USS Cal Builders, Inc VS San Francisco Bay Area Rapid Transi

RG21090616: USS Cal Builders, Inc VS San Francisco Bay Area Rapid Transi 08/18/2026 Hearing on Motion for Reconsideration in Department 518

Tentative Ruling - 08/13/2026 Mark Fickes

The cross-motions of plaintiff USS Cal Builders, Inc. (USS Cal) and cross-defendant Arch Insurance Company (Arch) for an order authorizing the parties' settlement with the San Francisco Bay Area Rapid Transit District (BART) and determining the distribution of the $352,798 settlement fund under Code of Civil Procedure section 708.440 came before the Court. Having reconsidered, on its own motion and after notice and an opportunity to be heard, the Court AUTHORIZES the settlement, DEFERS final distribution of the fund, and ORDERS the further proceedings and evidentiary submissions set forth below.

I. BACKGROUND

USS Cal was the prime contractor on BART's Downtown Berkeley plaza improvement project, Contract 05EA-110, and Arch was its payment and performance bond surety. (Arch Motion, pp. 3-5; USS Cal Motion, p. 4.) Between 2005 and 2015, USS Cal and related indemnitors executed a series of General Indemnity Agreements (GIAs) in favor of Arch. Each GIA assigns to Arch "any and all sums due, or to become due" under any bonded contract, "[e]ffective as of the date of th[e] Agreement, but enforceable only in the event of a Default," and appoints Arch as USS Cal's attorney-in-fact. (Alexander Dec. ¶¶ 8-10, Exs. A-I.)

On July 19, 2018, USS Cal transmitted to Arch a Request for Financial Assistance in which it acknowledged that it was "in breach and in default of its obligations to the Surety under the [GIAs]." (Alexander Dec. ¶¶ 11, 13, Ex. K.) The parties then executed a Collateral Pledge Agreement in July 2018, under which Arch advanced more than $5 million, followed by the January 16, 2019 Second Amendment to that agreement. (Alexander Dec. ¶¶ 12, 14, Ex. L.) Arch's records reflect payments of $2,662,605.27 to subcontractors and suppliers, and receipt of $489,606.74 from BART on the Project. (Alexander Dec. ¶ 17, Exs. M-N.)

USS Cal filed this action against BART on March 1, 2021, and BART cross-complained against USS Cal and added Arch on May 13, 2021. (Order, 12/18/25, p. 2.) Following an April 2023 mediation, BART agreed to pay $352,798 and was to be released, with Arch relieved of liability to BART. (Order, 12/18/25, p. 2.) On June 13, 2024, Arch, BART, and Arch signing on behalf of USS Cal executed a Settlement Agreement directing the fund to Arch, and USS Cal did not sign. (Alexander Dec. ¶ 18, Ex. O; Meyers Dec. (Aug. 19, 2025) ¶ 6, Ex. A.) The fund remains in escrow at Citizens Business Bank. (Status Report, 7/29/26.)

Five subcontractors of USS Cal, holding money judgments entered in other, unrelated actions, have filed notices of judgment lien in this action under Code of Civil Procedure section 708.410: Kiss Enterprises, Inc., dba Golden State Roofing (Oct. 2023, $39,826.39 remaining after a $7,500 partial satisfaction); Apple Valley Communications, Inc. (July 2024, $140,000, arising from a non-Arch project); ISR Painting & Wallcovering, Inc. (May 2025, $98,795); Anees Mufti RG21090616: USS Cal Builders, Inc VS San Francisco Bay Area Rapid Transi 08/18/2026 Hearing on Motion for Reconsideration in Department 518 dba AM Glazing (July 2025, $101,777.79); and Eagle Contracting (Oct. 2025, $275,000). (RJN, Exs. 1-4 [Kiss, Apple Valley, ISR, and AM Glazing]; USS Cal Opp., p. 6 [Eagle Contracting and the Kiss partial satisfaction].)

