Companion Property and Casualty Insurance Company v. Pro Tech Metal Inc et al

Filing 26

MEMORANDUM OPINION Signed by Chief Judge Karon O Bowdre on 8/5/14. (SAC )

FILED
2014 Aug-05 PM 03:04
U.S. DISTRICT COURT
N.D. OF ALABAMA

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ALABAMA
MIDDLE DIVISION
COMPANION PROPERTY &
CASUALTY INSURANCE COMPANY
Plaintiff,
v.
PRO-TECH METAL, INC., DEWAYNE
GURLEY and DONNA GURLEY,
Individually, Separately, and Severally,
Defendants.

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CV-12-BE-03670-M

MEMORANDUM OPINION
This indemnity contract dispute based on federal diversity jurisdiction comes before the
court on the Plaintiff’s “Motion for Summary Judgment” (doc. 19) and the Plaintiff’s “Motion to
Strike Affidavit of DeWayne Gurley” (doc. 24). The motion for summary judgment has received
thorough briefing (see docs. 20, 22, and 25), and Defendants filed no response to the motion to
strike. For the reasons stated in this Memorandum Opinion, the court FINDS that the motion to
strike is due to be DENIED and that the motion for summary judgment is due to be GRANTED.
I. MOTION TO STRIKE
This dispute arises from an indemnity agreement connected with bonds that the Plaintiff
issued on Defendant’s two construction projects at Gadsden State Community College.
Defendant does not deny that it owes indemnity payments to Plaintiff but argues that the Plaintiff
failed to mitigate the damages by retaining a construction consultant from Mobile, Alabama

