterred from acting unreasonably by the threat of stiff statutory and administrative sanctions and penalties, including license suspension and revocation.
We acknowledge that our unwillingness to recognize a new tort action may mean that isolated instances of surety misconduct may yet occur. Nonetheless, in the absence of compelling policy reasons supporting tort recovery, we leave it up to the Legislature, which is better equipped to gather data and study the effects of a significant shift in the balance of power between owner/obligees, contractor/principals and sureties, to determine whether statutorily authorized tort remedies would benefit the real estate development industry.
Accordingly, we hold that recovery for a surety's breach of the implied covenant of good faith and fair dealing is properly limited to those damages within the contemplation of the parties at the time the performance bond is given or at least reasonably foreseeable by them at that time. (See Applied Equipment Corp. v. Litton Saudi Arabia Ltd., supra, 7 Cal.4th at p. 515; Civ. Code, 3300 [measure of damages for breach of an obligation arising from contract].)”
Cates, at 60-61.
Defendant argues that the second cause of action seeks tort damages, including anxiety, emotional and mental distress and punitive damages, and that such damages are not recoverable against a surety under Cates, but plaintiff’s damages are limited the amount of the bond.
This argument does not dispose of the entire cause of action, but addresses certain claimed damages, when the cause of action also alleges that due to defendant’s alleged conduct, plaintiff has been deprived of the benefits of the policy, which defendant concedes is a properly recoverable variety of damages. [Complaint, para. 65]. As acknowledged by the Supreme Court in Cates, every contract, including a surety contract, includes an implied covenant of good faith and fair dealing. However, the damages for breach of such a covenant in the surety context are limited to available contractual damages. The cause of action sufficiently alleges recoverable foreseeable contractual damages, by way of a deprivation of the policy limits. The demurrer accordingly seeks to have the court sustain a demurrer to only part of the cause of action, the improper damages claimed, which is not permitted on demurrer.
A demurrer does not lie to only part of a cause of action (or to a particular type of damage or remedy), and a cause will survive demurrer if there are sufficient allegations that might entitle the pleader to relief. Kong v. City of Hawaiian Gardens Redevelop. Agency (2003, 2nd Dist.) 108 Cal.App.4th 1028, 1046; PH II, Inc. v. Superior Court (1995) 33 Cal.App.4th 1680, 1682.
There are sufficient allegations here which might entitle plaintiff to relief, and the demurrer is not sustained on this ground.
Third Cause of Action—Intentional Interference with Contract
With respect to a claim for intentional interference with contract:
“The elements which a plaintiff must plead to state the cause of action for intentional interference with contractual relations are (1) a valid contract between plaintiff and a third party; (2) defendant's knowledge of this contract; (3) defendant's intentional acts designed to induce a breach or disruption of the contractual relationship; (4) actual breach or disruption of the contractual relationship; and (5) resulting damage.”
Pacific Gas & Electric Co. v. Bear Stearns & Co. (1990) 50 Cal.3d 1118, 1126, citations omitted.
Defendant argues that the complaint is uncertain, as it is alleged that there was interference with a written contract between plaintiff and Hale, but later in the pleading plaintiff alleges that defendant has “made it impossible for Plaintiff to perform under the contract with her tenants.” [Complaint, para. 80]. Defendant argues that it is uncertain as to which contract defendant is alleged to have interfered.
However, the cause of action alleges all elements of such a claim in connection with the contract between plaintiff and Hale, pursuant to which the bond was requested of defendant. The opposition argues that valid contracts are alleged between plaintiff and both Hale and plaintiff’s tenants, suggesting plaintiff may be intending to pursue this cause of action on two separate theories, when plaintiff has not clearly alleged each element in connection with the alleged contract with the tenants.
However, as noted above, this would address only part of the cause of action, which is improper. The cause of action has been sufficiently stated on at least one theory, and the demurrer on this ground is overruled.
Defendant also argues that the cause of action fails because tort damages are not recoverable against a surety, based on Cates. However, the Court in Cates did not address a cause of action for intentional interference with contract, only the damages recoverable in connection with a cause of action for breach of the implied covenant of good faith and fair dealing. The demurrer on this ground is overruled.
