THE GUARANTEE COMPANY OF NORTH AMERICA v. GARY'S GRADING & PIPELINE CO INC et al
Filing
55
ORDER granting in part and denying in part 42 Motion for Summary Judgment Ordered by US DISTRICT JUDGE CLAY D LAND on 3/25/2016 (nmr)
IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF GEORGIA
ATHENS DIVISION
THE GUARANTEE COMPANY OF NORTH
AMERICA,
*
*
Plaintiff,
*
vs.
CASE NO. 3:15-CV-83 (CDL)
*
GARY’S GRADING & PIPELINE CO.,
INC., et al.,
*
Defendants.
*
O R D E R
This action arises from a construction company’s failure to
complete various projects which required its surety to step in
and make payments under its payment and performance bonds.
surety,
The
Guarantee
Company
of
North
America
That
(“Guarantee
Co.”), sues the construction company, Gary’s Grading & Pipeline
Co., Inc. (“Gary’s Grading”), along with other related entities,
CGP Equipment Company, Inc. (“CGP Equipment”), Bold Springs, LLC
(“Bold Springs”), Pine Plantation, LLC (“Pine Plantation”), and
individuals, Gary Opolka and Christopher Opolka.
claims
that
Gary
Opolka
and
Christopher
Guarantee Co.
Opolka
signed
an
Indemnity Agreement to repay Guarantee Co. for any payments it
made on the surety bonds.
Guarantee Co. also seeks specific
performance
in
requires
of
the
a
provision
indemnitors
to
the
Indemnity
provide
Agreement
additional
that
collateral
security under the circumstances presented here.
Defendants,
Gary’s
Grading,
CGP
Equipment
and
Three of the
Bold
Springs,
never answered Guarantee Co.’s complaint and are therefore in
default.
the
And Christopher Opolka has filed for protection under
bankruptcy
laws,
stayed as to him.
and
thus
this
action
is
automatically
Guarantee Co. filed a motion for summary
judgment against the defaulting Defendants, Gary’s Grading, CGP
Equipment, and Bold Springs, and against Pine Plantation, which
contends
that
it
is
not
bound
by
the
Indemnity
Agreement
(collectively the Court refers to Gary’s Grading, CGP Equipment,
Bold Springs, and Pine Plantation as “Defendants”).1
The parties
agree that a genuine factual dispute exists as to the claims
against Gary Opolka, and therefore, Guarantee Co. does not seek
summary judgment on its claims against him.
For the following reasons, the Court grants in part and
denies in part Guarantee Co.’s motion (ECF No. 42), finding that
(1) Defendants breached the Indemnity Agreement and are liable
1
To be precise, Guarantee Co. should be seeking a default judgment,
not summary judgment, as to the defaulting Defendants, and therefore,
the Court treats Guarantee Co.’s motion for summary judgment against
the defaulting Defendants as a motion for default judgment. Guarantee
Co.’s factual allegations against the defaulting Defendants are deemed
admitted due to their failure to answer the complaint.
Thus, their
liability is already established.
Since the damages are not
liquidated, however, Guarantee Co. must prove those damages with
reasonable certainty to the Court’s satisfaction. While this standard
is different from the summary judgment standard that Guarantee Co.
must satisfy to obtain judgment against Pine Plantation, which is not
in default, the weakness in Guarantee Co.’s damages evidence, as
described in today’s Order, applies equally to Guarantee Co.’s claims
against all Defendants.
2
for any damages caused by the breach; (2) Guarantee Co. failed
to establish the amount of its damages as a matter of law; and
(3) Defendants
are
required
to
provide
additional
collateral
security in the amount of $1,133,371.99.
STANDARDS
Default
judgment
is
appropriate
“[w]hen
a
party
against
whom a judgment for affirmative relief is sought has failed to
plead or otherwise defend,” Fed. R. Civ. P. 55(a), and “there is
‘a sufficient basis in the [record] for the judgment entered.’”
Surtain v. Hamlin Terrace Found., 789 F.3d 1239, 1245 (11th Cir.
2015) (per curiam) (quoting Nishimatsu Constr. Co. v. Houston
Nat’l
Bank,
515
F.2d
1200,
1206
(5th
Cir.
1975)).
“[A]
defaulted defendant is deemed to admit the plaintiff’s wellpleaded allegations of fact . . . .”
