Gonzalez v. Hudson Ins. Co.

1

JAZMIN GONZALEZ, Plaintiff and Respondent, v. HUDSON INSURANCE CO., Defendant and Appellant.

D080166, D081686

California Court of Appeals, Fourth District, First Division

February 13, 2024

NOT TO BE PUBLISHED

CONSOLIDATED APPEALS from a judgment and a postjudgment order of the Superior Court of San Diego County, No 37-2017-00042792-CU-CO-CTL James A. Mangione, Judge.

Law Offices of John L. Fallat, John L. Fallat, and Timothy J Tomlin for Defendant and Appellant.

Auto Fraud Legal Center, Christopher P. Barry, and Michelle A Cook for Plaintiff and Respondent.

McCONNELL, P. J.

I INTRODUCTION

Under Vehicle Code section 11710, an auto dealer seeking a license to conduct business in the state must procure and file with the Department of Motor Vehicles a surety bond in the amount of $50,000, subject to a condition "that the [dealer] shall not practice any fraud or make any fraudulent representation which will cause a monetary loss" to a car buyer. (Veh. Code, § 11710, subds. (a)-(b).)^[1] Section 11711 grants any person who suffers a loss from a dealer's fraud a cause of action against the dealer and the surety upon the dealer's bond, in an amount not to exceed the value of the vehicle sold.

Hudson Insurance Co. (Hudson) issued a section 11710 surety bond to auto dealer Sunny Hills Auto Sales, Inc. (Sunny Hills), which used fraudulent sales tactics to sell a used car to plaintiff Jazmin Gonzalez. After Gonzalez discovered the fraud, she sued Sunny Hills and Hudson for violations of the Consumers Legal Remedies Act (Civ. Code, § 1750 et seq.; CLRA) and section 11711, respectively. Although Gonzalez succeeded on her CLRA cause of action, she was unable to collect from Sunny Hills on the ensuing judgment. Therefore, she sought summary judgment against Hudson on the surety bond. The trial court granted summary judgment for Gonzalez, entered judgment in her favor, and awarded her $264,440 in attorney's fees recoverable from Hudson.

Hudson appeals both the judgment and the postjudgment attorney's fee order. However, Hudson does not articulate any cogent legal argument challenging the underlying judgment itself; instead, it focuses its attention solely on the attorney's fee order. For that reason, we affirm the judgment.

With respect to the attorney's fee order, we discern no error in the trial court's ruling. Because Gonzalez prevailed on her CLRA cause of action against Sunny Hills, she was statutorily entitled to recover her attorney's fees from Sunny Hills as an item of costs. (Civ. Code, § 1780, subd. (e); Code Civ. Proc., §§ 1032, subd. (b), 1033.5, subd. (a)(10)(B).) Hudson is also liable for these costs because its liability as surety is commensurate with that of its principal, Sunny Hills-even where, as here, the award of statutory costs exceeds the limit of the surety bond. (Civ. Code, § 2808.) Further, we discern no abuse of discretion in the trial court's calculation of the attorney's fees to which Gonzalez is entitled. Thus, we affirm the attorney's fee order.

II BACKGROUND

A. The Car Sale

Hudson is a surety insurer that issued a $50,000 surety bond to auto dealer Sunny Hills pursuant to section 11710. The surety bond was in effect at all times relevant to the events described herein.

In April 2017, Gonzalez bought a used 2010 Mazda 3 from Sunny Hills for $7,995. She executed a retail installment sales contract enabling her to finance the purchase and pay for the car on an installment basis. At the time of the sale, Sunny Hills did not disclose to Gonzalez that the car previously sustained accident damage. On the contrary, it gave her a disclosure form indicating the car did not have frame damage, was not involved in a prior accident, and did not sustain prior collision damage. Sunny Hills later assigned its interests in the retail installment sales contract to Reliant Financial Corporation dba Gold Acceptance (Gold Acceptance).

B. The Complaint and Arbitration

In November 2017, Gonzalez filed the present action against Sunny Hills, Gold Acceptance, and Hudson in the Superior Court for the County of San Diego, alleging her car sustained prior accident damage and Sunny Hills misrepresented the condition of the car to her and failed to disclose its prior accident damage. She asserted four causes of action against Sunny Hills and Gold Acceptance for violations of the CLRA, violations of the Unfair Competition Law (Bus. &Prof. Code, § 17200 et seq.), fraud and deceit, and negligent misrepresentation. She asserted a fifth cause of action against Hudson under section 11711.

Hudson answered the complaint with a general denial. It asserted 16 affirmative defenses in its answer, but did not identify exoneration of the surety bond as one of its affirmative defenses.

