In the representation of a surety who issued a mechanic’s lien release bond on a residential project, Lanak & Hanna Associate Attorney Lauren B. Stec was victorious on demurrer defeating a time barred and previously released bond claim recloaked as a declaratory relief cause of action. The demurrer was sustained by the court without leave to amend, obtaining a complete dismissal of the surety.
Plaintiff bond claimants are getting more creative in avoiding the statutory deadline to file a claim against a bond by recasting their bond claims as declaratory relief causes of action. In this case, the plaintiff could not sue the surety for a claim on the mechanics lien release bond because the claim was clearly time barred and the plaintiff had previously released all claims against the surety in a pre-litigation settlement agreement. Despite having no valid claim, the plaintiff sued the surety for declaratory relief. This was simply a tactic to gain leverage against the surety and force a quick settlement.
California Code of Civil Procedure section 1060 provides that a declaratory relief cause of action requires that there be an actual controversy relating to the legal rights and duties of the respective parties under a written instrument and requests that these rights and duties be adjudged by the court. Courts do no issue advisory opinions about the rights and duties of parties under particular agreements. Otay Land Co. v. Royal Indemnity Co. (App. 4 Dist. 2008) 169 Cal.App.4th 556.
In ruling on the demurrer, the court found plaintiff’s complaint failed to meet the pleading requirements for declaratory relief and that no amendment to the pleading could cure the defect. Specifically, the court found that the declaratory relief cause of action had no merit because it was based on contingent liability and because the settlement agreement release. The court sustained the demurrer without leave to amend and the surety was dismissed from the case.
The information contained in this Newsletter has been prepared by Lanak & Hanna, P.C. for educational and informational purposes only. It does not constitute legal advice, nor does it substitute for legal advice.