Fidelity And Deposit Company Of Maryland v. C.E. Hall Construction, Inc. et al
Filing
106
ORDER granting 88 Motion for Reconsideration; dismissing as moot 95 Motion. The plaintiff is directed to file within 30 days an affidavit. The Defendants shall have 20 days to respond. Signed by Judge William T. Moore, Jr on 9/20/13. (bcw)
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IN THE UNITED STATES DISTRICT COURT FQR
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THE SOUTHERN DISTRICT OF GEORGIALU
SAVANNAH DIVISION
CLERK
SO. DST. OF GA.
FIDELITY AND DEPOSIT COMPANY
OF MARYLAND,
Plaintiff,
CASE NO. CV411-102
V.
C.E. HALL CONSTRUCTION, INC.;
C. E. HALL, INC.; and
CHARLES E. HALL,
individually;
Defendants.
ORDER
Before
the
Court
is
Plaintiff's
"Motion
for
Reconsideration of Court's Denial of [its] Motion for
Summary Judgment Against C. E. Hall Construction, Inc., C. E.
Hall, Inc., and Charles E. Hall." (Doc. 88.) After
careful consideration, Plaintiff's motion is
GRANTED
and
the Court VACATES its prior order only as to the denial of
Plaintiff's motion for summary judgment (Doc. 86,
Analysis.III.B at 14-17). 1 For the following reasons,
summary judgment in favor of Plaintiff is appropriate.
Accordingly, Plaintiff is DIRECTED to file, within thirty
days, an affidavit outlining the total amount, costs, and
1
As a result, Plaintiff's motion for oral argument (Doc.
95) is DISMISSED AS MOOT.
any accrued interest to what Plaintiff believes it is
entitled. Defendants shall have twenty days to respond.
BACKGROUND
Plaintiff is a surety company that issues payment and
performance bonds to secure contractors' performance on a
construction project. (Doc. 1 at 1.) Defendants C.E. Hall
Construction, Inc., C.E. Hall, Inc., and Charles E. Hall
("Defendants") are a general contractor and its affiliates.
(Doc. 54 at 1.) On August 18, 2004, Defendants entered
into an "Agreement of Indemnity"
(
11
2004 Agreement") with
Plaintiff for a construction project (Doc. 17, Ex. A.)
The Defendants agreed that
[i]n the event of any breach or default asserted
by the obligee in any said Bonds, or the
Contractor has . . . failed to pay obligations
incurred in connection therewith, . . . the
Surety shall have the right, at its option and in
its sole discretion . . . to take possession of
any part or all of the work under any
contract . . . covered by any said Bonds, and at
the expense of the Contractor and Indemnitors to
complete or arrange for the completion of the
same, and the Contract and Indemnitors shall
promptly upon demand pay to the Surety all
losses, and expenses so incurred.
(Doc. 1, Ex. A ¶ 6.) Further, 2004 Agreement provided that
the Surety shall be entitled to charge for any
and all disbursements made by it in good
faith . . . under the belief that it is or was
liable for the sums and amounts so disbursed, or
that it was necessary or expedient to make such
disbursements, whether or not such liability,
necessity or expediency existed.
2
(Doc. 1, Ex. A ¶ 2.)
Critically, "the vouchers or other
evidence of any such payments made by the Surety shall be
prima facie evidence of the fact and amount of the
liability to the Surety." (Id.) "[The] Surety shall have
the right to adjust, settle or compromise any claim,
demand, suit or judgment upon the Bonds, unless the
Contractor and the Indemnitors shall request the Surety to
litigate such claim or demand, or to defend such suit."
(Id. ¶ 13.) When the contractors and indemnitors request
the surety to litigate such claim or demand, the agreement
requires that that "[the Indemnitors] deposit with the
Surety, at the time of such request, cash or collateral
satisfactory to the Surety in kind and amount, to be used
in paying any judgment or judgments rendered or that may be
rendered with interests, costs, expenses and attorney's
fees, including those of the Surety." (Id.)
Defendants defaulted on the construction project,
arguing that others caused the delays that ultimately led
to the default. (Doc. 86 at 3-7.) Performance bond claims
were made against Defendants.
(Id. at 5.)
Three
subcontractors also made payment bond claims. (Id.)
Plaintiff made a demand on Defendants to post collateral,
as required by the 2004 Agreement, but Defendants failed to
3
do so. After retaining an expert to evaluate the claims,
Plaintiff settled the performance and payment bond claims.
(Id. at 6.) Plaintiff now seeks indemnification from
Defendants for the full amount of settlements and payment
bond claims paid, totaling $1,447,964.50, plus any costs,
fees, and interest. (Doc. 34 at 7-8.)