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instead of retaining a less expensive one closer to the Gadsden job site.
Plaintiff directs the Motion to Strike at paragraphs 16 and 17 of Defendant Dewayne
Gurley’s affidavit. The Plaintiff objects to Gurley’s statement in paragraph 16 that “Pro-Tech
Metals, Inc.” contacted construction consultant John Payne of Greyson Construction and obtained
a specified price for supervision of the Gadsden State project to completion. The Plaintiff argues
that Gurley has not established that he had personal knowledge of the contact with Payne and that
he is otherwise competent to testify regarding that contact.
The Plaintiff also objects to Gurley’s statement in paragraph 17 of his affidavit that several
other qualified construction consultants are available in North Alabama to provide consulting
work “at a cost less than what the Plaintiff’s bonding company eventually paid in this case.”
(Doc. 23, at 8). The Plaintiff argues that Gurley does not provide facts showing that he is
competent to make that statement and that the statement is not sheer speculation.
However, Gurley specified that the statements in the affidavit were based on personal
knowledge, and he holds the position of President of Pro-Tech with experience in the construction
industry. Accordingly, the court has no reason to doubt that he has personal knowledge of the
facts asserted in those paragraphs, that he is competent to make the statements of fact, and that the
facts in the affidavit can be presented in a form that would be admissible in evidence at trial. See
Fed. R. Civ. P. 56(c)(4).
Therefore, the court FINDS that the motion to strike is due to be DENIED as to both
paragraphs. The court will enter an order to that effect. However, the denial of the motion to
strike does not mean that all of the statements in paragraphs 16 and 17 of Gurley’s affidavit are
material.
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The court notes that, in Defendants’ opposition brief, they do not properly dispute the
Plaintiff’s Statement of Facts showing payment of various sums in connection with the projects at
issue in this case. This court’s Uniform Initial Order (doc. 8 at 9 & attaching App. II), Scheduling
Order (doc. 11 at 5), and Order Setting Briefing Schedule on the motion for summary judgment
(doc. 21) all require compliance with Appendix II, which sets out the appropriate means of
disputing a movant’s facts: by responding “to the moving party’s claimed undisputed facts [ ] in
separately numbered paragraphs that coincide with those of the moving party’s claimed
undisputed facts. Any statements of fact that are disputed by the non-moving party must be
followed by a specific reference to those portions of the evidentiary record upon which the dispute
is based.” See www.alnd.uscourts.gov under the court information for Bowdre. Here,
Defendants’ opposition brief’s fact section does not attempt to respond to the paragraphs in
Plaintiff’s Statement of Facts showing the Plaintiff’s payments relating to the contracts at issue:
paragraphs 23-30. Therefore, the court FINDS that the the information in those paragraphs is
deemed to be admitted, as specified in Appendix II regarding the Opposing Party’s Statement of
Facts: “[a]ll material facts set forth in the statement required of the moving party will be deemed
to be admitted for summary judgment purposes unless controverted by the response of the party
opposing summary judgment.”
The court further notes that Defendant’s Additional Disputed Facts do not properly dispute
payment because they do not comply with Appendix II, and, in any event, they are not supported
by evidence countering Carroll’s affidavit testifying to payment. In addition, the court notes that
the indemnity contract provides that “[i]n any claim or suit hereunder, an itemized statement of
aforesaid loss and expense, sworn to by an officer or agent of Surety, or the vouchers or other
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evidences of disbursement by Surety, shall be prima facie evidence of the fact and extent of the
liability hereunder of Indemnitors.” (Doc. 20-4, at 7-8). Carroll’s affidavit represents an itemized
statement of loss and expense, sworn to by Companion’s agent, and complies with the contract
provision.
For all of these reasons, the court FINDS that the Defendants have admitted the Plaintiff’s
Statement of Facts relating to payments made under the indemnity contract, and the facts stated
below will reflect that admission.
II. FACTS
On November 17, 2009, Defendant Pro-Tech Metal, Inc. entered into two contracts with
Gadsden State Community College: a contract for the construction of a new student center in the
amount of $689,999.00; and a contract for the renovation of a shop building for $53,000.00.
On the same day as the execution of the contracts, the Plaintiff, Companion Property and
Casualty Insurance Company, issued payment and performance bonds for the full amount of the
contracts on those projects: bonds numbered 7068 on the student center, and bonds numbered
7069 on the shop building project. All of the bonds name Pro-Tech as the principal, Companion
as the surety, and Alabama Public School and College Authority and Gadsden State Community
College as the owners.
The performance bonds both include the following relevant language:
4. The Surety’s obligation under this Bond becomes effective after the
Contractor fails to satisfy a Notice to Cure and the Owner:
(a) gives the Contractor and the Surety ... a written Notice of Termination
declaring the Contractor to be in default under the Contract and stating that the
Contractor’s right to complete the Work, or a designated portion of the Work,
shall terminate seven days after the Contractor’s receipt of the notice; and
(b) gives the Surety a written demand that, upon the effective date of the Notice
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of Termination, the Surety promptly fulfill its obligation under this Bond.
5. In the presence of the conditions described in Paragraph 4, the Surety shall,
at its expense:
(a) On the effective date of the Notice of Termination, take charge of the Work
and be responsible for the safety, security, and protection of the Work . . . .
(Doc. 20-4, at 13 & 19).
Previously, on April 21, 2009, all Defendants—Pro-Tech; Dewayne Gurley, its president;
and Donna Gurley, Dewayne Gurley’s wife—had executed an indemnity agreement in favor of
Companion, the surety with Pro-Tech as the Principal. Dewayne Gurley signed it in his capacity
as President of Pro-Tech as well as in his individual capacity, and Donna Gurley signed it in her
individual capacity. No dispute exists that Dewayne Gurley was authorized to sign the agreement