USS Cal moved on August 19, 2025 for pro rata distribution to the lien claimants, and Arch cross-moved on August 21, 2025 for disbursement of the entire fund to itself. The Court continued the matter on December 18, 2025 and received supplemental briefs from both parties on January 20, 2026. No lien claimant has appeared. (Arch Suppl. Brief, p. 5.)

II. LEGAL STANDARD

Where a judgment creditor has obtained a lien on a party's pending cause of action under Code of Civil Procedure section 708.410, no settlement of that action "may be entered into by or on behalf of the judgment debtor, without the written consent of the judgment creditor or authorization by order of the court." (Code Civ. Proc., § 708.440, subd. (a).) On the judgment debtor's noticed motion, the court "may, in its discretion, after a hearing, make an order" authorizing the settlement on "such terms and conditions as the court deems necessary." (§ 708.440, subd. (b); Oldham v.

California Capital Fund, Inc. (2003) 109 Cal.App.4th 421, 429- 430.) Section 708.440 is a consent-or-authorization gate on the judgment debtor's power to compromise; it does not itself fix substantive priority among competing claimants to the fund, nor may it be used to re-order established priorities. (Pangborn Plumbing Corp. v. Carruthers & Skiffington (2002) 97 Cal.App.4th 1039, 1056-1057.) The ruling is reviewed for abuse of discretion, and the Court must have adequate information about the settlement and the competing claims before it exercises this discretion. (Oldham, supra, 109 Cal.App.4th at pp. 430, 435.)

III. ANALYSIS

A. The Court Reconsiders its February 4, 2026 Ruling on its Own Motion.

The Court is of the view that its February 4, 2026 ruling was erroneous. A trial court "retains the inherent authority to change its decision at any time prior to the entry of judgment," and Code of Civil Procedure sections 437c and 1008 “do not limit the court's ability, on its own motion, to reconsider its prior interim orders so it may correct its own errors.” (Le Francois v. Goel (2005) 35 Cal.4th 1094, 1105, 1107; Darling, Hall & Rae v. Kritt (1999) 75 Cal.App.4th 1148, 1156- 1157.) Before reconsidering ruling on its own motion, the court must give the parties notice of its concern and an opportunity to be heard. (Le Francois, supra, 35 Cal.4th at pp. 1108-1109.)

That condition is satisfied here: the Court is posting a tentative ruling. On reconsideration, and for the reasons stated below, the Court sets aside its order denying the motion for authorizing settlement and disbursement of settlement funds filed by Arch.

B. Section 708.440 Does Not Confer Substantive Priority on the Judgment Lien Claimants Over a Prior Assignee.

The central dispute is whether the section 708.410 judgment liens, by operation of section 708.440, defeat Arch's earlier contractual assignment. The Court concludes they do not.

SUPERIOR COURT OF CALIFORNIA COUNTY OF ALAMEDA

RG21090616: USS Cal Builders, Inc VS San Francisco Bay Area Rapid Transi 08/18/2026 Hearing on Motion for Reconsideration in Department 518 A judgment lien under section 708.410 attaches only to "[a]ny cause of action of such judgment debtor" and to “[t]he rights of such judgment debtor to money or property under any judgment subsequently procured.” (Code Civ. Proc., § 708.410, subd. (a).) Such a lien reaches only the interest the judgment debtor actually holds. As the Court of Appeal has explained, “[t]he liens of other creditors, such as attachment liens and judgment liens, reach only the debtor's interest in property, and are subject to prior equities against the debtor.” (Pangborn, supra, 97 Cal.App.4th at pp. 1051-1052.)

The Supreme Court has rejected the contention that a statutory judgment lien outranks a prior contractual claim; because the judgment lien statute “contains no language relating to the priority of liens,” Civil Code section 2897's first-in-time rule governs, and the earlier-created contractual interest prevails. (Cetenko v. United California Bank (1982) 30 Cal.3d 528, 534-535.) Applying that rule to section 708.410, a contractual interest arising from a contract entered into before the filing of a notice of lien “has priority over the judgment lien created by that filing.” (Brown v.

