PREACH v. C. Dean Virden, Objector and Respondent.

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Court of Appeal, Second District, Division 4, California.

Jeff L. PREACH, Plaintiff and Appellant, v. MONTERAINBOW, LTD., et al., Defendants; C. Dean Virden, Objector and Respondent.

No. B110236.

Decided: October 23, 1997

Whitman Breed Abbott & Morgan and Roger B. Coven, Los Angeles, for Plaintiff and Appellant. Blumberg Law Corporation and Ave Buchwald, Long Beach, for Objector and Respondent. Dudley W. Gray, Torrance, as Amicus Curiae.

Jeff L. Preach filed an action to collect a real estate commission and recorded a lis pendens against the real property involved.   The lis pendens was expunged pursuant to Code of Civil Procedure former section 409.2 when two sureties filed undertakings.   Preach eventually obtained a judgment, the judgment debtors filed bankruptcy, and a settlement for an amount less than the judgment was reached between Preach and the judgment debtors.   Preach appeals from the trial court's order denying his motion to execute on one of the undertakings.   He contends that he is entitled to enforce his judgment against the surety to the extent of the undertaking, although the judgment he obtained was not based on a claim that, by itself, would support a lis pendens.   Preach also argues that the surety was not exonerated by the settlement with the judgment debtor.

We conclude that Preach is entitled to enforce his judgment to the extent of the undertaking and reverse.

FACTUAL AND PROCEDURAL SUMMARY

The factual and procedural history of this litigation up to January 1993, is set forth in detail in our earlier opinion, Preach v. Monter Rainbow (1993) 12 Cal.App.4th 1441, 16 Cal.Rptr.2d 320 (“Preach I ”).   We therefore provide only a brief summary here.

Preach sued Monterainbow Ltd.,1 the Gray Family Corporation, and Dudley Gray, Sr. The suit was for breach of contract, foreclosure of equitable mortgage and fraud.   The gravamen of the complaint was that the defendants had breached a written agreement employing Preach to procure the HomeClub as a tenant for a building to be constructed on land owned by Monterainbow.   Preach claimed that he was owed an additional $300,000 in commissions, plus interest, upon completion of the lease between HomeClub and the defendants.   He alleged the defendants had promised, but failed, to execute a note and deed of trust securing the balance of the commission he was owed.   The defendants in that case were successful in their motion for summary judgment.   We reversed the ensuing judgment because Preach had raised material issues of fact.  (12 Cal.App.4th at pp. 1457-1458, 16 Cal.Rptr.2d 320.)

On remand, the case went to trial and the jury rendered a verdict in favor of Preach.   Judgment for Preach was entered against defendants Monterainbow and Gray Family Corporation in the amount of $761,934.25, plus interest.   (Preach II.)   Defendants appealed.   At oral argument on that appeal, the parties informed us that all claims involving Monterainbow and the Gray Family Corporation had been resolved by settlement.   We therefore limited the scope of our non-published opinion to the nonsuit granted to Preach on defendant Dudley Gray, Sr.'s cross-complaint.   We affirmed the order granting nonsuit and dismissed the remainder of the appeal as moot in light of the settlement.2

In December 1996, Preach filed a motion to enforce the liability of surety C. Dean Virden pursuant to Code of Civil Procedure section 996.440.   The motion was based on a $450,000 undertaking in which Virden obligated himself as surety for that amount in the event of a judgment in Preach's favor in Preach's action against Monterainbow.

Section 996.440 provides in pertinent part:  “(a) If a bond is given in an action or proceeding, the liability on the bond may be enforced on motion made in the court without the necessity of an independent action.”  Code of Civil Procedure section 995.140, subdivision (a)(2) defines a bond as “A surety, ․ executed by the sureties alone.”

Virden opposed the motion on the ground that Preach had not suffered damages as a result of the expungement of the lis pendens, and therefore was not entitled to look to the undertaking in order to satisfy the judgment.   Virden raised other defenses as well, including a claim that he had been exonerated by the settlement between Preach and defendants.   As an alternative ground, Virden argued that the undertaking was forged.   He said:  “[I]f the court disagrees with the above-presented analysis and deems that plaintiff has been damaged as a result of the expungement of the lis pendens and that the settlement agreement did not exonerate the sureties, then a material issue of fact exists as to whether Mr. Virden signed and delivered the undertaking.   In that event, a trial date should be set sufficiently in the future to allow [depositions regarding the undertaking].”

