Granite Re, Inc. v. Executive Construction Management Company et al

Filing 39

OPINION AND ORDER Granting 30 Motion for Summary Judgment. Signed by District Judge Sean F. Cox. (JMcC)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION
Granite Re, Inc.,
Plaintiff,
v.

Case No. 17-13449

Executive Construction Management
Company, et al.,

Sean F. Cox
United States District Court Judge

Defendants.
_________________________________/
OPINION & ORDER
GRANTING PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT
This matter is currently before the Court on Plaintiff’s Motion for Summary Judgment,
filed following the close of discovery. The motion asks the Court to grant summary judgment in
Plaintiff’s favor as to its breach of contract claim, which is based upon an indemnity agreement.
The Court concludes that oral argument would not aid the decisional process and orders that the
motion will be decided without a hearing. For the reasons set forth below, the Court shall
GRANT Plaintiff’s Motion for Summary Judgment.
BACKGROUND
On October 23, 2017, Plaintiff Granite Re, Inc. (“Granite”) filed this action against
Defendants Executive Construction Management Company (“Executive”) and Ronald C.
Jackson (“Jackson”), based upon diversity jurisdiction.
Granite’s Complaint asserts the following counts: 1) “Breach of Contract” (Count I),
wherein Granite alleges that Executive and Jackson breached an Indemnity Agreement; 2)
“Exoneration and Quia Timet” (Count II) wherein Granite asserts that it is entitled to the
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common law remedy known as quia timet, which secures a surety from loss when it appears that
the principal is reasonably likely to fail or refuse to perform or to protect the surety from loss; 3)
“Specific Performance of the Indemnity Agreement” (Count III); and 4) “Declaratory Judgment”
(Count IV).
On March 14, 2018, Executive and Jackson filed counterclaims against Granite, and
asserted third-party claims against Sachse Construction (“Sachse”).
On April 4, 2018, Granite filed a Motion to Dismiss the counterclaims asserted against it.
(ECF No. 13). After Executive and Jackson failed to file any response to the motion within the
time permitted for doing so, this Court issued an Order to Show Cause, requiring Executive and
Jackson to show cause why the unopposed motion should not be granted. (ECF No. 14).
Counsel for Executive and Jackson responded by asking for more time to file a brief, and then
after an extension was granted, failed to file a brief. This Court later granted the motion and
dismissed Executive and Granite’s counterclaims on August 17, 2018. (ECF No. 28).
Executive and Jackson did not serve Sachse until after this Court issued an order to show
cause why the third-party claims against Sachse should not be dismissed for failure to prosecute.
After being served, on August 16, 2018, Third-Party Defendant Sachse Construction filed
a Motion To Dismiss and to Compel Arbitration. (ECF No. 26). After Executive Construction
and Jackson failed to file a response to the motion, this Court issued a Show Cause Order,
requiring them to show cause in writing why the unopposed motion should not be granted. (ECF
No. 32). Thereafter, Counsel for Jackson and Executive filed a response stating that they would
stipulate to an order compelling arbitration of the matters in dispute with Sachse. (ECF No. 33).
Those third-party claims are therefore no longer pending in this action.

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Accordingly, the only remaining claims in this action are Granite’s claims against
Executive and Jackson.
Following the close of discovery, on September 13, 2018, Granite filed a Motion for
Summary Judgment, seeking summary judgment in its favor as to its Breach of Contract claim.
(ECF No. 30).
This Court’s practice guidelines, which are expressly included in the Scheduling Order
issued in this case, provide, consistent with Fed. R. Civ. P. 56, provide in pertinent part that:
a.

The moving party’s papers shall include a separate document entitled
Statement of Material Facts Not in Dispute. The statement shall list in
separately numbered paragraphs concise statements of each undisputed
material fact, supported by appropriate citations to the record. The
Statement shall include all necessary material facts that, if undisputed,
would result in summary judgment for the movant.

b.