Superior Court (2004) 116 Cal.App.4th 320, 328; Oldham, supra, 109 Cal.App.4th at p. 435.) Although those authorities arose from attorney charging liens, the first-in-time priority rule they apply under Civil Code section 2897 is not confined to that context. Civil Code section 2897 codifies the principle. (Civ. Code, § 2897.)

Section 708.440 does not change this result. It requires the judgment creditor's consent or a court order before the debtor may compromise the action; it does not “advance the judgment creditor's rights over those of another creditor.” (Pangborn, supra, 97 Cal.App.4th at pp. 1056-1057.) Arch's GIA assignments predate every judgment lien by years and, by their terms, became effective as of each GIA's execution date upon USS Cal's default. (Alexander Dec. ¶¶ 8-10, Exs. A-I.)

USS Cal’s contention that the lien claimants, as “the only parties with documented liens,” necessarily take first inverts the governing rule. The liens attach to USS Cal's residual interest and are subject to prior equities, and a prior assignee need not record its interest to defeat a later judgment lien. (Cetenko, supra, 30 Cal.3d at pp. 534-535.) That contention is not persuasive.

C. Arch’s Assignment, If Validly Executed and Triggered, Leaves No Interest to Which the Liens Can Attach.

The remaining question on the merits is whether USS Cal’s rights in the BART fund passed to Arch before the liens attached. The governing law favors Arch; what remains is a matter of proof.

An indemnity agreement is enforced according to its terms, and a surety’s assignment triggered by the principal's default relates back and takes priority over intervening claims. The surety’s “right of subrogation goes back to the date of the contract of suretyship and takes priority over a prior assignment,” and one who takes with notice “has no better title than his assignor.” (San Diego County v. Croghan (1934) 2 Cal.App.2d 494, 499-500.) USS Cal acknowledged its default in the 2018 Request for Financial Assistance (Alexander Dec. ¶¶ 11, 13, Ex. K), which on its face triggered assignments executed years before any lien was filed. If the assignment carried USS Cal's cause of action against BART to Arch, then USS Cal retained no interest for the liens

SUPERIOR COURT OF CALIFORNIA COUNTY OF ALAMEDA

RG21090616: USS Cal Builders, Inc VS San Francisco Bay Area Rapid Transi 08/18/2026 Hearing on Motion for Reconsideration in Department 518 to reach when they were filed. (Los Angeles Rock & Gravel Co. v. Coast Construction Co. (1921) 185 Cal. 586, 592-593 [contract proceeds that have passed by assignment are no longer the principal's property and cannot be reached].)

USS Cal’s argument that the settlement proceeds are litigation recoveries outside the surety agreements, and that Arch's rights are merely “un-adjudicated,” does not defeat priority; the GIAs assign “all claims and causes of action” and “any and all sums due, or to become due under any contract, whether bonded or not.” (Alexander Dec., Ex. A.) The limitation is evidentiary, not doctrinal, and is addressed in the further proceedings ordered below.

D. The Second Amendment Does Not Require Arch to Pay These Subcontractors Before Itself.

USS Cal contends that the Second Amendment to the Collateral Pledge Agreement obligates Arch to pay subcontractors before recovering for itself. On further consideration, the Court concludes it does not.

The operative paragraph assigns to Arch “all Project contract funds,” excepts “amounts to be paid to subcontractors, suppliers or laborers,” but expressly limits the clause to “payments to be paid to any INDEMNITOR in relation to the SSFUSD Modular Projects, for which the SURETY issued Bond Nos. SU 1119678-0001 through SU 1119678-00016.” (Othman Dec., Ex. C, § 4.) By its terms, the subcontractor exception governs the South San Francisco Unified School District modular projects and the identified bonds, not the BART Downtown Berkeley project, Contract 05EA-110, at issue here.

