American Motorists Insurance Company v. Club at Hokuli'a, Inc. (The) et al
Filing
432
ORDER DENYING THE CLUB AND HCA'S MOTION FOR RECONSIDERATION 385 - Signed by CHIEF JUDGE SUSAN OKI MOLLWAY on 9/20/11. (emt, )CERTIFICATE OF SERVICEParticipants registered to receive electronic notifications re ceived this document electronically at the e-mail address listed on the Notice of Electronic Filing (NEF). Participants not registered to receive electronic notifications shall be served by first class mail at the address of record on September 21, 2011.
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF HAWAII
AMERICAN MOTORISTS INSURANCE
COMPANY,
Plaintiff,
vs.
THE CLUB AT HOKULI`A, INC., a
Hawaii nonprofit corporation;
HOKULI`A COMMUNITY
ASSOCIATION, INC., a Hawaii
nonprofit corporation; 1250
OCEANSIDE PARTNERS, a Hawaii
limited partnership; TEXTRON
FINANCIAL CORPORATION, a
Delaware corporation; RED
HILL 1250, INC., a Washington
corporation; and OCD, LLC, a
Hawaii limited liability
company,
Defendants.
_____________________________
THE CLUB AT HOKULI`A, INC., a
Hawaii nonprofit corporation;
and HOKULI`A COMMUNITY
ASSOCIATION, INC., a Hawaii
nonprofit corporation,
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Counter and Cross- )
claimants,
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vs.
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AMERICAN MOTORISTS INSURANCE )
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COMPANY, an Illinois
corporation, and 1250
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OCEANSIDE PARTNERS, a Hawaii )
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limited partnership,
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Counter and Cross- )
defendants.
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CIVIL NO. 10-00199 SOM/KSC
ORDER DENYING THE CLUB AND
HCA’S MOTION FOR
RECONSIDERATION
ORDER DENYING THE CLUB AND HCA’S MOTION FOR RECONSIDERATION
I.
INTRODUCTION AND FACTUAL BACKGROUND.
On August 25, 2011, Defendants and Counterclaimants The
Club at Hokuli`a, Inc. (“The Club”), and Hokuli`a Community
Association (“HCA”) brought a motion for partial summary judgment
as to Plaintiff and Counterdefendant American Motorists Insurance
Company’s (“AMICO”) sixth cause of action.
See The Club/HCA’s
Mot. Partial Summ. J. (“MPSJ”) 1, ECF No. 202; Second Amended
Compl. (“SAC”) ¶ 110 & p.49, ECF No. 144.
In its prayer for
judgment on its sixth cause of action, AMICO sought a judicial
declaration:
That the CLUB and HCA bonds are indemnity
bonds that give AMICO the right but not the
obligation to take over and complete the
Project upon a default by OCEANSIDE. Should
AMICO choose not to exercise that right, the
CLUB and HCA must cause the Project to be
completed and then seek reimbursement from
OCEANSIDE and/or AMICO, subject to any other
defenses AMICO may have to the claim brought
by the CLUB and HCA.
SAC p.49.
In their MPSJ, The Club and HCA asserted that, as a
matter of law, AMICO was not entitled to a declaratory judgment
“that the bonds require [T]he Club and HCA to first perform and
then seek reimbursement.”
Mem. Supp. MPSJ 2, ECF No. 202-1.
The
Club and HCA relied on various documents, including the surety
bonds themselves, the underlying agreements, and state and
federal filings, to establish that the surety bonds did not
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require The Club and HCA to perform and then seek reimbursement.
See Mem. Supp. MPSJ 17-18, 27.
Although AMICO disputed the relevance of these
documents, it did not dispute the documents’ contents or their
authenticity.
See AMICO’s Obj. to The Club/HCA’s Sep. Concise
Stmt. Mat’l Facts Supp. MPSJ, ECF No. 256.
Similarly, The Club
and HCA did not dispute the additional facts AMICO presented to
the court in opposition to The Club and HCA’s motion, although
they argued that the evidence--specifically, the issuance of
certain bond riders and the fact that Oceanside, not AMICO,
provided the surety bond language–-was not relevant.
See The
Club/HCA’s Obj. to AMICO’s Concise Stmt. Facts Supp. AMICO’s Opp.
to MPSJ, ECF No. 290.
The parties therefore presented the court
with a dispute only as to law, a matter suitable for resolution
via summary judgment.
