Auto-Owners Insurance Company v. Tomberlin, Young & Folmar Insurance Co. et al
MEMORANDUM OPINION AND ORDER denying the 80 Motion to Dismiss, or in the Alternative, for Judgment on the Pleadings, without prejudice to the issues raised in the motion being raised again in a properly-filed Motion for Summary Judgment; granting the 83 Motion to Amend Answer; giving the Defendants leave to file the Answer and Counterclaim appended to their Motion. Signed by Honorable Judge W. Harold Albritton, III on 11/4/2011. (Attachments: # 1 Civil Appeals Checklist)(br, )
IN THE UNITED STATES DISTRICT COURT FOR
THE MIDDLE DISTRICT OF ALABAMA
AUTO-OWNERS INSURANCE COMPANY, )
TOMBERLIN, YOUNG & FOLMAR
INSURANCE CO. d/b/a SOUTH CENTRAL )
AGENCY, et al.,
CASE NO. 2:11-cv-468-WHA
MEMORANDUM OPINION AND ORDER
This cause is before the court on the Defendants' Motion to Dismiss, or in the Alternative,
for Judgment on the Pleadings (Doc. #80), and the Defendants' Motion to Amend Answer (Doc.
This case began with a Complaint filed in the Northern District of Florida by the United
States of America against the Dick Corporation and others. United States, etc. v. Dick Corp., et.
al., 3:08cv56/MCR/MD. A Fourth-Party Complaint was filed by Auto-Owners Insurance
Company (Auto-Owners) against Tomberlin, Young & Folmar Insurance Company d/b/a South
Central Agency, John S. Tomberlin and Harold S. Young (collectively "South Central Agency").
Auto-Owners and South Central Agency jointly stipulated to a transfer of the action to the United
States District Court for the Middle District of Alabama.
After the case was transferred to this court, South Central Agency filed an Answer.
Auto-Owners then filed an Amended Complaint,1 with leave of court. Auto-Owners brings
claims for breach of contract (Count I), breach of fiduciary duty during the application process
(Count II), breach of fiduciary duty following the application process (Count III), indemnification
(Count IV), negligent misrepresentation (Count V), and suppression of material facts (Count VI).
South Central Agency has moved to Amend its Answer in response to the Amended
Complaint, and to include a counterclaim. Auto-Owners concedes that South Central Agency is
entitled to file an Answer. See Doc. #86. Although Auto-Owners disputes that the counterclaim
included in South Central Agency''s Motion is necessary, for reasons to be discussed, the Motion
to Amend is due to be GRANTED. An Answer having been filed, the court will address AutoOwners's alternative Motion for Judgment on the Pleadings. That motion is due to be DENIED
for reasons to be discussed.
II. STANDARD FOR MOTION FOR JUDGMENT ON THE PLEADINGS
Judgment on the pleadings is appropriate where there are no material facts in dispute and
the moving party is entitled to judgment as a matter of law. Mergens v. Dreyfoos, 166 F.3d 1114,
1116-17 (11th Cir.1999). The court must accept the facts alleged in the complaint as true and
view them in the light most favorable to the nonmoving party. Id. at 1117.
The facts alleged in the Amended Complaint, taken in a light most favorable to the nonmovant, are as follows:
The complaint is labeled the First Amended Complaint, but there was a First Amended
Complaint filed before the case was transferred to this court. See Doc. #11. Therefore, the court
will refer to the most recent complaint as the Amended Complaint.
Auto-Owners is a company that issues performance and payment bonds related to
construction projects. Auto-Owners was sued by Dick Corporation on a performance and
payment bond that Auto-Owners had issued to benefit Dick Corporation on behalf of S&S
Construction, one of Dick Corporations's subcontractors. The bonds were to cover a subcontract
entered into by S&S for work on a project at the Naval Air Station in Pensacola, Florida.
