FILED
NOT FOR PUBLICATION
JUN 02 2017
UNITED STATES COURT OF APPEALS MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
FOR THE NINTH CIRCUIT
NACIMIENTO WATER COMPANY, No. 15-56323
INC.,
D.C. No. 2:13-cv-07959-DDP-MRW
Plaintiff-counter-defendant-
cross-defendant - Appellant,
MEMORANDUM*
v.
INTERNATIONAL FIDELITY
INSURANCE COMPANY,
A New Jersey Corporation,
Defendant-counter-claimant-
cross-claimant - Appellee.
NACIMIENTO WATER COMPANY, No. 16-55311
INC.,
D.C. No. 2:13-cv-07959-DDP-MRW
Plaintiff-counter-defendant-
cross-defendant - Appellee,
v.
INTERNATIONAL FIDELITY
INSURANCE COMPANY,
A New Jersey Corporation,
Defendant-counter-claimant-
cross-claimant - Appellant.
*
This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
Appeal from the United States District Court
for the Central District of California
Dean D. Pregerson, District Judge, Presiding
Argued and Submitted April 6, 2017
Pasadena, California
Before: PLAGER,** CLIFTON, and OWENS, Circuit Judges.
Plaintiff Nacimiento Water Company, Inc. appeals the district court’s order
granting summary judgment in favor of Defendant International Fidelity Insurance
Company (IFIC) as to Nacimiento’s claim for indemnification under a surety bond.
We have jurisdiction pursuant to 28 U.S.C. § 1291. We vacate and remand.
The district court concluded that Nacimiento’s claim was barred as a matter
of law by Cal. Civ. Proc. Code § 359.5. This statute provides:
If the obligations under a surety bond are conditioned
upon performance of the principal, the expiration of the
statute of limitations with respect to the obligations of the
principal, other than the obligations of the principal under
the bond, shall also bar an action against the principal or
surety under the bond, unless the terms of the bond
provide otherwise.
**
The Honorable S. Jay Plager, United States Circuit Judge for the
Federal Circuit, sitting by designation.
2
Cal. Civ. Proc. Code § 359.5. This statute bars a claim against the surety under the
bond if the claim is brought after the limitations period for a claim as to the
principal’s underlying obligation has expired.
Notably, the actual purpose of Cal. Civ. Proc. Code § 359.5 is to protect the
principal to a surety bond from extended exposure to liability based on a longer
statute of limitations for an action against the surety. As the California State
Legislature noted in passing the bill that was eventually codified as Cal. Civ. Proc.
Code § 359.5:
To allow an action against the surety after any action
against the principal is barred in effect eliminates the
protection of the statute of limitations for the principal.
If a judgment is obtained against the surety, the surety
may move against the principal for reimbursement of the
damages paid. Further, when a suit is brought against the
surety, it involves the principal, his or her employees,
and records as part of the litigation.
File of Governor’s Office on A.B. No. 2134 (1981-82 Reg. Sess.); see also Legis.
Counsel’s Dig., A.B. No. 2134 (1981-1982 Reg. Sess.). The purpose of the statute
also explains why Cal. Civ. Proc. Code § 359.5 requires that any tolling of the
statute of limitations with respect to a claim against the surety must be provided for
in the bond itself. This ensures that the principal, as a party to the surety bond, had
agreed to an extension of the limitations period.
3
Nacimiento argues that IFIC waived this statutory defense when it entered
into a mutual tolling agreement with Nacimiento. In response, IFIC contends that
it could not have waived the statutory defense intended to protect the Kings (the
principals) unless it obtained the Kings’ consent. It is undisputed that the Kings
were not a party to the mutual tolling agreement.
Tolling agreements are treated as contracts. See,e.g., Saavedra v. Donova,
700 F.2d 496, 498 (9th Cir. 1983). Under California law, “[a] contract must
receive such an interpretation as will make it lawful, operative, definite,
reasonable, and capable of being carried into effect, if it can be done without
violating the intention of the parties.” Cal. Civ. Code § 1643.
There is a triable issue as to whether the tolling agreement was intended to
extend the limitations period for a claim by Nacimiento against IFIC even though
IFIC could not later collect from the Kings, due to their financial circumstances or
otherwise. If this was the understanding of the parties in entering into the mutual
tolling agreement, then it could be accomplished by recognizing the tolling
agreement as including a waiver by IFIC of the protection that might otherwise be
provided to IFIC under Cal. Civ. Proc. Code § 359.5. This issue of fact precludes
summary judgment in IFIC’s favor.
4
Our disposition of the district court’s order denying summary judgment
moots IFIC’s cross-appeal pertaining to the district court’s denial of its motion for
attorney’s fees.
Costs are to be taxed against IFIC in favor of Nacimiento.
VACATED AND REMANDED.
5
FILED
Nacimiento Water Co., Inc. v. Int’l Fidelity Ins. Co., Nos. 15-56323+
JUN 02 2017
OWENS, Circuit Judge, dissenting: MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
I agree with the district court, so I respectfully dissent.