as president and bind Pro-Tech.
That indemnity agreement provides in relevant part as follows:
1. DEFINITIONS
The following definitions apply in this Agreement:
Bond - Any contractual obligation undertaken by the Surety or Principal as principal,
joint venturer or in any other capacity, before or after the date of this Agreement, and
any renewal or extension of said obligation.
***
2. INDEMNITY
The Indemnitors agree and bind themselves, their heirs, executors, administrators,
successors and assigns, jointly and severally, to indemnify and save harmless Surety
from and against any and all liability, loss, costs, damages or expenses of whatever
nature or kind and arising out of or in any way connected with such Bonds, including
but not limited to fees of attorneys and other expenses, costs and fees of investigation,
adjustment of claims, procuring or attempting to procure the discharge of such bonds
and attempting to recover losses or expenses from Indemnitors or third parties, whether
the Surety shall have paid or incurred same as aforesaid.
Surety shall have the right in its sole discretion to determine whether any suits or claims
shall be paid, compromised, defended, prosecuted or appealed and to pay out such sums
as it deems necessary to accomplish any of those purposes and its determination as to
whether such suit or claims should be settled or defended shall be binding and
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conclusive on Indemnitors .... In any claim or suit hereunder, an itemized statement of
aforesaid loss and expense, sworn to by an officer or agent of Surety, or the vouchers or
other evidences of disbursement by Surety, shall be prima facie evidence of the fact and
extent of the liability hereunder of Indemnitors.
If the surety has cause to enforce the terms of this indemnity agreement by filing suit
against Indemnitors to recover sums due under this Agreement, it is understood by the
Principal and Indemnitors that the Surety may recover its further expenses of such
litigation, accrued interest and including 25% of such sums as attorney’s fees. Any debt
accrued by the surety, on behalf of Principal and Indemnitors will accrue interest of
12% per annum.
3. DEFAULT
This Agreement shall be in Default upon the breach by any Indemnitor of any provision
hereof or upon the breach by Principal of the provisions of any Bond or Contract of the
application of any Bond, including but not limited to, any of the following events of
Default:
A. Principal breaches, abandons or repudiates any Contract.
B. Any Obligee under any Bond declares Principal to be in Default.
C. Principals fails to pay for bond premium, labor or materials when such payment is
due.
(Doc. 20-4, at 7-8).
Companion first became aware of Pro-Tech’s difficulties on both Gadsden State
projects through receipt of two notices to cure from the architect dated April 26, 2010, one
for each project.
On May 7, 2010, Gadsden State sent a letter via fax and certified mail to Pro-Tech and
Companion, providing official notice of termination of the student center project, declaring that
Pro-Tech was in default, and demanding that Companion fulfill its performance bond
obligations. On May 14, 2010, Companion sent a letter to Gadsden State via fax, email, and
regular mail, stating that Pro-Tech’s termination was wrongful, but that, subject to a reservation
of its rights, it intended to fulfill its performance bond obligations by hiring Pro-Tech to finish
the project. From that time through mid-June of 2010, Companion continued to negotiate with
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Gadsden State to complete the project using Pro-Tech, and as part of the negotiations,
Companion proposed to hire a scheduling expert. Gadsden State objected to the use of Pro-Tech
as the surety’s completion contractor unless the surety submitted a complete plan for
performance providing daily, on-site project management and supervision as well as project
reporting to Gadsden State with supplementation of Pro-Tech’s forces as necessary to meet the
project deadline.
In light of Gadsden State’s concern, Defendants offered the name of John Payne of
Grayson Construction, a construction consultant in Birmingham, Alabama, who had quoted a
price to Pro Tech of approximately $30,000.00 to supervise the completion of the project.
On June 22, 2010, Companion hired Robert C. Gentle Construction Consultants located
in Mobile, Alabama, to provide daily on-site management and supervision of the job to keep it on
schedule.
On July 1, 2010, Companion advised Pro-Tech that addressing Gadsden’s State’s concern
regarding project management was in the interests of both the principal and surety, that
Companion intended to ensure the existence of daily on-site management and supervision at the
student center project, and that Defendants ultimately would be responsible for those costs.
Defendants did not voice any objection to Companion about the surety’s planned course of action
to complete the project. Further, although Defendants had offered the name of John Payne as
construction consultant, the facts submitted in the parties’ briefs do not reflect that Defendants
objected while the Gadsden State project was on-going to the selection of Gentle because of
Gentle’s location and the costs associated with managing out-of-town jobs. Indeed, those facts
do not reflect that, during the pendency of the project, Defendants communicated to Companion
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any objection at all to the selection of Gentle and interim bills.
On September 7, 2010, Companion sent Pro-Tech an email advising it that Gentle’s total
fees on the student center project were approximately $56,000.00 as of that date. Pro-Tech did
not respond.
Meanwhile, on the second project, the Shop Renovation, Gentle Construction Consultants
received an email on November 23, 2010 from the project architect advising that substantial
completion of the project occurred on July 29, 2010, that the architect had been requesting closeout documents from Pro-Tech since that substantial completion date without response, and that
the vendors were anxious to receive final payment; in light of that information, the architect
asked Gentle to obtain the close-out documents, including a draft of the final pay request.
On January 4, 2011, Companion notified Pro-Tech via email that the surety had paid
$110,630.00 to Gentle in consultant fees and $75,098.00 in completion fees, presumably
referring to the student center project. Companion asked Pro-Tech to provide an interim
repayment schedule and corporate and individual financial statements, requesting a response by
January 7, 2011.