In August 2018, upon the motion of Sunny Hills and Gold Acceptance, the trial court compelled the case into arbitration with respect to Gonzalez, Sunny Hills, and Gold Acceptance pursuant to an arbitration clause contained in the retail installment sales contract. The court stayed the case as to Hudson, pending completion of the arbitration.

On November 26, 2019, after an evidentiary hearing, the arbitrator issued a final award in favor of Gonzalez and against Sunny Hills and Gold Acceptance on all causes of action including the CLRA claim. The arbitrator found the car sustained prior accident damage before the sale, Sunny Hills knowingly misrepresented the condition of the car to Gonzalez, and Sunny Hills failed to disclose the prior accident damage to her. The arbitrator awarded Gonzalez $8,748.28 in compensatory damages recoverable from Sunny Hills and Gold Acceptance, $5,000 in punitive damages recoverable from Sunny Hills, $120,581 in attorney's fees recoverable from Sunny Hills under the CLRA, and $15,253.62 in additional costs recoverable from Sunny Hills and Gold Acceptance. According to Gonzalez, Sunny Hills and Gold Acceptance disappeared after the arbitration, leaving the arbitration award unsatisfied.

On August 26, 2020, Gonzalez petitioned the trial court to confirm the arbitration award and enter judgment in her favor. On November 19, 2020, the court granted the petition and entered judgment for Gonzalez and against Sunny Hills and Gold Acceptance.

C. The Interpleader Action

In June 2020, a few months before the confirmation of the arbitration award, an individual named Ladonna McNeil filed a civil action against Sunny Hills and Hudson in the Superior Court for the County of Los Angeles, McNeil v. Sunny Hills Auto. Inc., et al., No. 19STLC07639 (hereafter, the Interpleader Action). Like Gonzalez, McNeil alleged that Sunny Hills sold her a used car and failed to disclose the car's prior accident damage. She likewise asserted a claim against Hudson under section 11711.

In July 2020, Hudson answered McNeil's complaint and filed a verified cross-complaint in interpleader naming both Gonzalez and McNeil as crossdefendants. Hudson also deposited $50,000-the amount of the surety bond-with the court overseeing the Interpleader Action.

On November 12, 2020, the court in the Interpleader Action discharged Hudson from liability and exonerated the bond.^[2] In its discharge and exoneration order, the court noted that "all that [was] before [the] [c]ourt [was] the bond, not the claims related to it, nor any other claims against Hudson." The court also stated that its ruling did "not include any independent cause of action which Jazmin Gonzalez may have against Hudson which is not based on Hudson's contractual obligation on the surety bond."

D. The Judgment and Attorney's Fee Order

After the trial court confirmed the arbitration award against Sunny Hills and Gold Acceptance, Gonzalez and Hudson filed competing motions for summary judgment or summary adjudication.

In its motion, Hudson argued that its deposit of the bond funds in the Interpleader Action exonerated it from liability and precluded Gonzalez from recovering damages from the surety bond in the present action. In her motion, Gonzalez agreed with Hudson that its deposit of bond funds in the Interpleader Action barred an award of damages on the surety bond. But she argued Hudson could still be found liable on the section 11711 cause of action-a finding that would thereafter entitle her to seek fees and costs from Hudson as a prevailing litigant. On the issue of liability, she argued Hudson's deposit of the funds in the Interpleader Action constituted an admission of liability and the arbitration award further evidenced Hudson's liability to her on her section 11711 claim. The trial court granted Gonzalez's motion, denied Hudson's motion, and entered judgment for Gonzalez.

After the entry of judgment, Gonzalez filed a motion for attorney's fees against Hudson and a memorandum of costs. She sought attorney's fees from Hudson on grounds that she had prevailed on her CLRA cause of action against Sunny Hills, an award of attorney's fees to a prevailing plaintiff is mandatory under the CLRA, and Hudson's liability as a surety was commensurate with the liability of its principal, Sunny Hills. The trial court awarded Gonzalez $120,581 in arbitration-related attorney's fees and $143,859 in post-arbitration attorney's fees, and found Hudson was liable for the entire $264,440 fee award.

Hudson appeals both the judgment (in appeal D080166) and the postjudgment attorney's fee order (in appeal D081686).^[3]

III DISCUSSION

A. Auto Dealer Suretyship Principles

"A surety is 'one who promises to answer for the debt default, or miscarriage of another, or hypothecates property as security therefor.' [Citation.] A surety bond is a' "written instrument executed by the principal and surety in which the surety agrees to answer for the debt, default, or miscarriage of the...