Id. (quoting Cotton v.
Mass. Mut. Life Ins. Co., 402 F.3d 1267, 1278 (11th Cir. 2005).
Summary judgment may be granted only “if the movant shows
that there is no genuine dispute as to any material fact and the
movant is entitled to judgment as a matter of law.”
Civ. P. 56(a).
In determining whether a
genuine
Fed. R.
dispute of
material fact exists to defeat a motion for summary judgment,
the evidence is viewed in the light most favorable to the party
opposing summary judgment, drawing all justifiable inferences in
the opposing party’s favor.
477 U.S. 242, 255 (1986).
Anderson v. Liberty Lobby, Inc.,
A fact is material if it is relevant
3
or necessary to the outcome of the suit.
Id. at 248.
A factual
dispute is genuine if the evidence would allow a reasonable jury
to return a verdict for the nonmoving party.
Id.
FACTUAL BACKGROUND
When viewed in the light most favorable to Pine Plantation,
the facts are as follows:
I.
The Parties
Plaintiff Guarantee Co. is a Michigan surety company that
issues payment and performance bonds on construction projects.
At times relevant to this action, Gary’s Grading was a Georgia
construction company primarily operated by Christopher Opolka.
Defs.’ Resp. in Opp’n to Prelim. Inj. Attach. 2, Gary Opolka
Aff.
I
¶ 3,
Oct.
28,
2015,
ECF
No.
27-2.
Defendant
Pine
Plantation, a Georgia limited liability company, was co-owned
and co-managed by Christopher Opolka and his two brothers, Gary
Opolka and Peter Opolka, Jr.
Id. ¶¶ 4 & 5; Def.’s Surreply in
Opp’n to Pl.’s Mot. for Summ. J. Attach. 1, Peter Opolka, Jr.
Aff. ¶¶ 2 & 3, ECF No. 53-1.
Defendants CGP Equipment and Bold
Springs are also Georgia entities.
The Pine Plantation Operating Agreement that governs the
division of authority between the brothers provides:
At any time when there is more than one Manager, no
one Manager may take any action permitted to be taken
by the Managers without agreement of the other Manager
or Managers, or unless other approval requirements of
4
the Managers are expressly set forth elsewhere in this
Operating Agreement or the Georgia Act.
Pl.’s
Mot.
for
Summ.
J.
Ex.
C,
Operating
Agreement
art.
V
§ 5.01, ECF No. 42-5.
II.
The Gary’s Grading Bonds
In 2012, Guarantee Co. contracted with Gary’s Grading to
provide payment and performance bonds for several construction
projects in Georgia.
In exchange for the Gary’s Grading bonds,
Christopher Opolka signed a General Agreement of Indemnification
(“Indemnity Agreement”) in favor of Guarantee Co. on behalf of
himself, CGP Equipment, Bold Springs and Pine Plantation.
Pl.’s
Mot. for Prelim. Inj. Ex. 1, Indemnity Agreement 6-7, ECF No.
22-1.
Gary Opolka’s signature also appears on the Indemnity
Agreement
on
behalf
of
himself
and
Gary’s
Grading.
Id.
According to Gary Opolka, however, he did not sign the Agreement
and he did not give Christopher Opolka permission to sign the
Agreement on behalf of their co-managed entity Pine Plantation.
Gary
Opolka
Aff.
I
¶¶ 8
& 9.
Gary
Opolka
believes
Christopher Opolka forged his signature on the Agreement.
that
Id.
John Redding, the Guarantee Co. employee responsible for
issuing the Gary’s Grading bonds in 2012, believed that all the
signatures on the Indemnity Agreement were genuine.
Redding
states that he “had no reason to distrust the authenticity of
the notarized signature[] of Gary Opolka.”
5
Pl.’s Reply in Supp.
of Summ. J. Ex. A, Redding Aff. ¶ 12, ECF No. 50-1.
Redding
also had no concerns “as to Chris Opolka’s authority to sign the
Indemnity Agreement on behalf of Pine Plantation.”
Id. at ¶ 11.
