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YORK v. STRONG, G052470. (2017)

Court: Court of Appeals of California Number: incaco20170131098 Visitors: 3
Filed: Jan. 31, 2017
Latest Update: Jan. 31, 2017
Summary: NOT TO BE PUBLISHED IN OFFICIAL REPORTS California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. OPINION MOORE , J. Kathleen Strong appeals from an order denying her motion to enforce liability on surety bonds given to stay enforcement of a judgmen
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NOT TO BE PUBLISHED IN OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

OPINION

Kathleen Strong appeals from an order denying her motion to enforce liability on surety bonds given to stay enforcement of a judgment for fees and costs while an appeal was pending. The bonds were given by Tim York and Janet Walker (the sureties), in an effort to stay Strong's collection of the judgment against Michael York (the debtor), who is also counsel for the sureties. However, Strong successfully objected to the sufficiency of the bonds in the trial court shortly after they were given, rendering them ineffective unless the insufficiency was cured within five days. The insufficiency was not cured, and thus Strong was allowed to continue collecting her judgment against the debtor while his appeal was pending.

Strong nonetheless argues the trial court erred when it later rebuffed her efforts to also enforce the ineffective bonds against the sureties after her judgment was affirmed. In short, Strong stands before this court insisting that when it comes to these surety bonds, she was entitled to eat her cake, and have it too. She is wrong, and her argument borders on the frivolous.

Once these surety bonds were declared insufficient by the trial court, they remained in effect only until the five-day period for giving a sufficient bond expired, and were thereafter effective only to the extent of any "liabilities incurred before . . . expiration." (Code Civ. Proc., § 995.960, italics added.)1 It is undisputed there was no liability incurred under these bonds during the relevant period because the surety's liability under an appeal bond is contingent upon a resolution of the relevant appeal, which did not occur until nearly a year later.2 We consequently affirm the order.

I

FACTS

Strong obtained a judgment against the debtor, and the debtor filed a timely appeal. In an effort to stay Strong's enforcement of the judgment while the appeal was pending, the debtor filed undertakings given by each of the sureties in March 2014. The sureties agreed to be jointly and severally liable to Strong in the amount of $45,406, pursuant to section 917.1, subdivision (b), which governs undertakings given to stay enforcement of a judgment during the pendency of an appeal.

Shortly after the undertakings were given, Strong filed a motion to "strike" them for their failure to contain the information required by section 995.920, subdivision (c). In April 2014, the trial court granted that motion "pursuant to [section] 995.960," and tracking the language of subdivision (b)(1) of that statute, the court ordered that "a bond with sufficient sureties and in a sufficient amount be given within five days," and if it was not, "all rights obtained by giving the bond shall immediately cease." No additional bond was given, and as Strong acknowledges, she thereafter proceeded with efforts to collect her judgment against the debtor while his appeal was pending.

Strong's judgment was affirmed by this court in March 2015. (York v. Strong (Mar. 10, 2015, G049512) [nonpub.opn.].) Strong thereafter filed motions to hold the sureties liable for the uncollected portion of the underlying judgment, pursuant to their undertakings. In neither motion did Strong acknowledge the trial court had previously granted her motion to strike the undertakings and declared them insufficient in accordance with section 995.960, or that she had continued her collection efforts against the debtor while the appeal was pending.

The sureties opposed the motions to enforce, relying specifically on the trial court's order granting Strong's earlier motion to strike the undertakings. The court agreed with the sureties and denied the motions.

II

DISCUSSION

Strong contends the trial court erred when it refused to enforce the sureties' undertakings. Specifically, she argues that while an order declaring a bond insufficient under section 995.960 cuts off "the rights obtained by giving the undertakings," it has no effect on the "the liabilities of the sureties," which remain "`in full force and effect.'" (Original capitalization and bolding omitted.) This argument presents an issue of statutory construction, which we review de novo. (Ailanto Properties, Inc. v. City of Half Moon Bay (2006) 142 Cal.App.4th 572, 582.) And while we agree with the first part of Strong's assertion, we cannot agree with the second.