See Fed. R. Civ. P. 56(a); Wash. Mut. Inc.
v. United States, 636 F.3d 1207, 1216 (9th Cir. 2011) (“Where, as
here, the case turns on a mixed question of fact and law and the
only disputes relate to the legal significance of undisputed
facts, the controversy is a question of law suitable for
disposition on summary judgment.”).
The court agreed with The Club and HCA that resolution
by summary judgment was appropriate based on the evidence
provided, but rejected The Club and HCA’s position, holding
instead that the surety bonds unambiguously limited AMICO’s
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obligation to reimbursement.
See Order Denying The Club and
HCA’s Motion for Partial Summary Judgment Regarding AMICO’s
Ability to Satisfy Its Obligations Through Reimbursement, ECF No.
361 [hereinafter “August 11 Order”].
The court determined that
the surety bonds obligated Oceanside to “assure completion” of
the project, but did not bind AMICO to the same obligation.
at 10-14.
Id.
Rather, the bonds bound AMICO jointly and severally
with Oceanside to insure the various improvements for the amounts
of the bonds’ penal sums, but permitted AMICO to fulfill this
obligation by reimbursement.
Id.
The court relied on language
in the surety bonds stating that, if Oceanside defaulted on its
obligations “to provide the funds necessary to assure completion
of [the listed improvements] within the time specified” under the
Amended Club Improvements Agreement, the Phase 1 Agreement, or
the Phase 2 Agreement, “[The Club or HCA] may cause the same to
be completed and recover the costs thereof from the principal and
surety.”
See id. at 11-13; see, e.g., Amended Club Improvements
Bond at 2, ECF No. 203-5.
The court also reviewed the other documents submitted
by The Club and HCA, including the various Agreements between
Oceanside and The Club or HCA.
August 11 Order at 15-16.
The
court noted that these documents required Oceanside to assure
completion of the project but did not set forth any duties on
AMICO’s part.
Id.
Similarly, none of Oceanside’s filings
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pursuant to federal or state law indicated an agreement that
AMICO would itself take over Oceanside’s performance obligations
upon default.
Id.
The Club and HCA now try to carve out a middle ground,
arguing that disputed questions of material fact prevented the
court from issuing a legal ruling on the question of whether
AMICO may fulfill its surety obligations through reimbursement,
and that the court’s failure to “revise” the August 11 Order to
state that the bonds are ambiguous will deny The Club and HCA
“their right to trial on the disputed meaning of the bonds, which
would constitute a manifest injustice.”
See Mem. Supp. Mot. for
Revision and/or Reconsideration of August 11 Order [Docket 361]
(“Mem. Supp. Mot.”) 8, ECF No. 385.
This novel approach does not
square with the facts and argument that The Club and HCA
presented to the court on their MPSJ.
Because The Club and HCA’s
motion for reconsideration presents no new facts, no intervening
change in law, and no manifest error or law or fact, it is
denied.
II.
LEGAL STANDARD.
A motion for reconsideration of an interlocutory order
of this court, such as an order on a motion for partial summary
judgment, is proper only on the following grounds:
(1) discovery
of new material facts not previously available; (2) an
intervening change in the law; or (3) a manifest error of law or
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See LR60.1; see also Oppenheimer v. L.A. County Flood
fact.
Control Dist., 453 F.2d 895, 895 (9th Cir. 1972) (per curiam)
(denial of motion for partial summary judgment is interlocutory).
“Mere disagreement with a previous order is an insufficient basis
for reconsideration.”
1274 (D. Haw. 2006).
White v. Sabatino, 424 F. Supp. 2d 1271,
Nor may the reconsideration motion be
“based on evidence and legal arguments that could have been
presented at the time of the challenged decision.”
Comeaux v.
Hawaii, Civ. No. 06-00341 SOM/BMK, 2007 WL 2300711, at *1 (D.
Haw. Aug. 8, 2007).
“Whether or not to grant reconsideration is
committed to the sound discretion of the court.”
White, 424 F.
Supp. 2d at 1274 (citing Navajo Nation v. Confederated Tribes &
Bands of the Yakama Indian Nation, 331 F.3d 1041, 1046 (9th Cir.
2003)).
III.
ANALYSIS.
The Club and HCA assert that they are not seeking
withdrawal by this court of its denial of The Club and HCA’s
motion for summary judgment.
The Club & HCA’s Mot. for Revision
and/or Reconsideration of August 11 Order (“Mot.”) 2, ECF No.
385.
They say they are instead asking the court to reconsider or
“revise” the August 11 Order.
Id.
According to The Club and
HCA, that Order determined that the surety bonds are indemnity
bonds.