III. Terms of the Indemnity Agreement
The
Indemnity
Agreement provides the following indemnity
provision:
The UNDERSIGNED shall indemnify [Guarantee Co.] and
hold it harmless from and against all claims, damages,
expenses, losses, costs, professional and consulting
fees, disbursements, interests and expenses of every
nature (including premiums and fees due for the
issuance and continuance of any BOND or BONDS) which
[Guarantee Co.] may sustain, incur or become liable
for by reason of having executed or procured the
execution of any BOND or BONDS, or by making any
investigation of any matter concerning any BOND or
BONDS, or by prosecuting or defending any action in
connection with any BOND or BONDS, or by recovering
any salvage or enforcing this Agreement.
Indemnity Agreement ¶ 4.
The Indemnity Agreement also gives
Guarantee Co. the right to settle any claims against the bonds:
[Guarantee Co.] may settle or compromise any claim,
liability, demand, suit or judgment upon any BOND or
BONDS executed or procured by it, and any such
settlement or compromise shall be binding upon the
UNDERSIGNED.
Vouchers or other evidence of payments
made by [Guarantee Co.] shall be prima facie evidence
of the fact and amount of the liability of the
UNDERSIGNED to [Guarantee Co.].
Id. ¶ 7.
And it contains a collateral security provision:
Upon [Guarantee Co.]’s reasonable belief that it may
incur a loss on a BOND or BONDS, [Guarantee Co.] may
demand and, upon [Guarantee Co.]’s demand,
the
UNDERSIGNED shall deliver over to [Guarantee Co.]
collateral security acceptable to [Guarantee Co.] to
cover any contingent losses and any subsequent
increase thereof. {Guarantee Co.] shall return to the
6
UNDERSIGNED any unused portion of collateral upon
termination of the liability of [Guarantee Co.] on all
BONDS and satisfaction by the UNDERSIGNED of [their]
obligations to [Guarantee Co.] under this Agreement.
Id. ¶ 5.
IV.
Guarantee Co.’s Damages and Claims
Several
of
the
subcontractors
and
suppliers
for
Gary’s
Grading submitted claims to Guarantee Co. against the Gary’s
Grading bonds.
Christina Zabek is the Guarantee Co. employee
assigned to manage the Gary’s Grading bond claims.
She states
that to date Guarantee Co. has paid $2,865,073.92 in settlements
on the bond claims.
Pl.’s Mot. for Summ. J. Ex. A, Zabek Aff.
¶ 13, ECF No. 42-2.
Zabek bases this calculation on Guarantee
Co.’s records, which Guarantee Co. attaches as Exhibit 4 to
Zabek’s affidavit.
Zabek claims that
Exhibit 4
“comes
from
business records maintained by or on behalf of [Guarantee Co.],
to
memorialize
payments
that
[Guarantee
Co.]
made,”
and
“contains copies of information kept in the course of regularly
conducted business activity by or on behalf of [Guarantee Co.],
and it is the regular practice to make these records.”
Id.
¶¶ 14 & 15.
Zabek also states that Guarantee Co.’s books, accounts, and
records
indicate
$1,133,371.99.
Guarantee
Co.
that
Id.
its
potential
¶ 16.
demanded
that
future
loss
exposure
is
Since receiving the bond claims,
Defendants
7
indemnify
it
for
its
losses and post collateral pursuant to the Indemnity Agreement.
Defendants
have
failed
to
indemnify
Guarantee
Co.
or
post
collateral.
Guarantee Co. filed this action against Defendants based on
diversity
breach
jurisdiction,
of
requiring
the
seeking
indemnity
Defendants
to
$2,865,073.92
provision
post
and
in
damages
specific
$1,133,371.99
breach of the collateral security provision.
in
for
performance
collateral
for
Guarantee Co. also
asks the Court to maintain jurisdiction over the case until all
claims against the Gary’s Grading bonds are settled and to order
additional damages if appropriate.
DISCUSSION
Three of the Defendants, Gary’s Grading, CGP Equipment and
Bold
Springs,
are
in
default.
Guarantee
Co.’s
factual
allegations establish that the defaulting Defendants breached
the Indemnity Agreement as a matter of law.
issue
that
damages.
support
remains
as
to
their
Therefore, the only
liability
is
the
amount
of
Guarantee Co. relies on the same damages evidence in
of
Defendants
its
that
default
it
relies
judgment
on
in
against
support
summary judgment against Pine Plantation.
these
of
its
defaulting
motion
for
Therefore, the Court
will first evaluate Pine Plantation’s liability.
The Court will
then consider Guarantee Co.’s remedies against all Defendants.
8
I.