Defendant has not argued how the statute of limitations argument would apply to bar this cause of action. The demurrer to this cause of action accordingly is overruled in its entirety.
Fourth Cause of Action—Declaratory Relief
The notice of motion demurs to this cause of action on the ground it fails to state a cause of action. This cause of action is not mentioned in the memorandum of points and authorities. The demurrer to this cause of action accordingly is overruled.
Indispensable Party
Defendant argues that the pleading fails for failure of plaintiff to name an indispensable party. Defendant relies on CCP section 996.430, which provides, in pertinent part:
“(a) The liability on a bond may be enforced by civil action. Both the principal and the sureties shall be joined as parties to the action.”
This code section would suggest that Hale, as principal, should be joined as a party in this action in connection with the first and second causes of action.
Plaintiff in opposition argues that Hale was a party in the prior lawsuit, is now a judgment debtor, and that Hale is not a necessary party in this case. Plaintiff relies on Pneucrete Corp. v. U.S. Fidelity & Guaranty Co. (1935) 7 Cal.App.2d 733, 739, which dealt with the Public Works Act. Plaintiff relies on the following language in the case:
“It has been held that the statutory materialman's bond referred to in the above excerpt as being similar to the bond here in question creates a direct obligation, and that the bond itself affords a right of action against the principal and the surety. (General Electric Co. v. American Bonding Co., 180 Cal. 675, 679 [182 Pac. 444]; Purington v. Olsten, 45 Cal. App. 621 [188 Pac. 288].) The action upon the statutory bond is not in any sense based upon the personal liability of the contractor but is based upon the obligation of the bond, since the bond provides a separate and distinct and statutory remedy. The obligation of the bond, therefore, is enforceable without reference to any contract between the contractor and the materialman. (Cooley v. Freeman, 204 Cal. 59 [266 Pac. 545]; Hub Hardware Co. v. Aetna etc. Co., 178 Cal. 264, 266, 267 [173 Pac. 81]; Los Angeles Stone Co. v. National Surety Co., 178 Cal. 247, 251 [173 Pac. 79]; Williams v. Tingey, 26 Cal. App. 574 [147 Pac. 584]; Holden v. Mensinger, 175 Cal. 300, 303, 304 [165 Pac. 950]; Hazard, Gould & Co. v. Rosenberg, 177 Cal. 295, 297 [170 Pac. 612]; Wood v. Oakland etc. Transit Co., 107 Cal. 500, 502 [40 Pac. 806]; Martin v. Becker, 169 Cal. 301, 306 [146 Pac. 665, Ann. Cas. 1916D, 171].)
Pneucrete Corp., at 738
This case [the Pneucrete Corp. case] does not appear to address whether a principal need be joined as a party in an action to recover upon the statutory bond under current statute. As pointed out in the reply, plaintiff does not address the statutory language, or its applicability here.
Plaintiff in opposition appears to concede that the complaint could be easily amended to add Hale as a party. The demurrer accordingly is sustained with leave to amend to add as a party the principal as the plaintiff’s attorney deems appropriate in light of the court’s ruling and explanation.
Motion to Strike
Defendant seeks to strike plaintiff’s claim for punitive damages, which the complaint seeks only in connection with the second cause of action for breach of implied covenant of good faith and fair dealing.
Defendant again relies upon Cates, discussed above, in which the California Supreme Court found that the court of appeal had erred in affirming a judgment which included a punitive damages award against a surety arising from a cause of action for breach of the implied covenant of good faith and fair dealing. As discussed above, the Court conducted a detailed analysis in reaching its conclusion that tort damages could not be recovered in connection in a claim for breach of the implied covenant; a plaintiff would be limited to contractual damages.
The Court in connection with the punitive damages award held:
“The law governing this subject has been aptly summarized as follows. “[P]unitive or exemplary damages, which are designed to punish and deter statutorily defined types of wrongful conduct, are available only in actions 'for breach of an obligation not arising from contract.' (Civ. Code, 3294, subd. (a), italics added.) In the absence of an independent tort, punitive damages may not be awarded for breach of contract 'even where the defendant's conduct in breaching the contract was wilful, fraudulent, or malicious.' ” (Applied Equipment Corp. v. Litton Saudi Arabia Ltd., supra, 7 Cal.4th at p. 516; see Crogan v. Metz (1956) 47 Cal.2d 398, 405 [303 P.2d 1029].)