The provision therefore does not reach this fund; and even within its scope it is a carve-out from Arch’s right to particular project funds, not an affirmative, cross-project duty to prefer judgment creditors on unrelated jobs. USS Cal’s broader reading rests on an unpublished appellate decision and a related-case order, and an unpublished opinion is not citable authority. (Cal. Rules of Court, rule 8.1115(a).) Thus, this contention lacks merit on the present record.

E. Equitable Subrogation Supports Arch but Depends on the Equities and the Proof.

Arch’s equitable-subrogation theory reaches the same result as its assignment but is more dependent on the facts. A surety that pays claims “steps into the shoes” of those it paid and of its principal, but the right of subrogation “is purely derivative”: the subrogee “has no greater rights than the insured” and can claim nothing the subrogor could not. (Fireman’s Fund Ins. Co. v. Maryland Casualty Co. (1998) 65 Cal.App.4th 1279, 1292-1293.) The pivotal element is superior equities; justice must require shifting the loss to a party “whose equitable position is inferior to that of the insurer.” (Fireman’s Fund, supra, 65 Cal.App.4th at p. 1292; Patent Scaffolding Co. v.

William Simpson Construction Co. (1967) 256 Cal.App.2d 506, 509-510.) The Supreme Court has cautioned that a compensated surety that has paid “what it contracted to pay” and “retained . . . the premiums” acquires no right of subrogation against an innocent competing party, and that “an assignment will be ineffectual to give the surety a right of subrogation he

SUPERIOR COURT OF CALIFORNIA COUNTY OF ALAMEDA

RG21090616: USS Cal Builders, Inc VS San Francisco Bay Area Rapid Transi 08/18/2026 Hearing on Motion for Reconsideration in Department 518 would not otherwise have.” (Meyers v. Bank of America etc. Assn. (1938) 11 Cal.2d 92, 95-97, 102-103.)

USS Cal’s superior-equities argument, that Arch received premiums and should have ensured its subcontractors were paid, is a legitimate equitable consideration. It does not, however, defeat priority on this record, because the competing claimants are not innocent third parties whose funds Arch seeks to reach; they are USS Cal’s own judgment creditors asserting USS Cal’s residual interest, which is subordinate to Arch's prior assignment. The equities will be weighed on the evidence at the hearing.

F. Arch’s Power of Attorney Does Not Control the Distribution Question.

USS Cal argues that Arch’s power of attorney does not permit it to disregard the rights of others. That argument does not bear on distribution. The GIAs appoint Arch attorney-in-fact “to make, execute, and deliver any and all . . . assignments, documents or papers deemed necessary and proper” to effectuate the assignments, and ratify Arch's acts. (Alexander Dec. ¶ 10, Ex. G.) Whether Arch exercised that authority reasonably as between principal and surety is a matter for the parties’ separate litigation in Orange County (OCSC No. 30-2023-01325572), not for the distribution determination here. Because the Court, and not the settlement agreement, determines distribution under section 708.440, USS Cal’s decision not to sign the agreement does not defeat authorization of the settlement. This contention is not compelling.

IV. DETERMINATION AND FURTHER PROCEEDINGS

As a preliminary matter, Arch's unopposed request for judicial notice of Exhibits 1 through 4, the notices of judgment lien and the underlying judgments of Kiss, Apple Valley, ISR, and AM Glazing, is GRANTED. (Evid. Code, § 452, subd. (d).) The settlement of the action for $352,798 is proper and is authorized. The competing requests for immediate distribution are not ripe for final decision. On the present record the Court cannot finally adjudicate priority between Arch’s asserted assignment and subrogation rights and the section 708.410 judgment liens, for two reasons.

First, no judgment lien claimant has appeared, and no lien may be subordinated or extinguished without notice and an opportunity to be heard. Second, the record does not yet establish, as a liquidated matter, that the $352,798 fund represents contract balance or retention on the BART Project to which Arch’s assignment and Project-specific payments attach; Arch reports receiving $489,606.74 from BART, while its payment records span multiple projects and are not reconciled to this fund. The Court will resolve priority after a noticed evidentiary hearing on a fund deposited with the Court.