The trial court denied the motion.   It reasoned:  “I just feel that, based on the CMSH [Co. v. Antelope Development (1990) 223 Cal.App.3d 174, 272 Cal.Rptr. 605] case, that, at a minimum, that you need to get a judgment on the cause of action for which the lis pendens would have been appropriate, regardless of whether you're able to enforce it.   That's the ․ that's the purpose of the bond, ․ because you can enforce it because there's no equity or whatever it might be, or you can't get the specific performance, then the bond pays you what you've lost by not being able to enforce it, but you still have to get the judgment for that cause of action, ․”  The trial court declined to decide whether the undertaking was forged:  “I'm assuming at this point that it's a valid surety.   I'm not finding it's a forgery or anything like that, but I'm just finding from a legal standpoint that I can't grant a judgment for the plaintiff against the surety, because the judgment doesn't contain a cause of action in which the lis pendens would have been recorded against, and for that reason, I'm denying the plaintiff's motion to enter a judgment.” 3

Preach filed a timely notice of appeal.

DISCUSSION

I-II***

III

Finally, the parties disagree over the impact of Preach's settlement with the Monterainbow defendants.   Virden argues that he was exonerated under Civil Code section 2819, either the version which was in effect at the time the undertaking was filed, or under the 1993 amendments which were in effect when the Monterainbow defendants settled.   Preach argues that Virden was not exonerated under the terms of Civil Code section 2822.

Prior to 1993, section 2819 provided:  “A surety is exonerated, except so far as he may be indemnified by the principal, if by any act of the creditor, without the consent of the surety the original obligation of the principal is altered in any respect, or the remedies or rights of the creditor against the principal, in respect thereto, in any way impaired or suspended.”   Prior to 1993, section 2822 provided:  “The acceptance, by a creditor, of anything in partial satisfaction of an obligation, reduces the obligation of a surety thereof, in the same measure as that of the principal, but does not otherwise affect it.”

In 1993, chapter 149 was enacted, amending both sections 2819 and 2822.   Section 1 of the statute added the following language to section 2819:  “However, nothing in this section shall be construed to supersede subdivision (b) of Section 2822.”  (Stats.1993, ch. 149, § 1.)  Section 2 of chapter 149 amended section 2822 as follows:  “(a) The acceptance, by a creditor, of anything in partial satisfaction of an obligation, reduces the obligation of a surety thereof, in the same measure as that of the principal, but does not otherwise affect it.   However, if the surety is liable upon only a portion of an obligation and the principal provides partial satisfaction of the obligation, the principal may designate the portion of the obligation that is to be satisfied. [¶] (b) For purposes of this section and Section 2819, an agreement by a creditor to accept from the principal debtor a sum less than the balance owed on the original obligation, without the prior consent of the surety and without any other change to the underlying agreement between the creditor and principal debtor, shall not exonerate the surety for the lesser sum agreed upon by the creditor and principal debtor.”

Section 3 of chapter 149 provided:  “The amendment of Section 2822 of the Civil Code made by Sections 1 and 2 of this act does not constitute a change in, but is declaratory of, the existing law.”

 “Whether a statute should apply retrospectively or only prospectively is, in the first instance, a policy question for the legislative body enacting the statute.  [Citation.]   Thus, where a statute provides that it clarifies or declares existing law, ‘[i]t is obvious that such a provision is indicative of a legislative intent that the amendment apply to all existing causes of action from the date of its enactment.   In accordance with the general rules of statutory construction, we must give effect to this intention unless there is some constitutional objection thereto.’  [Citations.]”   (Western Security Bank v. Superior Court (1997) 15 Cal.4th 232, 244-245, 62 Cal.Rptr.2d 243, 933 P.2d 507.)

 Applying these principles, we conclude that the 1993 amendments apply here.   Under section 2822, subdivision (b), the settlement with the Monterainbow defendants did not fully exonerate Virden.   He is still liable for the difference between the settlement amount and the $450,000 undertaking.

DISPOSITION

The order is reversed.   Preach is to have his costs on appeal.

FOOTNOTES

1.   In our earlier opinion, Preach I, this defendant was identified as “Monter Rainbow.”   We are informed that the pleadings, which initially used that name, were in error, and were corrected by stipulation and order after Preach I was filed.   The defendant partnership is now correctly identified as “Monterainbow, Ltd.”

2.   Dudley Gray was given permission to file an amicus curiae brief in this appeal.   His principal contention is that the previous appeal should not have been dismissed as moot.   We decline to revisit that decision.

3.   Virden appears to have abandoned the forgery theory on appeal, since he mentions it only in his statement of the case, and presents no argument on the issue.   We therefore do not reach the issue because the trial court based its ruling entirely on separate grounds, declining to make a finding on the forgery issue.

FOOTNOTE.   See footnote *, ante.

EPSTEIN, Acting Presiding Justice.

HASTINGS and BARON, JJ., concur.