See Mem. Supp. Mot. 5.
Further, they say that this
determination was improper because: (1) no one sought such a
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ruling, id. at 4-5; (2) there is a question of fact as to this
issue, id. at 5-8, 13-14; and (3) the underlying contracts
between Oceanside and The Club and HCA demonstrate that the bonds
are performance bonds, not indemnity bonds, id. at 9-12.
A.
The Club and HCA Sought a Ruling on AMICO’s
Ability to Satisfy Its Obligations Under the
Surety Bond Via Reimbursement.
As their first ground for reconsideration, The Club and
HCA assert:
By ruling that the bond language to the
effect that “the Club may cause the same to
be completed and recover the costs thereof
from the principal and surety” means that the
bonds are indemnity bonds (limiting the
surety’s obligation to reimbursement) rather
than performance bonds (requiring the surety
to assure completion) the Court raises, and
then summarily resolves, a significant
contractual ambiguity that was not before the
Court.
Mem. Supp. Mot. 4-5 (emphases added).
The Club and HCA further
assert that “[t]he effect of this ambiguity in the bonds is to
create an issue of fact that was not briefed by the parties, and
as to which no evidence was presented to the Court on the
Motion.”
Id. at 5.
The Club and HCA mischaracterize the August 11 Order.
They appear to be labeling as an “ambiguity” the issue of whether
the surety bonds are “indemnity” or “performance” bonds, with
AMICO saying the bonds are “indemnity” bonds, and The Club and
HCA saying the bonds are “performance” bonds.
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Although The Club
and HCA’s motion does argue in places that the bonds are not
indemnity bonds, see, e.g., Mem. Supp. Mot. 28-31, the court
agrees that The Club and HCA did not expressly ask the court to
denominate the bonds as either “indemnity bonds” or “performance
bonds.”
The August 11 Order refers in passing to the bonds as
performance bonds, but does not expressly rule that the bonds are
characterized as such.
See August 11 Order 2-3.
What is clear is that The Club and HCA sought partial
summary judgment on the question of whether AMICO’s obligation
under the surety bonds was limited to reimbursement.
That is,
although what label to assign to the bonds was not expressly
before the court, the court was asked to decide what the bonds
required AMICO to do.
Even a cursory glance at The Club and HCA’s briefing on
their motion establishes that they sought such a ruling.
The
very first pages of the MPSJ assert that, as a matter of law,
AMICO is not entitled to a declaratory judgment “that the bonds
require [T]he Club and HCA to first perform and then seek
reimbursement.”
Mem. Supp. MPSJ 2.
Instead, “[a]s a matter of
law,” the memorandum argues, “[T]he Club and the HCA are not
first required to complete these improvements and only then seek
reimbursement from AMIC.”
Id.
Similarly, the first portion of
the “Argument” section of The Club and HCA’s memorandum bears the
following heading:
“As a Matter of Law The Bonds Do Not Require
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The Club/HCA To Complete The Improvements And Then Seek
Reimbursement From AMIC, But Rather The Bonds Obligate AMIC To
Perform Without Requiring The Club/HCA First To Complete The
Improvements.”
Mem. Supp. Mot. 14.
Finally, the reply brief
reiterates that The Club and HCA “are seeking a judgment as to
AMIC’s contractual obligations under the Bonds should it be found
liable.
Specifically, a judgment on AMIC’s contention that the
Club and HCA must first complete the Improvements before AMIC has
any obligation to perform.”
MPSJ Reply 8, ECF No. 292.
The Club
and HCA placed the issue of whether AMICO was entitled to fulfill
its surety obligations via reimbursement squarely before the
court, and the August 11 Order resolved The Club and HCA’s motion
by ruling that AMICO’s obligation is limited to reimbursement.
See August 11 Order 3, 6, 16.
B.
The Club and HCA Asserted that “No Questions of
Material Fact” Prevented Resolution of Their Motion.
This court routinely denies motions for summary
judgment brought on issues that turn on disputed questions of
fact, even though one party (or, occasionally, both parties)
believe that only questions of law are presented for the court to
rule on.
See, e.g., Order Denying AMICO’s Mot. for Partial Summ.
J. Regarding Golf Course, ECF No. 360; see also Ortega v.
Hutchings, No. 2:08-cv-00588 SOM, 2011 WL 3813281 (E.D. Cal. Aug.
26, 2011) (denying unopposed motion for summary judgment),
Rodriguez v. Gen. Dynamics Armament & Tech. Prods., Inc., 696 F.