In the same email, Companion also stated its understanding that Pro-Tech had

not completed the shop renovation project, its hope that Pro-Tech would complete it, and its
request that Pro-Tech advise Companion about its intentions regarding the shop renovation
project. Pro-Tech did not respond to the email.
The next day, January 5, 2011, Companion’s counsel sent an email to Defendants asking
for all materials necessary to close out both the student center and shop renovation projects. The
attorney acknowledged that “there has been no proclaimed default by the Owner on the Shop
Building project,” but nevertheless stated that Companion “is continuing to receive demands
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from the Owner that the [shop renovation] project be closed out.” He noted Defendants’ failure
to provide close-out documents on both projects after repeated requests, demanded that the
Defendants provide specified close-out documents, and warned Defendants of the likelihood that
the Owner would declare Pro-Tech in default on the shop renovation project. (Doc. 20-6, at 9 ¶
34, & at 62-63 - Ex. BB).
On January 18, 2011, Companion wrote to Defendants via regular mail, certified mail,
and email, attaching a list of projected accounts payable totaling $67,270.00, asking them to
confirm or deny the validity of those charges, and projecting a loss on both projects at
$277,697.00, excluding attorney fees. In this letter, Companion again requested that Defendants
prepare an interim repayment plan. The Defendants did not respond to the requests in this letter.
After the November 28, 2011 year-end inspection of the student center project, Gadsden
State wrote a letter to Companion dated November 29, 2011, claiming that it had incurred
$74,577.39 in additional legal/architectural and internal project costs, and demanding that
Companion pay those additional costs.
Companion denied its liability for those additional costs, but began negotiations to close
out the project.
On February 1, 2012, via email and registered mail, Gadsden State requested a meeting
with Companion to attempt to resolve the claim for additional costs and to achieve project close
out regarding the student center project. Gadsden State and Companion scheduled the meeting
for February 16, 2012, and Companion notified Pro-Tech of the meeting. Despite Pro-Tech’s
attorney’s request to reschedule the meeting, and Companion’s attempt to reschedule at that
request, Gadsden State, its attorney and architect refused to change the date of the meeting.
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Accordingly, the meeting occurred on that date with representatives for Companion and Gadsden
State, including its attorney and architect, and a settlement was reached among those entities;
however, no one appeared at that meeting for Defendants. The settlement provided that
Companion would pay Gadsden State $40,000.00 to close out the student center project, would
satisfy Gadsden State’s claims for additional fees and expenses, and Gadsden State would release
Companion from any liability pursuant to bond 007068. Consistent with this settlement,
Companion paid $40,000.00 to Gadsden State to settle the claim and close out the student center
project.
In addition to the $40,000.00 paid to Gadsden State on the student center project,
Companion paid a total of $139,016.27 to complete performance of the two Gadsden State
projects1 and satisfy outstanding payment bond claims. It also paid $159,592.49 to Robert C.
Gentle Construction Consultants in connection with the completion of those two projects.
Finally, it paid $35,886.00 in attorney’s fees and expenses through July 31, 2013 for legal
representation in connection with completing the two projects and settling Gadsden State’s
claims. After crediting all contract funds received, the net loss to Companion on the projects is
$374,373.78.