The Amended Complaint alleges that S&S procured the bond through South Central
Agency. The bond was issued in two parts and related to four subcontracts Dick Corporation had
with S&S. At the time South Central Agency requested the bond from Auto-Owners, S&S had
been unable to obtain a bond on two other subcontracts that required bonds, which put S&S in
default on those two subcontracts.
Auto-Owners alleges that South Central Agency was aware that S&S had failed to obtain
bonds on the two subcontracts, but did not disclose that default to Auto-Owners when the
application for a bond was submitted to Auto-Owners. Auto-Owners also states that South
Central Agency knew S&S was unable to pay its suppliers, but did not disclose this information
S&S became unable to meet its payroll, and the Dick Corporation took over paying S&S
employees. This was known to South Central Agency, but not disclosed to Auto-Owners.
Because it issued a bond to S&S, Auto-Owners has incurred expenses and will continue
to incur expenses.
As stated above, Dick Corporation brought claims against Auto-Owners in United States,
etc. v. Dick Corp., 3:08cv56/MCR/MD based on the performance and payment bond issued by
Auto-Owners to benefit Dick Corporation on behalf of S&S. Auto-Owners settled with Dick
Corporation, with a mediator determining the amount Auto-Owners had to pay on the bond.
Auto-Owners states that it learned of the South Central Agency's conduct during the
deposition of Shelby Gardner, the Dick Corporation employee in charge of the Naval Air Station
construction project, on October 20, 2009. Auto-Owners states that had it known that S&S was
in default on another subcontract, it would have refused to issue the bond.
South Central Agency contends that judgment is due to be granted on the pleadings as to
all of the claims in Auto-Owners' Amended Complaint because the claims are barred by a state
law voluntary payment rule, and as to the negligent misrepresentation, suppression, and breach of
fiduciary duty claims because those claims are barred by the applicable two-year statute of
A. Motion to Dismiss Based on Voluntary Payment
South Central Agency argues that all of Auto-Owners's claims in this case are barred by
the Alabama voluntary payment doctrine because it voluntarily paid a settlement to Dick
Corporation. See Mount Airy Ins. Co. v. Doe Law Firm, 668 So. 2d 534 (Ala. 1995). On the
face of the Amended Complaint, however, Auto-Owners seeks damages in addition to the
amount which was paid in settlement to Dick Corporation. See Doc. #79 at p. 2. Therefore,
judgment is not to be granted on that basis. To the extent that South Central Agency seeks
partial judgment only on the amount paid in settlement, Auto-Owners' attempted reliance on
matters outside of the pleadings in opposing South Central Agency's motion indicates to the
court, as argued by Auto-Owners, that this issue is one more properly decided in the context of a
Motion for Summary Judgment. Therefore, the court will deny the Motion for Judgment on the
Pleadings, but South Cental Agency will be free to again raise this defense, should it choose to
do so, in a properly-filed Motion for Summary Judgment after development of the facts in this
B. Motion to Dismiss Based on the Statute of Limitations
South Central Agency points to various facts alleged in the Amended Complaint, such as
notice to Auto-Owners of the default by S&S, and states that because these facts occurred in
2006 or 2007, the negligent misrepresentation, suppression, and fiduciary duty claims are barred
by the two-year statute of limitations.
Auto-Owners contends that South Central Agency misunderstands the factual allegations
of the Amended Complaint. Auto-Owners says that the notice of default by S&S on other
subcontracts may have alerted it to the need to investigate performance by S&S, but not the need
to investigate South Central Agency and its agents who procured the bonds for S&S. AutoOwners points out that the Amended Complaint alleges that Auto-Owners was not aware of
South Central Agency's conduct until the deposition of Dick Corporation employee Shelby
Gardner. See Doc. #79 at ¶ 6. Auto-Owners argues that this allegation as to when it acquired
knowledge of the claims against South Central Agency establishes tolling for the negligent
misrepresentation, and the suppression claims, so that the claims are not time-barred.2
The question of whether a plaintiff discovered or reasonably should have discovered
fraud for purposes of tolling a statute of limitations is generally a question for the trier of fact.
