United Fire & Casualty Company v. Caskey Drywall NM, LLC et al
Filing
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MEMORANDUM OPINION AND ORDER by District Judge Kenneth J. Gonzales denying 13 Motion for Judgment on the Pleadings. (tah)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW MEXICO
UNITED FIRE AND CASUALTY COMPANY,
an Iowa corporation,
Plaintiff,
vs.
Civ. No. 17-1108 KG/JHR
CASKEY DRYWALL NM LLC; a Texas limited
liability company, CENTEX CONSTRUCTION OF
NEW MEXICO, LLC, a Delaware limited liability company;
CENTEX HOMES, a Nevada general partnership;
CENTEX REAL ESTATE CORPORATION, a Nevada
corporation; PULTE DEVELOPMENT NEW MEXICO,
INC., a Michigan corporation; THE PRESIDIO CONDOMINIUM
ASSOCIATION, INC., a New Mexico nonprofit corporation; and
THE PRESIDIO HOMEOWNER ASSOCIATION, INC., a New
Mexico nonprofit corporation,
Defendants.
MEMORANDUM OPINION AND ORDER
This matter comes before the Court upon Defendants The Presidio Condominium
Association, Inc. and The Presidio Homeowner Association, Inc.’s (collectively, Presidio)
“Motion for Judgment on the Pleadings,” filed February 16, 2018. (Doc. 13). Plaintiff United
Fire and Casualty Company (United Fire) filed a response on March 9, 2018, and Presidio filed a
reply on March 23, 2018. (Docs. 16 and 20). Having considered the Motion for Judgment on
the Pleadings and the accompanying briefing, the Court denies both Presidio’s request for a
hearing on the Motion and Motion for Judgment on the Pleadings.
A. The Complaint for Declaratory Judgment and Other Relief (Complaint) (Doc. 1)
1. The Underlying State Lawsuit
This insurance declaratory judgment case arises from an underlying state lawsuit brought
by Presidio against Defendants Centex Construction of New Mexico, LLC; Centex Homes;
Centex Real Estate Corporation; and Pulte Development New Mexico, Inc. (collectively,
Centex), among others. (Doc. 1-2). In that lawsuit, Presidio seeks damages from Centex “for
defects in the selection, design, construction, development, assembly, and installation of the
common area components in” what is known as “The Presidio,” a collection of condominiums
and townhomes. (Doc. 1-2) at ¶¶ 1 and 3. In response to Presidio’s claims, Centex filed a thirdparty complaint against Defendant Caskey Drywall New Mexico LLC (Caskey), an independent
contractor working for Centex, alleging it caused drywall defects related to The Presidio
construction project. (Doc. 1-3) at 15 ¶ 17(g). The state court subsequently entered an order
compelling arbitration of the state action. (Doc. 13-1).
2. The Insurance Policy at Issue
United Fire previously issued a commercial general liability insurance policy to Caskey
while Centex claims to be an additional insured under that policy. (Doc. 1) at 1 and ¶ 4.
Pursuant to the United Fire policy, “United Fire is currently defending Caskey Drywall on the
third-party claims by Centex, and is contributing to the defense of Centex on the claims by
Presidio allegedly arising from the work of Caskey Drywall.” Id. at 2. United Fire is providing
those defenses “subject to reservation of rights under the applicable policy.” Id.
3. The Claims in this Declaratory Judgment Lawsuit
Although the underlying state liability lawsuit is still pending, United Fire filed this
declaratory judgment lawsuit under the Declaratory Judgment Act, 28 U.S.C. §§ 2201 and 2202,
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naming Centex, Presidio, and Caskey as Defendants. With respect to Presidio, specifically,
United Fire alleges that
[t]here is a disagreement and dispute between United Fire on the one hand, and Caskey
Drywall, Centex and Presidio on the other hand, which is ripe and appropriate for judicial
determination by way of declaratory judgment. This Court is asked to, and should,
exercise its discretion to determine the rights and obligations of United Fire and Caskey
Drywall, Centex and Presidio under the Policy, with regard to the defense and
indemnification of the claims asserted in the Underlying Action.
(Doc.1) at ¶ 29. United Fire further contends that it “is entitled to a declaratory judgment that it
has no duty to defend or indemnify Caskey Drywall or Centex with regard to the claims asserted
in the Underlying Action” and that “Centex and Caskey Drywall are obligated to reimburse”
United Fire for the funds they received from United Fire to defend the underlying lawsuit.1 Id. at
¶¶ 32 and 36.
B. The Motion for Judgment on the Pleadings
Presidio brings this Motion for Judgment on the Pleadings under Fed. R. Civ. P. 12(c).
Presidio argues that United Fire “lacks standing to assert a right to declaratory relief against
Presidio because there is no privity contract between [United Fire] and Presidio.” (Doc. 13) at ¶
16. Presidio also contends that the declaratory judgment claim against it “fails because Presidio
has not asserted any claims against [United Fire] which could serve as predicate for a declaratory
judgment action.” Id. If Presidio prevails on the Motion for Judgment on the Pleadings, Presidio
seeks an award of costs. (Doc. 13) at 4. In addition, Presidio requests that the Court hold a
hearing on the Motion for Judgment on the Pleadings. (Doc. 35) at 1.