Summary Judgment on Pine Plantation’s Liability
On
the
issue
of
Pine
Plantation’s
question is what law to apply.
is
based
on
diversity,
the
liability,
the
first
When subject matter jurisdiction
Court
applies
the
forum
state’s
choice-of-law rules to determine which law governs the action.
Bituminous Cas. Corp. v. Advanced Adhesive Tech., Inc., 73 F.3d
335, 337 (11th Cir. 1996).
Under Georgia’s choice-of-law rules,
“[contracts] are to be governed as to their nature, validity and
interpretation
made . . . .”
311
S.E.2d
by
the
law
of
the
place
where
they
are
Gen. Tel. Co. of Se. v. Trimm, 252 Ga. 95, 95,
460,
461
(1984)
(first
alteration
in
original)
(quoting Tillman v. Gibson, 44 Ga. App. 440, 442-43, 161 S.E.2d
630,
632
(1931)).
Here,
there
is
no
indication
that
the
Indemnity Agreement was made in a state other than Georgia, “and
the parties seem to agree that substantive Georgia law applies
because almost all of the cases cited in their briefs discuss
Georgia law.”
OneBeacon Am. Ins. Co. v. Catholic Diocese of
Savannah, 477 F. App’x 665, 669 (11th Cir. 2012) (per curiam).
Accordingly, the Court applies Georgia law.
A.
Pine Plantation is Bound by the Indemnity Agreement
It is well established under Georgia law that “an act done
by
an
agent
in
principal . . . .”
S.E.2d
288,
294
excess
of
his
authority
does
not
bind
the
Gaulding v. Courts, 90 Ga. App. 472, 480, 83
(1954).
Here,
9
Pine
Plantation
argues
that
Christopher
Indemnity
Opolka
exceeded
Agreement
Plantation
is
on
not
its
bound
his
authority
behalf
by
the
and,
by
signing
therefore,
Agreement.
the
that
Pine
Guarantee
Co.
responds that Christopher Opolka had actual authority to bind
Pine Plantation to the Indemnity Agreement, and even if he did
not
have
actual
authority,
he
certainly
acted
with
apparent
authority.
The Pine Plantation Operating Agreement provides that one
co-manager may not unilaterally bind Pine Plantation “without
agreement of the other Manager or Managers,
or
unless
other
approval requirements of the Managers are expressly set forth
elsewhere
in
this
Operating
Operating
Agreement
art.
V
Agreement
§ 5.01
or the
(emphasis
Georgia
Act.”
added).
Pine
Plantation ignores the phrase beginning with “unless” and argues
that
Pine
concur.
the
Plantation
which
“unless . . . other
in . . . the
refers
only
be
bound
if
all
the
managers
This interpretation disregards the plain language of
agreement
forth
can
to
the
provides
approval
Georgia
Georgia
that
all
managers
requirements
Act.”
Limited
“The
Liability
are
must
agree,
expressly
Georgia
Act”
Company
set
clearly
Act.
Id.
art. I, at 3 (defining “Georgia Act” as the “Georgia Limited
Liability
manager
Company
of
an
LLC
Act”).
is
an
And
that
agent
of
exception if two requirements are met:
10
Act
provides
the
LLC
with
that
a
every
limited
Every manager is an agent of the limited liability
company for the purpose of its business and affairs,
and the act of any manager, including, but not limited
to, the execution in the name of the limited liability
company of any instrument for apparently carrying on
in the usual way the business and affairs of the
limited liability company of which he or she is a
manager, binds the limited liability company, unless
the manager so acting has in fact no authority to act
for the limited liability company in the particular
matter, and the person with whom he or she is dealing
has knowledge of the fact that the manager has no such
authority.
O.C.G.A. § 14-11-301(b)(2).
The Act also provides:
No act of a manager or member in contravention of a
restriction on authority shall bind the limited
liability company to persons having knowledge of the
restriction.
O.C.G.A. § 14-11-301(d).
Here, there is no dispute that Christopher Opolka was a
manager of Pine Plantation.
Nor does Pine Plantation dispute
that Christopher Opolka was “apparently carrying on in the usual
way
the
signed
business
the
and
Indemnity
affairs
of
[Pine
Agreement.
Plantation]”
O.C.G.A.
§
when
he
14-11-301(b)(2).