In response, the opposing party shall file a separate document entitled
Counter-Statement of Disputed Facts. The counter-statement shall list
in separately numbered paragraphs following the order or the movant’s
statement, whether each of the facts asserted by the moving party is
admitted or denied and shall also be supported by appropriate citations to
the record. The Counter-Statement shall also include, in a separate
section, a list of each issue of material fact as to which it is contended
there is a genuine issue for trial.

c.

All material facts as set forth in the Statement of Material Facts Not in
Dispute shall be deemed admitted unless controverted in the CounterStatement of Disputed Facts.

d.

The statements shall be non-argumentative and avoid the use of color
words or distortions of the record in a party’s favor. Conclusory,
speculative, or conjectural statements in support of a position shall be
avoided. Hearsay statements and other inadmissible evidence cannot be
considered.

e.

Facts stated in the Statement of Material Facts Not In Dispute and
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Counter-Statement of Disputed Facts shall be supported with appropriate
citations to the record, including but not limited to the pleadings,
interrogatories, admissions, depositions, affidavits and documentary
exhibits. Citations to the record must be specific, ie., cite to a discrete
page or portion of deposition testimony or page(s) of documentary
evidence, not simply the entire deposition or document . . . .
(ECF No. 11 at Pg ID 155-56) (emphasis added).
In compliance with this Court’s practice guidelines, along with its motion, Granite filed a
“Statement of Material Facts Not In Dispute.” (ECF No. 31 at Pg ID 347-52).
After Defendants Executive and Jackson failed to file any response to Granite’s Motion
for Summary Judgment within the time permitted for doing so, this Court issued yet another
Show Cause Order. (ECF No. 37). That order required Executive and Jackson to show cause, in
writing, no later than October 15, 2018, why the unopposed summary judgment motion should
not be granted.
On October 15, 2018, Counsel for Executive and Jackson filed a “Response To Show
Cause Order,” wherein they assert that the motion should be denied. Notably, Counsel for
Defendants did not file any exhibits along with that submission. In addition, in violation of this
Court’s practice guidelines, Executive and Jackson failed to respond to Granite’s Statement of
Material Facts Not in Dispute.
As such, the only evidence that has been presented to the Court is that provided by
Granite in support of its Motion for Summary Judgment.
The Projects, Indemnity Agreement, And Bonds
Sachse served as the prime contractor on the construction projects known collectively as
Du Charme Place – Detroit, MI (the “Projects”). Sachse hired Executive as a subcontractor to