Since Talbot may not recover in tort for Transamerica's breach of the implied covenant of good faith and fair dealing, the foregoing rule compels a reversal of the award of punitive damages in its entirety.”
Cates, at 61.
Similarly, here, since plaintiff cannot recover tort damages against defendant on a cause of action for which punitive damages may not be awarded.
Plaintiff in opposition does not refer to Cates but argues that punitive damages have long been recognized as recoverable in insurance bad faith actions. Plaintiff does not address the thorough treatment in Cates in which the surety bond context is distinguished from the insurance policy context on which plaintiff relies. In Cates, the Court clearly declined to extend the unique exception to the general rule that no tort recovery is available in breach of implied covenant cases to surety bond claims.
The motion to strike accordingly is granted. Plaintiff argues that if the motion is granted, plaintiff should be permitted leave to amend. Plaintiff does not explain how the pleading could be successfully amended to state a claim for punitive damages, given the holding in Cates, and the nature of the cause of action and plaintiff’s claim. It will be discussed at the hearing whether leave to amend will be permitted, but under the circumstances, the court is inclined to grant the motion to strike without leave to amend.
RULING:
Demurrer to Complaint by Hudson Insurance Company:
Demurrer to the first cause of action for recovery on a contractor’s license bond is SUSTAINED WITH LEAVE TO AMEND
(1) On the ground the cause of action appears to be barred by the statutory statute of limitations included in Business & Professions Code section 7071.11.
On any further amendment and challenge on this ground, the Court will expect plaintiff to fully meet and confer and brief to this Court the grounds pursuant to which this cause of action is timely under the applicable statutory provisions in connection with contractor’s bonds.
(2) On the ground plaintiff has not included as a party to the cause of action the principal, as required under CCP section 996.430.
Demurrer to the second cause of action for breach of the covenant of good faith and fair dealing is SUSTAINED WITH LEAVE TO AMEND
(1) On the ground the cause of action appears to be barred by the statutory statute of limitations included in Business & Professions Code section 7071.11.
On any further amendment and challenge on this ground, the Court will expect plaintiff to fully meet and confer and brief to this Court the grounds pursuant to which this cause of action is timely under the applicable statutory provisions in connection with contractor’s bonds.
(2) On the ground plaintiff has not included as a party to the cause of action the principal, as required under CCP section 996.430.
Demurrer on all other grounds is OVERRULED.
Demurrer to the third cause of action for intentional interference with contract and fourth cause of action for declaratory relief is OVERRULED.
Motion to Strike Punitive Damages is GRANTED WITHOUT LEAVE TO AMEND, pursuant to Cates Construction, Inc. v. Talbot Partners (1999) 21 Cal.4th 28, 34-35, 61.
UNOPPOSED Request for Judicial Notice by Hudson Insurance Company is GRANTED.
Ten days leave to amend.
The parties are ordered to meet and confer in full compliance with CCP 430.41 before any further demurrer may be filed.
GIVEN THE CORONAVIRUS CRISIS, AND TO ADHERE TO HEALTH GUIDANCE THAT DICTATES SAFETY MEASURES, DEPARTMENT D IS ENCOURAGING AUDIO OR VIDEO APPEARANCES
Please make arrangement in advance if you wish to appear via LACourtConnect/Microsoft Teams by visiting www.lacourt.org to schedule a remote appearance. Please note that LACourtConnect/Microsoft Teams offers free audio and video appearance. Counsel and parties (including self-represented litigants) are encouraged not to personally appear. With respect to the wearing of face masks, Department D recognizes that currently, the Los Angeles Department of Public Health strongly recommends masks indoors, especially when interacting with individuals whose vaccination status is unknown; for individuals who have a health condition that puts them at higher risk for severe illness; individuals who live with someone who is at higher risk; and for individuals who are around children who are not yet eligible for vaccines. In accordance with this guidance, it is strongly recommended that anyone personally appearing in Department D wear a face mask. The Department D Judge and court staff will continue to wear face masks. If no appearance is set up through LACourtConnect/Microsoft Teams, or otherwise, then the Court will assume the parties are submitting on the tentative.


related-case-search

Dig Deeper

Get Deeper Insights on Court Cases


Latest cases where Hudson Insurance Company is a litigant

Latest cases represented by Lawyer CAMERON CLARK HOWARD