Auto-Owners also states that the fiduciary duty claims did not accrue until AutoOwners suffered damage and therefore are not time-barred. The court need not address this
argument at this point in the proceedings.
See Whitlock v. Jackson Nat'l Life Ins. Co., 32 F. Supp. 2d 1286, 1290 (M.D. Ala. 1998). An
exception to this rule exists in the “reasonable reliance” standard, which requires consideration of
the facts and circumstances surrounding the transaction. See Foremost Ins. Co. v. Parham, 693
So.2d 409, 421 (Ala. 1997). The same analysis appears to be applicable to fiduciary duty claims.
See, e.g., Davis v. Dorsey, 495 F. Supp. 2d 1162, 1173-74 (M.D. Ala. 2007).
South Central Agency states that the court should not rely on the allegation that AutoOwners learned of South Central Agency's conduct in 2009, because that is a legal conclusion,
not a statement of fact. South Central Agency states that the pled fact is actually a legal
conclusion because it omits all of the prior facts that Auto-Owners had clear notice of in 2007.
South Central Agency argues, therefore, that this allegation in the Amended Complaint is a legal
conclusion and does not save the claims from a judgment on the pleadings.
Auto-Owners' theory is that, whether or not it had a duty to inquire further into defaults
by S&S as early as 2007 for purposes of S&S's conduct, it had no reason to inquire into whether
it had been misled by South Central Agency as to S&S's status at that time. Auto-Owners has
alleged in the Amended Complaint that it was not until a deposition taken in 2009 that AutoOwners learned that South Central Agency had acted improperly in its conduct with AutoOwners. That allegation is an allegation of fact which could support equitable tolling of the
statute of limitations. Furthermore, Auto-Owners has sought to substantiate its position with
information outside of the pleadings. Rather than improperly consider that information in the
context of a Motion for Judgment on the Pleadings, however, the court concludes that the
application of tolling principles to the statute of limitations defense is one which is better
addressed upon further factual development. Therefore, based on the allegations of the
Amended Complaint, judgment is not due to be granted as to the negligent misrepresentation,
suppression, or fiduciary duty claims at this time. If South Central Agency raises the statute of
limitations issue again in a properly-filed Motion for Summary Judgment, the court will address
it in the context of the facts as developed at that time.
C. Motion to Amend to Add Counterclaim
As earlier stated, South Central Agency has sought to Amend its Answer and to add a
counterclaim. Auto-Owners concedes that the Amended Answer is due to be filed, but has
opposed the filing of the Counterclaim, citing to district court opinions outside of this circuit for
the proposition that counterclaims are unnecessary if they merely mirror the claim in the
South Central Agency responds that it seeks attorneys' fees should it prevail, and has
sought a declaration as to Auto-Owners's underwriting practices, in addition to the issues relied
upon by Auto-Owners.
The court finds no reason to deny the properly-filed Motion to Amend the Answer,
including the Counterclaim. See Fed. R. Civ. 15(a)(2) (stating "The court should freely give
leave when justice so requires."). The Motion to Amend is, therefore, due to be GRANTED.
For the reasons discussed, it is hereby ORDERED as follows:
1. Defendants Tomberlin, Young & Folmar Insurance Co. d/b/a South Central Agency,
John S. Tomberlin and Harold W. Young's Motion to Dismiss, or in the Alternative, for
Judgment on the Pleadings (Doc. #80) are DENIED, without prejudice to the issues raised in the
motion being raised again in a properly-filed Motion for Summary Judgment.
2. Defendants Tomberlin, Young & Folmar Insurance Co. d/b/a South Central Agency,
John S. Tomberlin and Harold W. Young's Motion to Amend Answer (Doc. #83) is GRANTED
and the Defendants are given leave to file the Answer and Counterclaim appended to their
DONE this 4th day of November, 2011.
/s/ W. Harold Albritton
W. HAROLD ALBRITTON
SENIOR UNITED STATES DISTRICT JUDGE
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