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perform certain work on the Projects. (See Ex. A to Pl.’s Motion and Tollefson Affidavit at ¶ 3).
In connection with the Projects, Granite issued five performance and payment bonds on
behalf of Executive as principal, which are collectively referred to as “the Bonds:”
Bond Number: GRMI23192B
Bond Amount: $446,900.00
Bond Number: GRMI23249B
Bond Amount: $407,000.00
Bond Number: GRMI23365B
Bond Amount: $28,236.00
Bond Number: GRMI23393B
Bond Amount: $14,568.00
Bond Number: GRMI23738B
Bond Amount: $436,950.98
(Tollefson Affidavit at ¶ 4; see also Ex. A to Pl.’s Motion).
As a condition precedent to Granite’s agreement to issue the Bond, Executive and
Jackson (the “Indemnitors”) executed an Indemnity Agreement in favor of Granite. (Tollefson
Affidavit at ¶ 5; see Ex. B to Pl.’s Motion, copy of Indemnity Agreement). In reliance on the
Indemnity Agreement, Granite, as surety, executed the Bonds. (Tollefson Affidavit at ¶ 4).
The provisions of the Indemnity Agreement apply with respect to all “Bonds” executed
on behalf of Executive or Jackson, as defined in the agreement. (Ex. B to Pl.’s Motion at ¶ 20)
(“the liability of the Indemnitor shall extend to any and all bonds executed on behalf of Principal
and/or Indemnitor before, simultaneously, and/or after the effective date of this Agreement.”).
Pursuant to the Indemnity Agreement, the Indemnitors agreed to jointly and severally
indemnify and hold Granite harmless from and against all claims, liability, and losses Granite
may incur as a result of having executed the Bonds. (Ex. B to Pl.’s Motion at ¶¶ 2 & 5).
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In addition, the Indemnitors agreed that all Bonded Contract proceeds were trust funds
and were to be held in trust in special accounts for the benefit of Granite and also assigned all
Bonded Contract proceeds to Granite. (Id. at ¶ 9).
As security for their obligations under the Indemnity Agreement, the Indemnitors made
an assignment and granted Granite a security interest in “all accounts, accounts receivable,
financial institution deposits, machinery, equipment, contract rights, causes of action, inventory,
securities, investments, promissory notes, insurance proceeds, and intangibles of whatsoever
nature,” and Granite perfected the assignment and security interest on August 9, 2017, by filing a
UCC-1 Form with the Michigan Department of State. (Indemnity Agreement at ¶ 11; Ex. D to
Pl.’s Motion).
In addition, in the event of default under the Indemnity Agreement, the Indemnity
Agreement assigns to Granite all of the Indemnitors’ rights under the Bonded Contracts,
including all of their rights in the subcontracts to the Projects. (Indemnity Agreement at ¶ 8).
Also in the event of default, the Indemnitors nominate, constitute and appoint Granite as their
attorney-in-fact with the right to exercise any right assigned, transferred, and set over to Granite
in the Indemnity Agreement. (Id. at ¶ 23).
Payment of Claims
Sachse declared Executive in default and terminated Executive from the Projects.
(Tollefson Affidavit at ¶ 7). In addition, Executive failed to pay subcontractors and/or suppliers
for work performed and/or materials supplied to Executive. (Id. at ¶ 8). Granite received claims
against the Bonds in an amount in excess of $747,428.69 from claimants. (Id. at ¶ 9).
Granite investigated the Performance and Payment Bond claims and retained the services

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of Construction Consulting & Disbursement Services (“CCDS”), a construction expert, to assist
that investigation. (Id. at ¶ 9).
As result of Granite’s investigation, Granite made a determination with respect to
amounts owed on the Performance and Payment Bond claims and has paid the following claims
against its Bonds through September 30, 2017:
Bond Number

Claimant

Amount Paid by Granite

GRMI23738B

National Ceiling &
Partitions, Inc.

$25,845.07

GRMI23738B

B&D Drywall
Supply/National Ceilings

$43,094.25

GRMI23249B

Detroit Builders, LLC

$19,477.71

GRMI23249B

D&J Premier Painting &
Drywall

$92,727.60

GRMI23249B

Sachse Construction

$407,000.00

GRMI23192B

Sachse Construction

$116,480.06

GRMI23365B

Sachse Construction

$28,236.00

GRMI23393B

Sachse Construction

$14,568.00

TOTAL:

$747,428.69

(Tollefson Affidavit at ¶ 10).
Granite received gross subrogation in the amount of $39,372.59 through September 30,
2017, which reduces its loss through September 30, 2017 to $708,056.10. (Tollefson Affidavit at
¶ 11).
On May 12, 2017, and August 7, 2017, Granite made demands to Executive and Jackson
as Indemnitors, demanding payment and collateral in the amount of $750,000.00 in accordance
with the requirements of the Indemnity Agreement. (See Ex. E to Pl.’s Motion). Nevertheless,