Thus, Pine Plantation is bound under the Act unless: “[1] the
manager
so
acting
has
in
fact
no
authority
to
act
for
the
limited liability company in the particular matter, and [2] the
person with whom he or she is dealing has knowledge of the fact
that the manager has no such authority.”
Id.
Even if Christopher Opolka had “no authority to act for
[Pine
Plantation]
in
[signing
11
the
Indemnity
Agreement],”
Guarantee
Co.
“knowledge
presents
of
authority.”
the
undisputed
fact
that
evidence
that
[Christopher]
it
ha[d]
had
no
no
such
After reviewing the underwriting documents for the
Gary’s Grading bonds in 2012, Guarantee Co. underwriter Redding
had no concerns “as to Chris Opolka’s authority to sign the
Indemnity Agreement on behalf of Pine Plantation.”
¶ 11.
Redding Aff.
Redding also “had no reason to distrust the authenticity
of the notarized signature[] of Gary Opolka” on the Indemnity
Agreement.
Id.
¶ 12.
And
Redding
had
never
seen
Pine
Plantation’s Operating Agreement.
Def.’s Surreply Attach. 4,
Redding Dep. 80:1-2, ECF No. 53-4.
Pine Plantation points to no
evidence
from
which
a
reasonable
jury
could
conclude
that
Guarantee Co. knew that Christopher Opolka had no authority to
act on behalf of Pine Plantation.
Instead
of
producing
evidence
of
a
factual
dispute
on
Guarantee Co.’s knowledge, Pine Plantation argues that Guarantee
Co.
did
not
do
enough
to
verify
that
Christopher
had
requisite authority to act on behalf of Pine Plantation.
the
Pine
Plantation presumably maintains that Guarantee Co. should have
asked to review the Operating Agreement.
no reason to do so.
But Guarantee Co. had
It had been dealing with Christopher Opolka
with no indication that he did not possess the authority to act
on behalf of Pine Plantation.
Agreement
may
have
created
While a review of the Operating
some
12
concern,
the
Agreement
also
provided that the agreement of all the managers was not the
exclusive means for Pine Plantation to act given the language in
the Agreement that makes an exception if the Georgia LLC Act
provides otherwise.
bind
Pine
To invalidate Christopher’s authority to
Plantation
under
the
circumstances
presented
here
would be directly contrary to the LLC Act, the requirements of
which Pine Plantation was aware of given that it incorporated
the Act into its Operating Agreement.
The cases relied on by Pine Plantation are distinguishable.
Pine Plantation relies on Ly v. Jimmy Carter Commons, LLC, 286
Ga. 831, 832-33, 691 S.E.2d 852, 853 (2010) in which the Georgia
Supreme Court held that a genuine factual dispute regarding the
third party’s knowledge precluded summary judgment in favor of
the LLC.
Ly, 286 Ga. at 833, 691 S.E.2d at 853-54.
here,
third
the
requirement
Nevertheless,
party
in
the
the
in
Ly
knew
LLC’s
third
of
the
operating
party
relied
manager
agreement.
on
a
forged
document purporting to show the managers’ consent.
Id.
Unlike
approval
Id.
consent
The Ly
court assumes that on remand the third party must show that its
reliance on the consent document was justified.
Id.
This makes
sense because whether the third party was justified in relying
on the forged consent document was relevant to determine the
third party’s actual knowledge under the statute.
dispute
exists
regarding
Guarantee
13
Co.’s
lack
But here no
of
actual
knowledge.
of
the
Pine Plantation recognizes that Redding did not know
manager
approval
Operating Agreement.
requirement
in
Pine
Plantation’s
And there are no other facts in the record
tending to show that Guarantee Co. had knowledge.
The Court
does not interpret Ly or any other Georgia authority to impose a
duty
on
Guarantee
representations
Co.
of
to
investigate
authority
by
Christopher
reading
Pine
Opolka’s
Plantation’s
Operating Agreement.2
Guarantee Co. presents undisputed evidence that Christopher
Opolka held himself out as an agent of Pine Plantation and that
Guarantee Co. had no indication that he lacked the authority to
bind Pine Plantation to the Indemnity Agreement.
Accordingly,
based on the undisputed evidence, he acted as an agent of Pine
Plantation when he executed the Indemnity Agreement.
Whether he
was an “actual” or an “apparent” agent does not matter.
clearly
had
the
legal
authority
to
bind
Pine
He
Plantation.