Previously, this Court denied Plaintiff's motion for
partial summary judgment against Defendants.
14-17.)
(Doc. 86 at
Plaintiff has moved for reconsideration of this
Court's prior order as to that denial.
(Doc. 88 at 1.) In
the prior order, the Court found that there were genuine
issues of material fact as to whether Plaintiff breached
its duty of good faith. (Doc. 86 at 15.) In response,
Defendants contend that the 2004 Agreement provides that
Plaintiff is entitled for only those disbursements made in
good faith. (Doc. 90 at 2.) Further, Defendants argue
that this good faith requirement is not altered by whether
Defendants request Plaintiff to dispute a claim or post
collateral. (Id.)
ANALYSIS
I.
MOTION FOR RECONSIDERATION STANDARD
Courts within the Eleventh Circuit have held that
reconsideration is appropriate in a limited number of
circumstances. Specifically,
4
[r]econsideration is appropriate only if the
movant demonstrates (1) that there has been an
intervening change in the law, (2) that new
evidence has been discovered which was not
previously available to the parties in the
exercise of due diligence, or (3) that the court
made a clear error of law.
Binqham v. Nelson, 2010 WL 339806, at *1 (M.D. Ga. Jan. 21,
2010) (internal quotation marks and citation omitted); see
also Wells v. Gen. Dynamics Info. Tech., Inc., 2012 WL
5207519, at
*1 (M.D. Ga. Oct. 22, 2012) . Additionally,
"[un order to demonstrate clear error, the party moving
for reconsideration must do more than simply restate his
prior arguments, and any arguments which the party
inadvertently failed to raise earlier are deemed waived."
McCoy v. Macon Water Auth., 966 F. Supp. 1209, 1222-23
(M.D. Ga. 1997) . After careful consideration, Plaintiff
has met its burden.
II. SUMMARY JUDGMENT STANDARD OF REVIEW
According to Federal Rule of civil Procedure 56 (a),
"[a] party may move for summary judgment, identifying each
claim or defense—or the part of each claim or defense—on
which summary judgment is sought." Such a motion must be
granted "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." Id. The "purpose of
summary judgment is to 'pierce the pleadings and to assess
the proof in order to see whether there is a genuine need
for trial.' " Matsushita Elec. Indus. Co. v. Zenith Radio
Corp., 475 U.S. 574, 587 (1986) (quoting Fed. R. Civ. P. 56
advisory committee notes)
Summary judgment is appropriate when the nonmovant
"fails to make a showing sufficient to establish the
existence of an element essential to that party's case, and
on which that party will bear the burden of proof at
trial."
Celotex Corp. v. Catrett, 477 U.S. 317, 322
(1986).
The substantive law governing the action
determines whether an element is essential. DeLong Equip.
Co. v. Wash. Mills Abrasive Co., 887 F.2d 1499, 1505 (11th
Cir. 1989)
As the Supreme Court explained:
[A] party seeking summary judgment always bears
the initial responsibility of informing the
district court of the basis for its motion and
identifying those portion of the pleadings,
depositions, answers to interrogatories, and
admissions on file, together with the affidavits,
if any, which it believes demonstrate the absence
of a genuine issue of material fact.
Celotex, 477 U.S. at 323.
The burden then shifts to the
nonmovant to establish, by going beyond the pleadings, that
there is a genuine issue as to facts that are material to
N
.
the nonmovant's
case.
Clark v.
Coats
& Clark, Inc., 929
F.2d 604, 608 (11th Cir. 1991)
The Court must review the evidence and all reasonable
factual inferences arising from it in the light most
favorable to the nonmovant. Matsushita, 475 U.S. at 58788. However, the nonmoving party "must do more than simply
show that there is some metaphysical doubt as to the
material facts." Id. at 586. A mere "scintilla" of
evidence, or simply conclusory allegations, will not
suffice.
See, e.g., Tidwell v. Carter Prods., 135 F.3d
1422, 1425 (11th Cir. 1998) .
Nevertheless, where a
reasonable fact finder may "draw more than one inference
from the facts, and that inference creates a genuine issue
of material fact, then the Court should refuse to grant
summary judgment." Barfield v. Brierton, 883 F.2d 923, 933
(11th Cir. 1989)
"In a diversity jurisdiction case, the court applies
the substantive law of the state in which the case arose."
Azar v. Nat'l City Bank, 382 F. App'x 880, 884 (11th Cir.
2010) . Therefore, the choice of law rules of the forum
state of Georgia determine what substantive law applies to
this dispute.