V. FURTHER EVIDENCE REQUIRED FOR A FINAL DECISION

To permit a final determination of entitlement to the fund, the parties and any appearing lien claimant shall submit the following, by declaration of a competent witness with the supporting documents authenticated, no fewer than 30 days before the evidentiary hearing (with responsive

SUPERIOR COURT OF CALIFORNIA COUNTY OF ALAMEDA

RG21090616: USS Cal Builders, Inc VS San Francisco Bay Area Rapid Transi 08/18/2026 Hearing on Motion for Reconsideration in Department 518 submissions due 15 days before). Live testimony will be received only as to any matter on which a genuine credibility conflict cannot be resolved on the written record.

1. From Arch: the executed General Indemnity Agreements on which it relies, with foundation establishing their valid execution by USS Cal and the indemnitors, and identification of the specific assignment provision invoked. (Alexander Dec., Exs. A-I.)

2. From Arch: evidence that USS Cal's default triggered the assignment as to the BART Project, including the Request for Financial Assistance and any notice of default. (Alexander Dec., Ex. K.)

3. From Arch: a Project-specific accounting that ties the $352,798 fund to BART Contract 05EA-110, whether as contract balance or retention, and that allocates Arch's claimed payments to the BART Project, reconciled against the $489,606.74 Arch reports receiving from BART, so that the amount of Arch's Project loss is established as a liquidated sum. (Alexander Dec. ¶ 17, Exs. M-N.)

4. From Arch: evidence whether and when Arch gave BART or the escrow holder notice of its assignment.

5. From each judgment lien claimant that appears: proof that its underlying judgment is final and unsatisfied, the current balance of its lien, and whether the lien has been released in whole or in part, including the status of the Kiss partial satisfaction and any release of Arch by ISR Painting & Wallcovering, Inc.

6. From USS Cal: any evidence contesting the execution, authenticity, or triggering of the GIAs, and any evidence supporting its contention that the equities are superior in the lien claimants, so that the issue is joined on evidence rather than argument.

7. From the escrow holder or the parties jointly: a current statement of the escrow account, including accrued interest, so that any final disbursement order states an exact sum. I f any party believes such evidence is already in the Court’s record, please provide specific citations to that evidence.

VI. ORDERS

Having reconsidered its prior orders on its own motion, the Court vacates its prior order denying the cross-motions to approve settlement, and IT IS ORDERED:

1. The settlement of this action for $352,798 is AUTHORIZED under Code of Civil Procedure section 708.440, subdivision (b). BART shall be dismissed upon completion of the deposit ordered in paragraph 3.

2. USS Cal’s request for immediate pro rata distribution to the judgment lien claimants, and

SUPERIOR COURT OF CALIFORNIA COUNTY OF ALAMEDA

RG21090616: USS Cal Builders, Inc VS San Francisco Bay Area Rapid Transi 08/18/2026 Hearing on Motion for Reconsideration in Department 518 Arch's request for immediate disbursement of the entire fund to Arch, are each DENIED WITHOUT PREJUDICE.

3. Within 20 days of service of this order, the escrow holder, Citizens Business Bank, shall deposit the $352,798, together with all accrued interest, with the Clerk of this Court. Counsel shall lodge a proposed order directing the escrow holder to do so; if Arch declines to stipulate, USS Cal or BART may lodge the proposed order.

4. USS Cal shall serve this order, together with notice of the evidentiary hearing, on all five judgment lien claimants and on the escrow holder, and shall file proof of service. Each lien claimant may appear and submit evidence. No lien will be subordinated or extinguished without notice and an opportunity to be heard.

5. An evidentiary hearing on entitlement to the fund is set for October 9, 2026 at 9:00 a.m. in Department 518. The submissions required by Part V are due on the schedule stated there.

IT IS SO ORDERED.