Accordingly, Guarantee Co. is entitled to a finding as a matter
of law that Pine Plantation is bound by the Indemnity Agreement.
B.
Pine Plantation’s Breach of the Indemnity Agreement
The next question is whether Pine Plantation breached the
Indemnity
Agreement.
To
establish
a
breach
of
contract,
Guarantee Co. must establish: (1) an enforceable agreement; (2)
2
Given that Guarantee Co.’s claim is not one for fraud, the fraud
cases cited by Pine Plantation are inapposite.
14
breach of that agreement; and (3) damages as a result of that
breach.
Broughton v. Johnson, 247 Ga. App. 819, 819, 545 S.E.2d
370, 371 (2001).
validity
executed
and
in
Georgia courts “consistently [] up[hold] the
enforceability
connection
with
of
indemnification
the
issuance
of
agreements
surety
bonds.”
Anderson v. U.S. Fid. & Guar. Co., 267 Ga. App. 624, 627, 600
S.E.2d 712, 715 (2004).
To determine whether Pine Plantation
breached
under
its
obligations
the
Indemnity
Agreement,
the
Court “appl[ies] the ordinary rules of contract construction.”
Id.
However, “[n]o construction is required or even permissible
when the language employed by the parties in the contract is
plain,
unambiguous
interpretation.”
and
capable
of
only
one
reasonable
Id. (quoting Nguyen v. Lumbermens Mut. Cas.
Co., 261 Ga. App. 553, 555, 583 S.E.2d 220, 223 (2003)).
It is clear that Pine Plantation breached the indemnity
provision as a matter of law.
The relevant provision states
that the “UNDERSIGNED shall indemnify [Guarantee Co.] and hold
it
harmless”
for
sustain . . . by
any
reason
damages
of
“which
having
BONDS” on behalf of Gary’s Grading.
[Guarantee
executed . . . any
Co.]
BOND
may
or
Indemnity Agreement ¶ 4.
Guarantee Co. “may settle or compromise any claim, liability,
demand, suit or judgment upon any BOND or BONDS executed or
procured by it, and any such settlement or compromise shall be
binding upon the UNDERSIGNED.”
Indemnity Agreement ¶ 7.
15
The
Court finds this language unambiguous and therefore it must be
strictly
enforced.
See
Anderson,
267
Ga.
App.
at
627,
600
S.E.2d at 715 (affirming summary judgment for a surety company
based on similar language in an indemnity agreement).
It is undisputed that Guarantee Co. received several claims
against the Gary’s Grading bonds and chose to settle many of the
claims with payments to the claimants.
Pine Plantation does not
argue that any of these settlements were made in bad faith or an
abuse of discretion.
See Nguyen, 261 Ga. App. at 556, 583
S.E.2d at 224 (“[W]here a decision is left to the discretion of
a designated entity, the question is not whether it was in fact
erroneous,
but
whether
it
was
in
bad
faith,
arbitrary,
or
capricious so as to amount to an abuse of that discretion.”
(alteration
in
original)
(quoting
MacDougald
Constr.
Co.,
v.
State Highway Dep’t, 125 Ga. App. 591, 593, 188 S.E.2d 405, 406
(1972))).
Yet Pine Plantation has not indemnified Guarantee Co.
for its damages.
Thus, Pine Plantation breached this provision
as a matter of law.
It is also undisputed that Pine Plantation breached the
collateral security provision.
that
“if
Guarantee
Co.
The Indemnity Agreement provides
“reasonabl[y]
belie[ves]
that
it
may
incur a loss” from the Gary’s Grading bonds, Guarantee Co. may
demand, and Pine Plantation “shall deliver over to [Guarantee
Co.] collateral security acceptable to [Guarantee Co.] to cover
16
any contingent losses.”
unambiguously
requires
Indemnity Agreement ¶ 5.
Pine
Plantation
Guarantee Co.’s discretion.
to
post
This language
collateral
at
Here, Zabek states that Guarantee
Co.’s records indicate that it will incur additional losses on
the
Gary’s
demanded
Grading
that
Pine
potential losses.
bonds.
Zabek
Plantation
Aff.
post
¶ 16.
Guarantee
collateral
Co.
to
the
cover
Pine Plantation has failed to present any
evidence that the demand was made in bad faith and has not
posted
Co.’s
collateral.
motion
for
Accordingly,
summary
the
judgment
Court
as
to
grants
Pine
Guarantee
Plantation’s
liability for breach of the Indemnity Agreement.