The first part of Strong's assertion simply tracks the language of section 995.960, subdivision (b)(1), which states that if a court deems a bond insufficient, it "shall order that a bond with sufficient sureties and in a sufficient amount be given within five days. If a sufficient bond is not given within the time required by the court order, all rights obtained by giving the bond immediately cease and the court shall upon ex parte motion so order." (§ 995.960, subd. (b)(1), italics added.)

However, the effect of such an order on the liabilities associated with an existing bond is not quite what Strong portrays: Section § 995.960, subdivision (b)(2), states "[i]f a bond is in effect, the bond remains in effect until a bond with sufficient sureties and in a sufficient amount is given in its place, or the time in which to give the bond has expired, whichever first occurs." (Italics added.) Hence, that existing bond becomes ineffective when the five-day period for curing the insufficiency expires. But the statute also provides for an exception to that general rule of ineffectiveness: "[i]f the time in which to give a sufficient bond expires, the original bond remains in full force and effect for all liabilities incurred before, and for acts, omissions, or causes existing or which arose before, expiration." (§ 995.960, subd. (b)(2), italics added.)

Thus, section 995.960 specifies that although an insufficient surety bond is rendered ineffective upon expiration of the five-day cure period, the failure to cure the insufficiency means the bond will nonetheless remain effective as to those liabilities incurred before that expiration date. In this case, none were.

When an undertaking is given pursuant to section 917.1 to stay enforcement of a judgment pending appeal — the type of bond given by the sureties in this case — the surety incurs no liability until the appeal is resolved. The conditional nature of an appellate bond is spelled out in section 917.1, subdivision (b): "The undertaking shall be on condition that if the judgment or order or any part of it is affirmed or the appeal is withdrawn or dismissed, the party ordered to pay shall pay the amount of the judgment or order, or the part of it as to which the judgment or order is affirmed, as entered after the receipt of the remittitur, together with any interest which may have accrued pending the appeal and entry of the remittitur, and costs which may be awarded against the appellant on appeal." (Italics added.)

Thus, the surety on an appellate bond given pursuant to section 917.1 incurs no liability to the judgment creditor as long as the appeal remains pending. Strong recognized this when she confined her collection efforts to the debtor during the pendency of his appeal. It was only after the debtor's appeal was resolved that she sought to hold the sureties liable under the terms of their undertakings. By that time, their undertakings had long since been rendered ineffective.

Strong does suggest, without analysis or citation to authority, that the reference to "`all liabilities incurred before' expiration of the five day period" in section 995.960, subdivision (b)(2), actually refers to the "one liability" encompassed by the bond — which in this case, is the "[underlying] judgment and any cost award that may be tacked on to the judgment." In other words, Strong is claiming that it is the undertaking itself, rather than any subsequent obligation to pay money in accordance with its terms, which represents the "liability" the sureties "incurred" before the five-day statutory period expired. We reject the suggestion.

If the undertaking itself were the "liability" incurred by a surety for purposes of section 995.960, subdivision (b)(2), then there could never be more than one liability incurred in connection with any bond — because whatever amounts the surety was later obligated to pay in accordance with the bond would simply comprise a portion of that original "liability" incurred when the bond was given. Thus, that interpretation is inconsistent with section 995.960, subdivision (b)(2)'s reference to the possibility that multiple liabilities might be incurred under the terms of a bond deemed "insufficient" before the five-day statutory cure period expires. Further, equating the undertaking itself with the "liability" incurred by the surety for purposes of section 995.960, subdivision (b)(2), would mean the latest date that such liability could be incurred is the date the undertaking was given. And that would mean the italicized portion of the phrase specifying the insufficient bond remains "in full force and effect for all liabilities incurred before, and for acts, omissions, or causes existing or which arose before, expiration" (§ 995.960, subd. (b)(2), italics added) would be surplusage. We are obligated to avoid such a construction. (People v. Hudson (2006) 38 Cal.4th 1002, 1010.)

