207 Cal. App. 4th 83
Cal. Ct. App.2012Background
- Vehicle Code sections 11710-11711 require a bonded dealer to provide a $50,000 surety bond to cover fraud losses; bond liability limited to the vehicle value purchased.
- Pierce filed a 11711 claim against Western Surety on a bond issued to Autorama, which later settled with Pierce; Pierce obtained a settled judgment and an attorney fees award against Autorama and Western Surety.
- Trial court held that although 11711 does not expressly authorize attorney fees, the dealer’s contract fees and CLRA-related fees could be recovered via Western Surety’s liability being commensurate with the principal.
- Western Surety argued 11711 is silent on attorney fees and that the bond does not secure the contract’s covenants; fees could not be recovered under 11711 or the contract, since the bond covers fraud, not contract breaches.
- The court relied on Civil Code § 2808 and authorities Boliver, T&R Painting, and National Technical Systems to allow fees from the surety when the underlying contract provided for attorney fees or the bond secured conduct covered by those statutes; the distinction from construction bonds was emphasized.
- The Court affirmed the judgment, concluding Pierce could recover attorney fees under CLRA (and related statutes) from Western Surety, while 11711 itself provides no fee recovery and the bond’s cap remains on damages (not on fees as costs).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Attorney fees under 11711 allowed? | Pierce should recover fees since principal would bear them. | 11711 silent on fees; not recoverable by statute. | No, 11711 does not authorize attorney fees. |
| Surety liability framework? | Liability mirrors principal for fee-shifting under underlying contracts or statutes. | Bond limits and nature require look to bond terms and applicable statutes. | Surety liable for fees only where authorized by statutes and bond terms. |
| CLRA Fees against surety? | CLRA fees payable to prevailing plaintiff extend to the surety. | CLRA fees arise from CLRA claims, not 11711; unsure if surety bears Fees. | Pierce may recover CLRA fees from Western Surety. |
| Bond coverage for contract breaches? | Bond is security for fraud; fees tied to fraud falls within coverage. | Bond covers fraud; fees tied to contract breach not covered. | Bond did not secure contract breaches; fees tied to CLRA fraud are covered by surety. |
| Relation to construction-bond authorities? | Construction-bond authorities support fee recovery when covenants exist. | Construction-bond reasoning not applicable to consumer fraud bond. | Not controlling; distinction upheld. |
Key Cases Cited
- Boliver v. Surety Co., 72 Cal.App.3d Supp. 22 (Cal. App. Supp. 1977) (surety liability includes contract-attorney fees when underlying contract provides for them)
- T&R Painting Construction, Inc. v. St. Paul Fire & Marine Ins. Co., 23 Cal.App.4th 738 (Cal. App. 1994) (bond security for covenants; fees recoverable if within bond context and cap applies)
- National Technical Systems v. Superior Court, 97 Cal.App.4th 415 (Cal. App. 2002) (subcontractor may recover attorney fees from a bond for stop notices)
- Schmitt v. Insurance Co. of North America, 230 Cal.App.3d 245 (Cal. App. 1991) (surety liability commensurate with principal; bond terms incorporated by statute)
- American Financial Services Assn. v. City of Oakland, 34 Cal.4th 1239 (Cal. 2005) (legislative history not controlling on intent to grant/deny fees)
- Harris v. Northwestern National Ins. Co., 6 Cal.App.4th 1061 (Cal. App. 1992) (costs/attorney fees not limited by bond cap when authorized)