II.
Guarantee Co.’s Remedies
A.
Damages
As
previously
explained,
Guarantee
Co.
is
entitled
to
default judgment against the defaulting Defendants as to the
existence of their liability.
Guarantee Co. is also entitled to
summary judgment as to the liability of Pine Plantation.
But,
as explained more fully below, the Court is troubled by the
evidence presented by Guarantee Co. in support of the amount of
its damages.
While it is clear that Guarantee Co. has suffered
damages that are recoverable against the defaulting Defendants
and Pine Plantation, the evidence in the present record does not
permit the Court to calculate the amount of those damages with a
reasonable degree of certainty.
17
Accordingly, the Court cannot
at this time grant Guarantee Co.’s motion for default judgment
and summary judgment regarding the amount of the judgment.
The Indemnity Agreement provides the method for calculating
damages:
Vouchers or other evidence of payments made by
[Guarantee Co.] shall be prima facie evidence of the
fact and amount of the liability of the UNDERSIGNED to
[Guarantee Co.].
Indemnity
offer
Agreement
the
type
Agreement.
stack
¶
of
7.
Remarkably,
evidence
Guarantee
contemplated
by
Co.
the
fails
to
Indemnity
Instead, counsel provides an affidavit along with a
of
documents
that
are
largely
indecipherable.
Specifically, Guarantee Co. submits the affidavit of Christina
Zabek
who
states
that
to
date
Guarantee
Co.
has
paid
$2,865,073.92 in settlements to claimants on the Gary’s Grading
bonds.
Zabek Aff. ¶ 13.
Zabek cites Exhibits 2 and 4, attached
to her affidavit as evidence of payments totaling this amount.
But these exhibits do not clearly reflect these payments.
Exhibit
2
contains
an
“Exposure
Summary
Analysis”
that
lists $2,871,834.17 in settlement damages, not $2,865,073.92 as
Zabek claims.
Exhibit 4 contains over three hundred pages of
disorganized documents that Zabek asserts are business records,
including
copies
of
Guarantee
Co.’s
correspondence
with
claimants, copies of settlement agreements, and copies of checks
from
Guarantee
Co.
to
claimants.
18
The
Court
has
tried
to
reconcile the disorganized collection of documents with Zabek’s
statement that these records somehow add up to $2,865,073.92 in
settlement claims, but has been unable to do so.
Court
finds
that
Guarantee
Co.
has
failed
to
Thus, the
establish
the
amount of its damages as a matter of law for purposes of summary
judgment
and
reasonable
has
failed
certainty
Accordingly,
the
motion
summary
for
to
in
Court
at
establish
support
this
of
judgment
time
and
those
damages
default
denies
default
with
judgment.
Guarantee
judgment
Co.’s
as
to
$2,865,073.92 in damages.
Guarantee Co. shall have seven days from this Order to file
a
more
coherent
damages.
evidentiary
basis
supporting
the
amount
of
This evidence should include a chart listing each
settlement claim that Guarantee Co. has paid.
The chart should
include the following information about each claim: the amount
paid; the date the payment was made; the claimant that received
the payment; and the specific page or pages of Exhibit 4 that
are evidence that Guarantee Co. made the payment.
Co.
seeks
attorney
fees
or
additional
If Guarantee
expenses
with
the
settlement payments, the expenses must be listed in the chart
and must be supported by page citations to Exhibit 4 or an
affiant with personal knowledge that the expenses were paid.
Defendants will have seven days from the date of Guarantee Co.’s
filing to respond to Guarantee Co.’s evidence.
19
B.
Specific Performance
The appropriate remedy for the failure to post collateral
is specific performance.
Specific performance may be granted
when “the damages recoverable at law would not be an adequate
compensation for nonperformance.”
O.C.G.A. § 23-2-130.
It is
an equitable remedy and it may not be granted “unless strictly
equitable and just.”
Kirkley v. Jones, 250 Ga. App. 113, 115-
16, 550 S.E.2d 686, 690 (2001).