United Fire opposes the Motion for Judgment on the Pleadings in its entirety. Aside from
arguing against the merits of the Motion for Judgment on the Pleadings, United Fire argues that
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The Clerk of the Court, in this case, subsequently filed an Entry of Default as to Caskey on
June 22, 2018. (Doc. 34).
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the Court should deny the Motion for Judgment on the Pleadings because Presidio failed to
comply with Local Rule 7.1(a) (“Movant must determine whether a motion is opposed, and a
motion that omits recitation of a good-faith request for concurrence may be summarily denied.”).
C. Standard of Review
The Court reviews a Rule 12(c) motion for judgment on the pleadings under the same
legal standard as a motion for failure to state a claim made under Fed. R. Civ. P. 12(b)(6). Mock
v. T.G. & Y. Stores Co., 971 F.2d 522, 528 (10th Cir. 1992) (“A motion for judgment on the
pleadings under Fed. R. Civ. P. 12(c) is treated as a motion to dismiss under Fed. R. Civ. P.
12(b)(6).”). To survive a Rule 12(b)(6) motion, “[t]he complaint must plead sufficient facts,
taken as true, to provide ‘plausible grounds’ that discovery will reveal evidence to support
plaintiff's allegations.” Shero v. City of Grove, Okla., 510 F.3d 1196, 1200 (10th Cir. 2007).
That is, a complaint must include “enough facts to state a claim to relief that is plausible on its
face.” TON Servs., Inc. v. Qwest Corp., 493 F.3d 1225, 1235 (10th Cir. 2007).
“A claim has facial plausibility when the plaintiff pleads factual content that allows the
court to draw the reasonable inference that the defendant is liable for the misconduct alleged.”
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). “A pleading that offers labels and conclusions or a
formulaic recitation of the elements of a cause of action will not do, [n]or does a complaint
suffice if it tenders naked assertion[s] devoid of further factual enhancement.” Id. (internal
quotation marks omitted).
Moreover, a Rule 12(c) motion for “[j]udgment on the pleadings should not be granted
‘unless the moving party has clearly established that no material issue of fact remains to be
resolved and the party is entitled to judgment as a matter of law.’” Park Univ. Enters., Inc. v.
Am. Cas. Co., 442 F.3d 1239, 1244 (10th Cir. 2006) (citation omitted). In other words, a motion
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for a judgment on the pleadings “only has utility when all material allegations of fact are
admitted or not controverted in the pleadings and only questions of law remain to be decided by
the district court.” 5C Fed. Prac. & Proc. Civ. § 1367 (3d ed.).
D. Discussion
1. Presidio’s Request for a Hearing on the Motion for Judgment on the Pleadings
Having reviewed the Motion for Judgment on the Pleadings and the briefing on that
Motion, the Court determines that a hearing on the Motion for Judgment on the Pleadings is
unnecessary. The Court, therefore, denies Presidio’s request for a hearing on this matter.
2. Presidio’s Failure to Comply with Local Rule 7.1(a)
Presidio admits that it did not comply with Local Rule 7.1(a), having determined that it
did not need to comply with that Rule. (Doc. 13) at ¶ 9 (“Due to the dispositive nature of this
Motion for Judgment on the Pleadings, concurrence of [United Fire] was not sought.”). Local
Rule 7.1(a), however, does not make an exception for dispositive motions. Nonetheless, since
United Fire opposes the Motion for Judgment on the Pleadings and the Court prefers to rule on
the merits of that Motion, the Court waives Local Rule 7.1(a) in this instance to avoid injustice.
See D.N.M. LR-Cv 1.7 (“These rules may be waived by a Judge to avoid injustice.”).
Consequently, the Court will not deny the Motion for Judgment on the Pleadings because
Presidio failed to comply with Local Rule 7.1(a).
3. Whether United Fire has Standing to Bring this Declaratory Judgment Action Against
Presidio
In analyzing the standing issue raised by Presidio, the Court begins by examining the
Declaratory Judgment Act. The Declaratory Judgment Act states:
In a case of actual controversy … any court of the United States, upon the filing of an
appropriate pleading, may declare the rights and other legal relations of any interested
party seeking such declaration, whether or not further relief is or could be sought.
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28 U.S.C. § 2201(a) (emphasis added). The United States Supreme Court has explained that
[t]he difference between an abstract question and a ‘controversy’ contemplated by the
Declaratory Judgment Act is necessarily one of degree, and it would be difficult, if it
would be possible, to fashion a precise test for determining in every case whether there is
such a controversy. Basically, the question in each case is whether the facts alleged,
under all the circumstances, show that there is a substantial controversy, between parties
having adverse legal interests, of sufficient immediacy and reality to warrant the issuance
of a declaratory judgment.