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Supp. 2d 1163, 1184-85 (D. Haw. 2010) (genuine issue of material
fact as to whether defense contractor’s predecessor manufactured
mortar cartridge according to all government requirements
precluded summary judgment on contractor’s government contractor
defense in negligence and strict liability action), aff’d, 627
F.3d 1259 (9th Cir. 2010).
In this case, for example, if the
language of the surety bonds were ambiguous as to AMICO’s
obligations, extrinsic evidence as to what the parties understood
at the time they prepared the bonds might be relevant and might
raise a question of fact that would preclude summary judgment.
See Stewart v. Brennan, 7 Haw. App. 136, 143, 748 P.2d 816, 821
(Ct. App. 1988) (When the meaning of specific contractual terms
is unclear, a court may consider extrinsic evidence, such as
evidence of surrounding circumstances and the subsequent acts and
conduct of the parties); see, e.g., Seascape Dev., LLC v. Fairway
Capital, LLC, Civ. No. 10-00301 JMS/RLP, 2011 WL 1134296, at *7*8 (D. Haw. Mar. 23, 2011) (denying motion for summary judgment
in contract dispute because meaning of words in disputed
provision was “uncertain” and holding that parol evidence of
parties’ intent would be considered).
However, whether a contract is ambiguous is a question
of law, and it is the language of the surety bonds themselves
that provides the starting point for determining whether such an
ambiguity exists.
Local Motion, Inc. v. Niescher, 105 F.3d 1278,
1280 (9th Cir. 1997); United Public Workers, AFSCME, Local 646,
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AFL-CIO v. Dawson Int’l, Inc., 113 Haw. 127, 141, 149 P.3d 495,
509 (2006).
In this case, the court concluded that the bonds
were not ambiguous.
See August 11 Order 10-15.
Indeed, The Club
and HCA never argued that the bond language was ambiguous.
To
the contrary, their summary judgment motion repeatedly contended
that the surety bonds’ language unambiguously required AMICO to
“assure completion” and prohibited AMICO from fulfilling its
surety obligation by reimbursement:
There are no issues of material fact in
dispute. As a matter of law, AMIC is not
entitled to the declaratory judgment it
seeks. The Club and HCA are entitled to
partial summary judgment on AMIC’s claim and
prayer for relief for a determination that
the bonds require the Club and HCA to first
perform and then seek reimbursement.
Mem. Supp. Mot. 2; see also id. at 1 (“there are no issues of
material fact in dispute”); MPSJ 1 (same); Mem. Supp. Mot. 15
(“As explained below, there is no genuine issue of material fact
concerning AMIC’s obligations under the Bonds.”).
In the absence of ambiguity (or claims of fraud,
duress, or mutual mistake), extrinsic evidence regarding the
meaning of an incorporated agreement is inadmissible.
State Farm
Fire & Cas. Co. v. Pac. Rent-All, Inc., 90 Haw. 315, 324, 978
P.2d 753, 762 (1999).
The evidence submitted by The Club and HCA
in support of their Motion for Reconsideration is a post-hoc
attempt to create ambiguity that fails to persuade the court that
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the bonds are actually ambiguous or that any “manifest injustice”
otherwise resulted from the August 11 Order.
The first piece of evidence is a brief excerpt from the
deposition of AMICO’s expert, William Cheatham.
See Decl.
Jeffrey A. Sykes (“Sykes Decl.”) Exh. A, ECF No. 385-2.
two-page document is unhelpful.
This
First, neither Cheatham nor the
deposing attorney explains what bond is being discussed, a
crucial piece of information if the court is to rely on the
testimony in determining whether a bond is ambiguous.
generally id. at 86-87.
See
Second, the phrase being used by the
attorney questioning Cheatham, “The Club may complete,” does not
appear in any of the surety bonds.
If The Club and HCA purport
to parse the terminology of the bonds in any detailed manner, the
court is unsure why they do not rely on the actual wording of the
surety bonds.
Even if the court assumes that the phrase “may
complete” is being used as shorthand for the phrase, “The Club
may cause the same to be completed” (which does appear in the
Amended Club Improvements Bond), Cheatham, in saying that he did
not understand the phrase, provides no detail regarding what
aspect of the phrase “may complete” was problematic.
87.
Id. at 86-
Cheatham does not mention the terms “indemnity” or
“performance.”
Nor does he actually state that the words “The
Club may complete” are ambiguous.
See id.
At most, Cheatham
states that, when he saw the words, he wanted to read the
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underlying agreements, but he believed those agreements were
specific to the obligations of only the developer.