“A contract upon which specific
performance is sought must be certain, definite, and clear; and
so
precise
in
its
misunderstand it.”
terms
that
neither
party
can
reasonably
Hibbard v. McMillan, 284 Ga. App. 753, 755,
645 S.E.2d 356, 359 (2007) (quoting Firstline Corp. v. ValdostaLowndes Cty. Indus. Auth., 236 Ga. App. 432, 434, 511 S.E.2d
538, 541 (1999)).
Generally,
performance
surety
for
breach
companies
of
are
collateral
entitled
security
to
specific
provisions.
Hanover Ins. Co. v. Holley Constr. Co. & Assocs., Inc., No.
4:11-CV-41(CDL), 2012 WL 398135, at *5 (M.D. Ga. Feb. 7, 2012).
Here, Guarantee Co. “‘bargained for a collateral security clause
to protect it from the impending risks of liability once a claim
had been made on the bond[s]’ and the availability of damages
after trial would not protect [Guarantee Co.] from a present
risk of exposure.”
Asphalt
Paving
&
Id. (quoting Safeco Ins. Co. of Am. v. Lake
Constr.,
LLC,
20
No.
4:10-CV1160-CAS,
2011
WL
3439129, at *5-*6 (E.D. Mo. Aug. 5, 2011)).
Thus, the Court
concludes that Guarantee Co. has no adequate remedy at law for
breach of the collateral security provision.
The
Court
provision’s
terms
misunderstand
discretion
also
finds
are
such
them.
with
that
that
The
Guarantee
the
no
collateral
party
provision
Co.
to
could
security
reasonably
unambiguously
demand
collateral
places
when
it
“reasonabl[y] belie[ves]” it will incur losses and to determine
the
amount
it
finds
“acceptable.”
Indemnity
Agreement
¶ 5.
Defendants could not reasonably misunderstand Guarantee Co.’s
rights or their obligations.
Accordingly, the Court finds that
specific performance is equitable and just here, and the Court
orders the defaulting Defendants and Pine Plantation to post
$1,133,371.99 in collateral.
Defendants
necessary
to
do
not
protect
Indemnity Agreement.
dispute
Guarantee
the
Co.
amount
as
of
collateral
contemplated
by
the
But Pine Plantation appears to argue that
requiring it to post collateral would not be equitable and just
because
there
is
a
fact
dispute
regarding
Plantation has sufficient assets to do so.
argument
unpersuasive.
While
Pine
whether
Pine
The Court finds this
Plantation’s
financial
viability may be disputed, that fact is not material to whether
Pine
Plantation
Indemnity
is
Agreement.
obligated
Pine
to
post
Plantation
21
collateral
does
not
under
the
assert
any
ambiguity
or
misunderstanding
collateral security provision.
regarding
the
terms
of
the
And Pine Plantation does not
provide any authority for its assertion that financial hardship
should relieve it from its unambiguous contractual obligation.
Accordingly, the Court grants Guarantee Co.’s motion for summary
judgment on its specific performance claim.
The Court further
finds that the present record supports specific performance as
the appropriate remedy against the defaulting Defendants.
CONCLUSION
As to Pine Plantation, the Court grants Guarantee Co.’s
motion for summary judgment regarding liability for breach of
the indemnity provision, but denies the motion as to damages
(ECF No. 42).
summary
The Court also grants Guarantee Co.’s motion for
judgment
provision
and
regarding
grants
breach
specific
of
the
collateral
performance
security
requiring
Pine
Plantation to post $1,133,371.99 in collateral.
As to the defaulting Defendants, Guarantee Co. is entitled
to default judgment that Defendants are liable for breach of the
Indemnity Agreement, but Guarantee Co. has not established its
damages
entitled
to
to
a
reasonable
default
certainty.
judgment
that
Guarantee
requires
Co.
the
is
also
defaulting
Defendants to post jointly with Pine Plantation $1,133,371.99 in
collateral.
22
Pine Plantation and the defaulting Defendants shall post
the
collateral
required
by
today’s
Order
within
45
days
of
today.
The Court provides Guarantee Co. with an opportunity to
file a supplemental brief in support of its claim for damages
that includes competent, coherent evidence of its damages.
brief shall be filed within seven days of today.
That
Defendants
shall have seven days to respond to Guarantee Co.’s supplemental
brief.
IT IS SO ORDERED, this 25th day of March, 2016.
S/Clay D. Land
CLAY D. LAND
CHIEF U.S. DISTRICT COURT JUDGE
MIDDLE DISTRICT OF GEORGIA
23
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