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Executive and Jackson failed and/or refused to indemnify and hold harmless, and provide
collateral to, Granite with respect to loss and exposure to liability and loss resulting from having
furnished the Bonds. (Tollefson Affidavit at ¶ 14).
ANALYSIS
In its Motion for Summary Judgment, Granite asks the Court to grant summary judgment
in its favor as to its Breach of Contract claim. (See Pl.’s Br. at 9) (asserting that Granite is
“entitled to summary judgment against the Indemnitors [Executive and Jackson] with respect to
its claim for breach of contract.”).
Because this action is in federal court based upon diversity jurisdiction, Michigan law
governs Granite’s breach of contract claim.
In Michigan, indemnity agreements are construed in accordance with the rules applicable
to contracts in general. Grand Trunk W. R., Inc. v. Auto Warehousing Co., 262 Mich. App. 345,
350 (2004). Where, as here, the parties have expressly contracted for indemnification, the extent
of the duty must be determined from the language of the indemnity agreement itself. MillerDavis Co. v. Ahrens Const., Inc., 495 Mich. 161, 175 (2014).
Here, pursuant the terms of the Indemnity Agreement: 1) Executive and Jackson are
obligated to indemnity Granite from and against every claim, demand, liability loss, cost and
expense which Granite may pay, sustain or incur in consequence of having executed or procured
the execution of the Bonds (Indemnity Agreement at ¶ 2); and 2) upon demand, in Granite’s sole
discretion, Executive and Jackson are obligated to pay to Granite collateral security in the
amount deemed sufficient by Granite. (Id. at ¶ 5).
The evidence before the Court establishes that Executive and Jackson materially

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breached those terms by: 1) failing to indemnify and hold Granite harmless from actual and
potential liability on the Bonds; and 2) failing to place with Granite sufficient funds in an amount
deemed necessary by Granite to secure it from all exposure to liability on the Bonds and to
reimburse Granite for related losses Granite has incurred. (Tollefson Affidavit at ¶ 14).
Granite has shown that it has been damaged by those breaches. Pursuant to the
unambiguous provisions of the Indemnity Agreement, Granite is entitled to recover from the
Indemnitors Executive and Jackson its losses. Granite has paid bond claims through September
30, 2017, in the amount of $747,428.69 and received gross subrogation in the amount of
$39,372.59, for a total loss of $708,056.10.
Granite’s brief addresses potential arguments that Executive of Jackson might make in
opposing their motion. (See Pl.’s Br. at 3 to 9). Granite argues that Executive and Jackson
cannot dispute that they owe Granite all amounts that it has paid, nor can they challenge
Granite’s determination to pay or defend against the Bond Claims, because: 1) the Indemnitors’
failure to provide collateral precludes the Indemnitors’ rights, if any to dispute the payment of
Bond Claims; and 2) Granite also has the right to settle claims pursuant to the settlement,
assignment, and attorney in fact provisions of the Indemnity Agreement.
In light of the profoundly deficient nature of Executive and Jackson’s Show Cause
Response, which does not raise or address those issues, the Court need not address them either.
The only possibly relevant1 argument they appear to make is their assertion that

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Executive and Jackson’s Show Cause Response contains language regarding the
standard applicable to motions to dismiss, and includes arguments relating to
Executive/Jackson’s previously-dismissed counterclaim for breach of duty of good faith and fair
dealing. Those arguments are not relevant to the issues in the pending summary judgment
motion.
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“Defendants ECM and JACKSON will prove at trial that Plaintiff failed to act according to
standard industry norms in verifying claims, made unwarranted payments over Defendants’
objections, acted discriminatorily in its actions and acted fraudulently pursuant to conflict of
interest motives.” (Defs.’ Show Cause Response at 6). But their brief contains no legal
authority in support of their assertions, and even more importantly, Executive and Jackson failed
to direct the Court to any evidence that could possibly support those assertions.
Accordingly, the Court shall grant summary judgment in favor of Granite and against
Executive and Jackson, jointly and severally, in the amount of $708,056.10 for claims paid
through September 30, 2017.
CONCLUSION & ORDER
For the reasons set forth above, IT IS ORDERED that Plaintiff’s Motion for Summary
Judgment is GRANTED.
IT IS FURTHER ORDERED that Granite shall file a proposed Judgment within
ten (10) day of this Opinion & Order.
IT IS SO ORDERED.
s/Sean F. Cox
Sean F. Cox
United States District Judge
Dated: November 30, 2018
I hereby certify that a copy of the foregoing document was served upon counsel of record on
November 30, 2018, by electronic and/or ordinary mail.
s/Jennifer McCoy
Case Manager

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