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Although Carroll’s affidavit indicates that these payments involved both Gadsden State
projects, the paperwork attached to the affidavit involving those payments refers to the student
center project and/or bond 7068, which was the bond for the student center. The payment of
$1,500.00 to Glenn Bentley Flooring could be a payment on the shop renovation project; the
paperwork connected to that payment references bond 7068, the bond for the student center, but
at least one document regarding the $1,500.00 payment identified the job as shop renovation.
Because both projects were located at Gadsden State and bond 7068 was the larger of the two,
Companion may have put notations for bond 7068 on all Gadsden State payments and failed to
distinguish the payments made pursuant to bond 7069 for the Gadsden State shop renovation
project.
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III. DISCUSSION
The Complaint in this case contains three Counts: Count I - a claim for common law
indemnity based on Companion’s payment; Count II - a claim for statutory indemnity brought
pursuant to Alabama Code § § 8-3-2 and 8-3-5; and Count III - a claim for contractual indemnity
in the amount of $347,051.24, plus interest, costs, and attorney’s fees, brought pursuant to the
written indemnity agreement between Companion and Defendant. Companion’s Motion for
Summary Judgment is directed at the claim for contractual indemnity in Count III with the
amount of damages updated through July 31, 2013 so that the amount it claims to be due under
the contract is $374,373.78. The motion does not address the other indemnity claims presented
in Counts I and II.
The undisputed facts show that Dewayne Gurley signed, both in his individual capacity
and as president of Pro-Tech, and that his wife signed individually an indemnity agreement with
Companion. In this agreement, they promised to indemnify Companion from “any and all
liability, loss, damages or expenses of whatever nature or kind and arising out of or in any way
connected with such Bonds, including but not limited to fees of attorneys and other expenses,
costs and fees ....” (Doc. 20-4, at 7). The undisputed facts further show that Gadsden State
declared Pro-Tech to be in default on the student center project.
As to the shop renovation project, the parties have pointed the court to no evidence
reflecting that Gadsden State formally declared that project in default. However, the evidence
does reflect that, in November of 2010, Gadsden State requested help from Gentle, Companion’s
consultant, in closing the shop renovation project as well, communicating to Gentle that the
project had reached substantial completion four months before but that Pro-Tech had ignored for
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four months the architect’s requests for close-out documents and that not all vendors had
received final payment. Regardless of whether a formal default declaration existed for the shop
renovation project, Gadsden State asked for help from Companion as surety on the project
because Pro-Tech was not paying vendors, and Companion provided that help. The court finds
that any payments that Companion made under that project pursuant to Gadsden State’s request
fall within the broad language of the indemnity agreement.
Having determined that Companion’s payments under both projects fall within the
indemnity agreement, the court must next determine the amount Defendants owe under the
indemnity agreement. The task is not arduous; Companion’s brief sets out the totals paid on both
projects and Defendants admitted those payments, as discussed above. The Defendants did not
effectively dispute the payments made, but merely argued that Companion should have mitigated
the loss by hiring a local consultant instead of Gentle, a consultant with headquarters in Mobile.
However, the indemnity agreement itself contained no provision expressly requiring the
mitigation of damages or the use of local companies to reduce costs; rather, the indemnity
language requires Defendants to hold Companion harmless from “any and all ... expenses of
whatever nature or kind ... in any way connected with such Bonds.” (Doc. 20-4, at 7-8). To the
extent, if any, that Companion had an arguable extracontractual duty to mitigate costs, the court
nevertheless knows of no authority requiring such mitigation under these facts and
circumstances. While the facts reflect that Defendants had previously proposed a consultant who
quoted a lower price for supervising the project, the facts do not reflect that Defendants objected
to the hiring of Gentle, and Defendants admit that they did not object to Gentle’s fees and
expenses when Companion sent them interim fee statements and requests for indemnity. Under
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these facts, Defendants have not effectively raised a jury issue supporting their argument that
Companion had a duty to mitigate damages and failed to do so.
Accordingly, the court FINDS that the amount due to Companion from Defendants under
the indemnity agreement as of July 31, 2013 is $374,373.78.
Therefore, the court FINDS that Companion’s motion for summary judgment as to the
contractual indemnity claims in Count III is due to be GRANTED, and FINDS that SUMMARY
JUDGMENT is due to be ENTERED on that claim in the amount of $374,373.78, plus costs and
expenses incurred since July 31, 2013, as well as interest at 12% per annum and attorney’s fees at
25% of the sum due, as specified in the indemnity agreement.
The court will enter a separate Order consistent with this Memorandum Opinion.
Dated this 5th day of August, 2014.

____________________________________
KARON OWEN BOWDRE
CHIEF UNITED STATES DISTRICT JUDGE

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