Maryland Casualty Co. v. Pacific Coal & Oil Co., 312 U.S. 270, 273 (1941). This controversy
requirement is, in fact, a standing requirement. Philadelphia Indem. Ins. Co. v. Lexington Ins.
Co., 845 F.3d 1330, 1335 (10th Cir. 2017) (holding that in declaratory judgment context the
“controversy requirement raised here is standing”).
In applying the Declaratory Judgment Act’s actual controversy requirement in the
insurance context, the United States Supreme Court in Maryland Casualty Co. held that an
insurer’s federal declaratory judgment action against an injured third party involved an actual
controversy, even though the injured third party’s claim to the policy proceeds was contingent
upon the injured party obtaining a final liability judgment in state court against the insurer’s
insured. 312 U.S. at 271-73 (holding “[t]hat the complaint in the instant case presents such a
controversy is plain” although the state “action has not proceeded to judgment”). See also 10B
Fed. Prac. & Proc. Civ. § 2760 (4th ed.) (discussing Declaratory Judgment Act in insurance
cases and summarizing Maryland Casualty Co.: “The other important question was resolved in
1941, when the Court held that a liability insurer may bring an action against its insured and a
person the insured has injured, seeking a declaration of noncoverage, even though the injured
person contends that no controversy can exist between him and the insurance company until he
has obtained a judgment against the insured.”). The Tenth Circuit later reiterated this holding by
stating that “[i]n declaratory actions brought to determine coverage under insurance policies
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issued to protect the insured against liability to third persons, third persons asserting such
liability have been held to be proper parties to a declaratory judgment proceeding, although their
claims against the insurer are contingent upon recovery of a judgment against the insured.”
Franklin Life Ins. Co. v. Johnson, 157 F.2d 653, 658 (10th Cir. 1946) (citing Maryland Casualty
Co., 312 U.S. at 273 and other cases).
Presidio does not cite caselaw presenting legal principles contrary to those articulated in
Maryland Casualty Co. and Franklin Life Ins. Co., respectively. Rather, Presidio attempts to
factually distinguish those cases from this one.
Maryland Casualty Co. involved an automobile accident and automobile insurance
coverage. In that case, the injured third party sued the insured in state court to recover damages
incurred from the accident, which was caused by an employee of the insured who had purchased
the car from the insured. 312 U.S. at 271. While that action was pending, the insurer sued its
insured and the injured third party in a federal declaratory judgment action to determine whether
it must defend the insured in the underlying action or indemnify the insured if it was found liable
for damages. Id.
Except for the kind of insurance and underlying harm at issue, Maryland Casualty Co. is,
otherwise, on point with this lawsuit. Similar to Maryland Casualty Co., Presidio, the injured
third party, is suing Centex, an alleged additional insured under United Fire’s policy, in state
court for damages incurred from defects discovered in The Presidio construction project. Also,
similar to Maryland Casualty Co., United Fire, the insurer, is now suing both Centex, an alleged
additional insured under United Fire’s policy, and Presidio, the injured third party, for federal
declaratory relief, including a declaration that United Fire has no duty to defend or indemnify
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Centex with respect to the underlying state liability lawsuit. The Court finds that any factual
distinctions between Maryland Casualty Co. and this case are tangential and inconsequential.
In Franklin Life Ins. Co., the Tenth Circuit applied the legal principles from Maryland
Casualty Co. to an action involving a life insurance policy wherein an insurer brought a
declaratory judgment action against the beneficiary of the policy and a contingent beneficiary.
157 F.2d at 655. After describing the Maryland Casualty Co. holding regarding standing to sue
an injured third party under the Declaratory Judgment Act, the Tenth Circuit concluded that it
could “discern no difference between the position of [the] … contingent beneficiary in this
litigation, and the contingent claim of an injured third party in a declaratory action to establish
nonliability under casualty insurance.” Id. at 658. Franklin Life Ins. Co., thus, does not limit
application of the Maryland Casualty Co. holding to the life insurance situation described in that
case. Hence, the factual distinctions between Franklin Life Ins. Co. and this case, likewise, are
tangential and inconsequential.
In analyzing this Motion for Judgment on the Pleadings, the Court accepts the allegations
in the Complaint as true and reads the Complaint as a whole. In accord with the above caselaw
and in light of the allegations in the Complaint, the Court determines that United Fire has pled
sufficient facts from which the Court can reasonably infer that an actual controversy exists
between United Fire and Presidio. Additionally, the Court determines that Presidio has not
carried its burden of showing that it is entitled to judgment as a matter of law based on those
uncontested allegations. The Court, therefore, concludes that United Fire has standing to sue
Presidio in this declaratory judgment lawsuit. Consequently, the Motion for Judgment on the
Pleadings is not well-taken.
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IT IS ORDERED that Motion for Judgment on the Pleadings (Doc. 13) is denied.
______________________________
UNITED STATES DISTRICT JUDGE
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