Finally, Strong also relies on two cases, Conservatorship of O'Connor (1996) 48 Cal.App.4th 1076 (O'Connor), and Lewin v. Anselmo (1997) 56 Cal.App.4th 694 (Lewin), to support her assertion that a finding of defects in a surety bond do not release the surety from liability. However, neither case involves an effort to enforce an appellate bond after it was declared insufficient under section 995.960 and neither provides persuasive support for her position.

O'Connor addressed a surety's purported rescission of a bond issued to a conservator. According to Strong, the case is relevant because it cited section 995.380, subdivision (a), which states: "If a bond does not contain the substantial matter or conditions required by this chapter or by the statute providing for the bond, or if there are any defects in the giving or filing of the bond, the bond is not void so as to release the principal and sureties from liability." But that provision is inapposite, for two reasons.

First, the sureties in this case never claimed their undertakings were void because of defects. Instead, it was Strong who asked the trial court to strike those undertakings on the basis they were insufficient to support a stay of her enforcement of the underlying judgment. In other words, it was Strong who was arguing the undertakings were voidable, which is quite a different thing than a claim they are void.

"A void contract is without legal effect. [Citation.] `It binds no one and is a mere nullity.' [Citation.] `Such a contract has no existence whatever. It has no legal entity for any purpose and neither action nor inaction of a party to it can validate it. . . .' [Citation.] As we said of a fraudulent real property transfer in First Nat'l Bank v. Maxwell (1899) 123 Cal. 360, 371, `"A void thing is as no thing."' [¶] A voidable transaction, in contrast, `is one where one or more parties have the power, by a manifestation of election to do so, to avoid the legal relations created by the contract, or by ratification of the contract to extinguish the power of avoidance.' [Citation.] It may be declared void but is not void in itself. [Citation.] Despite its defects, a voidable transaction, unlike a void one, is subject to ratification by the parties." (Yvanova v. New Century Mortg. Corp. (2016) 62 Cal.4th 919, 929-930.)

When the trial court granted Strong's motion, she got what she asked for, and it was the court's order, rendered pursuant to section 995.960, that declared those undertakings ineffective as of a date five days hence. Strong cannot now complain because the court gave her the remedy she sought.

And the second reason section 995.380, subdivision (a), is inapposite is that the trial court's order in this case, granting Strong's motion to strike the undertakings, did not release the debtor or the sureties from any liability. As we have already explained, the sureties had yet to incur any liability under the terms of their undertakings when the court granted the motion.

The second case Strong relies on, Lewin, did involve an appellate bond, but the question was whether the sureties could enforce a provision in their joint undertaking which purportedly gave them a unilateral right to rescind within 15 days, which they then exercised in a timely manner. The trial court ruled they could not enforce the provision because the only way a surety can be released from an undertaking is pursuant to court order, in accordance with the requirements of statute. (Lewin, supra, 56 Cal.App.4th at pp. 700-701.) But In this case, of course, that is exactly what did happen. It was the court's order, made pursuant to section 995.960, which rendered the undertakings given by these sureties ineffective, thus relieving them of any future liability they might otherwise have incurred.

III

DISPOSITION

The order is affirmed. The Plaintiffs are to recover their costs on appeal.

O'LEARY, P. J. and ARONSON, J., concurs.

FootNotes


1. All further statutory references are to the Code of Civil Procedure.
2. In July 2016, the sureties filed a motion to dismiss this appeal on the ground it was moot, arguing the underlying judgment would be fully satisfied by the judgment debtor's payment of $23,333.00 in April 2016, in accordance with the terms of a "payoff agreement" entered into between Strong and the debtor. In November 2016, they filed a supplement to their motion, reflecting the debtor made an additional payment of $23,334.00. We deny the motion.

Our own reading of the payoff agreement relied upon by the sureties reveals it will not be fully performed until a final payment of $25,000 is made by the debtor "on or before April 1, 2017." We acknowledge the debtor's contention that the payoff agreement covers other liabilities in addition to the underlying judgment, however, we can find no support for his implicit assertion that all payments made pursuant to the payoff agreement thus far were intended to be allocated solely to that underlying judgment. Consequently, we cannot conclude the underlying judgment has been satisfied, and we deny the motion.

Source:  Leagle

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