Id. at 86.
Cheatham appears to think the word “ambiguous” is not the right
word to describe the phrase, and settles on saying that the
language was “a little unclear.”
Id. at 87.
This testimony does
not persuade this court that it should find the bonds ambiguous
in any relevant respect.
The Club and HCA also supply two expert reports in
support of their position that the surety bonds require AMICO to
ensure completion of the projects.
Exh. D at 2, ECF Nos. 385-4, 385-5.
See Sykes Decl. Exh. C at 4,
The Club and HCA acknowledge
that these reports were available at the time The Club and HCA
filed their motion for summary judgment, but argue that they
failed to submit the reports “because the Motion raised only
issues of law, not issues of fact.”
Mot. 8 n.4.
order in no way introduces factual disputes.
This court’s
While these
experts’ opinions support The Club and HCA’s position that the
language of the bonds should be read as requiring AMICO to step
into Oceanside’s shoes and complete the project if Oceanside
failed to do so, the experts’ construction of the bonds cannot
create ambiguity out of clear contractual language.
See
Foundation Int’l, Inc. v. E.T. Ige Constr., Inc., 102 Haw. 487,
497, 78 P.3d 23, 33 (2003).
What the clear language of a
contract requires is a matter for a court, not an expert witness.
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C.
The Club and HCA Fail to Demonstrate that the Surety
Bonds in Ameron or Fireman’s Fund Resemble the Bonds at
Issue in this Case, or that the Underlying Agreements
Enlarge AMICO’s Obligations Beyond the Scope of the
Surety Bonds.
Neither Ameron Inc. v. Fireman’s Fund Insurance Co.,
Civ. No. 94-00487 HG, 1995 WL 904999 (D. Haw. Jan. 25, 1995), nor
Island Insurance Co. v. Hawaiian Foliage & Landscape, Inc., 288
F.3d 1161 (9th Cir. 2002), cited by The Club and HCA, persuade
the court that reconsideration is appropriate.
Mot. 9-12.
See Mem. Supp.
The Club and HCA assert that the relevant language of
the surety bonds in those cases is “largely identical” to the
bonds here.
Id. at 11.
But these cases do not address the
import of the language central to the court’s holding that
AMICO’s obligation may be fulfilled via reimbursement--that,
“upon default, [The Club/HCA] may cause the same to be completed
and recover the costs thereof from the principal and surety”
(emphasis added).
Nor do the holdings of these cases materially assist
The Club and HCA.
The dispute in Ameron centered on whether the
obligee’s claim against the surety was time-barred.
904999, at *3-*5.
1995 WL
No party argued that the surety was obligated
to assure completion of the underlying project by stepping in and
paying for the project up front.
See id. at *1-*2.
Rather, the
obligee on the bond sought only reimbursement of amounts it had
paid to the principal, as well as payment of an arbitration award
owed by the principal.
See id. at *1, *6-*7.
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Island Insurance
concerned the scope of the surety’s liability, not the manner and
method of its payment.
By contrast, The Club and HCA’s motion
for partial summary judgment related solely to the manner and
method of payment and did not address any of AMICO’s defenses
regarding scope.
Finally, the court did not err in holding that the
surety bonds were the only documents before the court that
spelled out the nature of AMICO’s obligations.
Order 16.
See August 11
As the Order explained, neither the language of the
underlying agreements nor any of the other extrinsic documents
presented by The Club and HCA contains any language expanding
AMICO’s obligations beyond those defined in the surety bonds.
The Club and HCA fail to demonstrate that language committing
Oceanside to complete the projects should be interpreted as
requiring AMICO to step into Oceanside’s shoes and complete the
project itself in the event of Oceanside’s default.
11 Order 15-16.
See August
The Club and HCA asserted their argument to the
contrary in their initial motion, Mem. Supp. MPSJ 18-28, and
their continued disagreement with the court’s conclusion, Mem.
Supp. Mot. 12, is not justification for reconsideration.
White,
424 F. Supp. 2d at 1274.
V.
CONCLUSION.
For the reasons stated above, The Club and HCA’s motion
for reconsideration is DENIED.
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IT IS SO ORDERED.
DATED: Honolulu, Hawaii, September 20, 2011.
/s/ Susan Oki Mollway
Susan Oki Mollway
Chief United States District Judge
AMICO v. The Club at Hokuli`a; Civil No. 10-00199 SOM/KSC; ORDER DENYING THE CLUB AND
HCA’S MOTION FOR RECONSIDERATION
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