U.S. Fid. & Guar. Co. v. Liberty Surplus
Ins. Corp., 550 F. 3d 1031, 1033 (11th Cir. 2008).
Georgia
applies the traditional rule of lex loci contractus.
7
Corivergys Corp. v. Keener, 276 Ga. 808, 811, 582 S.E.2d 84,
86 (2003) . The parties agree that Georgia law governs this
dispute. Accordingly, the Court will apply Georgia law,
where applicable.
III. OBLIGATIONS UNDER THE 2004 AGREEMENT
A surety has a duty to act in good faith to the
indemnitor, but this duty does not require that the surety
act with the loyalty of a fiduciary. See Fid. & Deposit
Co. of Md. v. Douglas Asphalt Co., 2008 WL 5351039, at *7
(S.D. Ga. Dec. 22, 2008) (unpublished) (aff'd 338 F. App'x
886 (11th Cir. 2009)) . "Where 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." Transamerica Ins. Co. v. H.V.A.C.
Contractors, 857 F. Supp. 969, 975 (N.D. Ga. 1994) (citing
Reliance Ins. Co. v. Romine, 707 F. Supp. 550, 552 (S.D.
Ga. 1989)). The inquiry rests on whether "the surety's
conduct was manifested by a lack of improper motive."
Philip L. Bruner & Patrick J. O'Connor, Jr., Bruner &
O'Connor Construction Law § 10:108 (2008)
The exercise of a contractual right, without more,
cannot form the basis for a claim of bad faith. Marriott
Corp. v. Dasta Constr. Co., 26 F.3d 1057, 1069-70 (11th
Cir. 1994) ("[T]he exercise of a legitimate contractual
right simply does not amount to a wrongful act.")
Additionally, "[a]n indemnitor's failure to request that
the surety defend against a claim and failure to post
security collateral, when requested to do so under the
terms of the indemnity agreement, defeats the defense of
bad faith." Douglas Asphalt, 2008 WL 5351039, at *8
(citing Nguyen v. Lumbermens Mut. Cas. Co., 261 Ga. App.
553, 555, 583 S.E.2d 220, 223 (2003)). In affirming the
district court's findings in Douglas Asphalt, the Eleventh
Circuit held that the failure of a surety to contest a
default does not show bad faith. Douglas Asphalt, 338 F.
App'x at 887. The issue of bad faith generally requires
resolution by the trier of fact; however, "in limited
circumstances, [Georgia courts] have found as a matter of
law that insurers that act reasonably do not act in bad
faith." See Lumbermen's, 261 Ga. App. at 555, 583 S.E.2d
at 223 (string citation omitted) (affirming trial court's
finding that surety acted reasonably—and thus, not in bad
faith—as a matter of law).
Just as the courts in Transamerica and Douglas
Asphalt, this Court can find no authority for imposing on
Plaintiff any duty to Defendants beyond that provided in
the 2004 Agreement. Defendants dispute neither their
01
failure to request that Plaintiff contest their default nor
that they failed to post collateral as required by the 2004
Agreement. Instead, Defendants rely on the 2004
Agreement's indemnity provision, which provides that
Plaintiff is entitled to reimbursement only for those
disbursements made in good faith. (Doc. 1, Ex. A ¶ 2.)
Defendants have not identified anything in the record to
suggest that Plaintiff acted unreasonably by settling the
performance bond and payment bond claims related to
Defendants' default.
Defendants' failure to make a request that Plaintiff
contest default and failure to post collateral is
dispositive. As discussed above, the Court's review of the
record in this case has not located any support for a
finding that Plaintiff's actions were unreasonable.
short,
In
Plaintiff is entitled to reimbursement from
Defendants because the disbursements were made in good
faith. (Doc. 1, Ex. A ¶ 2.) Accordingly, summary judgment
on these grounds is proper.
CONCLUSION
For the foregoing reasons, summary judgment in favor
of Plaintiff is appropriate. Plaintiff's motion is GRANTED
and the Court VACATES its prior order (Doc. 86) only as to
its denial of Plaintiff's motion for summary judgment (Doc.
10
86, Analysis.III.B at 14-17) .
Plaintiff
is DIRECTED
to
file, within thirty days, an affidavit outlining the total
amount, costs, and any accrued interest to what Plaintiff
believes it is entitled. Defendants shall have twenty days
to respond.
SO ORDERED this
01iay of September 2013.
WILLIAM T. MOORE, /
UNITED STATES DISTICT COURT
SOUTHERN DISTRICT OF GEORGIA
11
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