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Hokojitsugyo Company, Ltd. v. Federal Insurance Co.

June 19, 2008

HOKOJITSUGYO COMPANY, LTD., PLAINTIFF,
v.
FEDERAL INSURANCE COMPANY, DEFENDANT.



The opinion of the court was delivered by: Hayes, Judge

ORDER ON APPLICATIONS FOR DISBURSEMENT OF JUDGMENT PROCEEDS

Pending before the Court are the applications for disbursement of judgment proceeds pursuant to CAL. CODE CIV. P. §§ 708.410-708.480 filed by Otay Project, LLC (Doc. # 302) and Century Surety Company (Doc. # 303). The Court finds these matters suitable for submission on the papers without oral argument.

BACKGROUND

On December 13, 2004, Plaintiffs Hokojitsugyo Company, Ltd. (Hoko) and David Blackburn (Blackburn) filed a Complaint against Defendant Federal Insurance Company (Federal) for breach of contract and bad faith in the California State Superior Court in San Diego, California. See (Doc. # 1). On January 14, 2005, Defendant Federal removed the case to this Court. (Doc. # 1).

On December 12, 2005, the parties filed a stipulation whereby the parties agreed to allow Plaintiffs to file a First Amended Complaint in which 350 W.A. was substituted as a Plaintiff "in place and instead of Blackburn as the real party in interest for the claims erroneously asserted on behalf of Blackburn." (Doc. # 33 at 1). Pursuant to the stipulation, Defendant Federal retained the right to require Blackburn to respond to discovery requests even though Blackburn was made a "nonparty" to the suit. (Doc. # 33 at 2). On December 12, 2005, Plaintiffs filed the First Amended Complaint which was the subject of the stipulation, and thereby terminated Blackburn as a Plaintiff, and added as a Plaintiff 350 West Ash, LLC (350 W.A.). (Doc. # 34). The First Amended Complaint asserted claims for breach of contract, breach of the implied covenant of good faith and fair dealing, negligent infliction to prospective economic advantage, and declaratory relief. (Doc. # 34).

On January 26, 2006, Defendant Federal moved for summary judgment on each of the claims asserted by Hoko and 350 W.A. (Doc. # 43). On May 1, 2006, the Court granted Defendant's motion for summary judgment with respect to all of the claims asserted by Plaintiff 350 W.A., as well as with respect to Plaintiff Hoko's claims for declaratory relief and negligent infliction to prospective economic advantage. (Doc. # 101). As of May 1, 2006, only Plaintiff Hoko's claims for breach of contract and breach of the implied covenant of good faith and fair dealing remained pending in this action. See (Doc. # 101).

On January 11, 2008, Plaintiff Hoko served an Offer of Compromise pursuant to CAL. CODE CIV. P. § 998 upon Defendant Federal for $999,999.00. (Docs. # 298, 300). On January 25, 2008,

Defendant Federal accepted Plaintiff Hoko's Offer of Compromise. (Doc. # 300).

On January 28, 2008, Century Surety Company (Century) filed a notice of judgment lien against 350 W.A. and Blackburn. (Doc. # 273); see also CAL. CODE CIV. P. §§ 708.410(a-b). On January 31, 2008, Duckor, Spradling, Metzger & Wynne law corporation (Duckor) filed a notice of judgment lien against Blackburn. (Doc. # 288). On February 21, 2008, Duckor filed a notice of contractual lien for attorneys' fees against 350 W.A. and Blackburn. (Doc. # 291). On February 27, 2008, Otay Project, LLC (Otay) filed a notice of contractual lien against Blackburn and 350 W.A. (Doc. # 293). Otay's notice also claimed "a security interest in any funds paid to Blackburn, 350 W.A., or Hokojitsugyo Company, Ltd." (Doc. # 293 at 1).

On April 15, 2008, the Court entered Judgment in favor of Hoko and against Federal in the amount of $999,999.00. (Doc. # 300). The Court ordered enforcement of the judgment to be held in abeyance pending adjudication of the rights of the lien holders. (Doc. # 300). On April 15, 2008, the Court set a briefing schedule for application to the court for judgment proceeds. (Doc. # 301).

On April 28, 2008, claimants Century, Otay, and Duckor filed applications for judgment proceeds pursuant to CAL. CODE CIV. P. § 708.470(a). (Docs. # 302, 303, 304). On May 5, 2008, Plaintiff Hoko filed a response to Duckor's application for judgment proceeds (Doc. # 305), Otay filed a response to the applications filed by Duckor and Century (Doc. # 308), and Century filed responses to the applications of Duckor and Otay. (Docs. # 306, 307).

On June 5, 2008, the Court filed an Order requesting further briefing on (1) whether the Court has the power to adjudicate judgment or contractual liens against non-parties, and (2) whether the Court had the power to adjudicate contractual liens in this proceeding. (Doc. # 310). On June 13, 2008, claimants Century and Otay, as well as Plaintiff Hoko, filed responses. (Docs. # 311, 313, 314). On June 13, 2008, claimant Duckor filed a notice withdrawing its liens and application for judgment proceeds. (Doc. # 312).

FACTUAL BACKGROUND

On December 13, 2004, Plaintiffs Hoko and Blackburn filed the Complaint in this matter seeking to recover money under an insurance policy and for bad faith. (Doc. # 1). Before filing suit, Plaintiff Hoko assigned its rights to insurance proceeds ...


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