Case Name: Merryfields v. Steve DiMaggio Inc., et al.

Case No.: 19CV344591

According to the allegations of the complaint, on November 11, 2015, plaintiff May-Lynn Merryfields (“Plaintiff”) entered into an agreement with Steve Di Maggio Inc. (“Di Maggio Construction”) for the installation of new roofs; DiMaggio required the payment of a $3000 deposit, in violation of the Contractors State License Law. (See complaint, ¶¶ 8-9.) Di Maggio Construction performed work in disregard of the requirements of the construction contract, and below the standards of quality workmanship, and suspended its work, resulting in damage to the property. (See complaint, ¶¶ 11-15.) As a condition of the issuance, maintenance and renewal of a contractor’s license, Di Maggio Construction was required at the time of the project to have on file with the registrar a contractor’s bond in the principal sum of $12,500. (See complaint, ¶ 38.) Defendant Business Alliance Insurance Company (“BAIC”) issued and maintained that bond for Di Maggio Construction. (See complaint, ¶ 38-43.) On March 14, 2019, Plaintiff filed a complaint against Di Maggio Construction, Steve Di Maggio, and BAIC, asserting causes of action for:

1) Negligence/breach of warranty (against Di Maggio Construction and Steve Di Maggio);
2)
3) Negligent misrepresentation (against Di Maggio Construction and Steve Di Maggio);
4)
5) Violation of Business & Professions Code section 7160 (against Di Maggio Construction and Steve Di Maggio);
6)
7) Negligence per se (against Di Maggio Construction and Steve Di Maggio);
8)
9) Breach of the implied covenant of good faith and fair dealing (against Di Maggio Construction and Steve Di Maggio); and,
10)
11) Recovery on contractor’s license bond (against BAIC).
12)

BAIC moves to strike allegations of paragraph 42 of the complaint supporting extra-contractual damages and attorney fees and costs, and paragraphs 1-3 of the prayer of the complaint for general damages, special damages and attorney fees.

In opposition, Plaintiff argues that the motion to strike was not timely and that there was inadequate meet and confer.

Meet and confer

Here, the issue as to BAIC is fairly limited and thus meet and confer need not be of extended duration. BAIC’s counsel submits a declaration that indicates that he discussed the limited issue on at least three separate occasions. The court finds that there was adequate meet and confer.

Timeliness

As to the timeliness of the motion, Code of Civil Procedure section 435 allows “[a]ny party, within the time allowed to respond to a pleading [to] serve and file a notice of motion to strike the whole or… part” of a complaint. Plaintiff did not request entry of default against BAIC. Here, BAIC is allowed to have filed its motion to strike, and the court will consider it. (See Goddard v. Pollock (1974) 37 Cal.App.3d 137, 141 (stating that “[i]t is generally recognized that an untimely pleading is not a nullity… [t]he proper procedure is for the plaintiff to move to strike the defendant’s untimely pleading and, if the court grants such relief, thereafter proceed to obtain the entry of the defendant’s default”).)

Extra-contractual damages and attorney fees and costs

Here, Plaintiff asserts a cause of action for recovery on a contractor’s license bond against BAIC. Plaintiff does not address attorney’s fees and costs in its opposition. Nevertheless, “[i]t is the general rule that the amount that can be recovered from a surety is limited to the penal sum of the bond.” (Lawrence Tractor Co. v. Carlisle Ins. Co. (1988) 202 Cal.App.3d 949, 953.) “Even where the bond stipulates that damages shall include attorney’s fees, under the rule that a surety on a bond is not liable beyond the penalty named therein, the surety is not liable for attorney’s fees in excess of the penalty named.” (Id. at pp. 953-956; see also Hartford Acc. & Indem. Co. v. Industrial Acc. Commission (1932) 216 Cal. 40, 49.) Similarly, the surety would be neither liable for extra-contractual damages. (See Cates Construction, Inc. v. Talbot Partners (1999) 21 Cal.4th 28, 44-6 (stating that “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’”; also stating that “while surety is listed as a class of insurance for regulatory purposes, there is no doubt that it ‘differs in material respects’ from other forms of insurance… [i]n contrast to other classes of insurance, surety insurance involves a promise to answer for the debt, default or miscarriage of a principal who has the primary duty to pay the debt or discharge the obligation and who is bound to indemnify the insurer”; also stating that “[c]ase law makes clear, however, that tort remedies for breach of the implied covenant are permitted in the insurance policy setting for policy reasons pertaining to the distinctive nature of such contracts and the relationship between the contracting parties”; also stating that “[a]lthough suretyship is listed in the Insurance Code as a class of insurance, it does not follow that a surety bond equates to a policy of insurance under the common law or common law theories of liability… [n]or does it follow that the unique policy reasons which justify extraordinary remedies in the insurance policy context are similarly implicated for bonds guaranteeing the performance of a commercial construction contract… bonds do not reflect the adhesion and unequal bargaining power that are inherent in insurance policies… unlike an insurance policy, the typical performance bond bears no indicia of adhesion or disparate bargaining power that might support tort recovery by an obligee”; also stating that “a principal basis for recognizing tort liability in the context of liability insurance, [is] the insurer’s assumption of the insured’s defense and of settlement negotiations of third party claims… [i]n contrast to a liability insurer, a surety bears no responsibility to defend an obligee against third party claims and has no right to represent the obligee’s interests by virtue of the surety bond… [t]hus, to the extent such responsibilities give rise to fiduciary or quasi-fiduciary obligations in the liability insurance setting, their absence in surety arrangements supports a different result”; also stating that “tort remedies appear largely unnecessary to induce a surety’s performance or to fully compensate for a surety’s breach of the covenant of good faith”; also stating that “it is generally recognized that a primary purpose of a performance bond is to protect the obligee against the risk of the principal’s default on the construction contract… [w]here, as here, a bond is given to guarantee faithful performance of a construction contract, then contract remedies, which compensate for all damages within the contemplation of the parties at the time of contracting or at least reasonably foreseeable by them at that time (Civ. Code, § 3300), provide adequate compensation for breach of the bond… [t]hese considerations, which have no parallel in disputes involving insurance policies, weigh against the recognition of extracontractual liability in the performance bond context”).) In opposition, Plaintiff asserts that Cates, supra, involved a performance bond, whereas here, it involves a contractor’s licensing surety bond. However, Plaintiff has not cited to any legal authority to support her position that extracontractual damages would be available to third parties for the breach of a contractor’s licensing surety bond.

Accordingly, the motion to strike is GRANTED with 10 days leave to amend. Paragraphs 1 through 3 of the prayer of the complaint and the portion of paragraph 42, on page 15, lines 5-8 stating “including, but not limited to extra-contractual damages and attorney fees and costs should BAIC fail and continue to refuse, unreasonably and in bad faith, to pay out to Merryfields the principal amount of the bond, or the unpaid balance remaining” is hereby stricken.

The Court shall prepare the order.