Disapproves Contrary Reasoning in Cooper v. Westbrook Torrey Hills.
In our August 28, 2011 post, we mentioned that the California Supreme Court was considering a case on recoverability of consequential interest expense by an appellate litigant who prevailed after posting a letter of credit but sought to recover the interest expense incurred by borrowing money to obtain the LOC securing an appellate bond. In a closely analogous case, an appellate court in Cooper v. Westbrook Torrey Hills, 81 Cal.App.4th 1294 (2000) held that interest expenses were recoverable costs on appeal where the appellant borrowed funds to deposit as an undertaking in order to stay foreclosure pending appeal.
Above: Undertaking. Chicago. Edwin Rosskam, photographer. 1941. Library of Congress.
The California Supreme Court disapproved Cooper and ruled against the recovery of interest expenses as costs in Rossa v. D.L. Falk Construction, Inc., Case No. S183523 (Cal. Supreme Court Jan. 23, 2012). The main basis for determining interest expenses were not recoverable costs was grounded upon the historical premise that California routine costs statutes/rules of court are strictly construed with respect to costs recoverability. Secondarily, the smaller premium for a bond or LOC generally was much, much smaller than the fluctuating exponentially larger expense associated with obtaining a loan to post an LOC for the undertaking, with the Judicial Council needing to express in much clearer fashion that CRC 8.278(d)(1)(F) encompassed these more expensive items.
In doing so, our state high court did not opine on whether rules relating to bonds were applicable to cash deposits in lieu of bonds in the routine costs context.
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