Selective Insurance Company of America v. Hester Drywall LLC et al

Filing 29

ORDER : The Court has thoroughly reviewed the entire record, including all pleadings and motions filed in this case. For the reasons stated above, Plaintiffs Partial Motion for Summary Judgment as to Liability [ECF # 22 ] is GRANTED as to Defendants Hester Drywall, LLC; HW Glass, LLC a/k/a HWGLASS, LLC; and Hester Properties Village, LLC only. Signed by the Honorable R Bryan Harwell on 01/30/2019.(lsut, )

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF SOUTH CAROLINA
FLORENCE DIVISION
Selective Insurance Company of
America,

)
)
)
Plaintiff,
)
)
v.
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)
Hester Drywall, LLC; HW Glass, LLC
)
a/k/a HWGlass, LLC; Hester Properties )
Village, LLC; James C. Hester a/k/a Jim )
Hester; and Shannon E. Hester;
)
)
Defendants.
)
____________________________________)

Civil Action No.:4:18-cv-00431-RBH

ORDER

Plaintiff Selective Insurance Company of America (“Selective”) is in the business of
providing commercial insurance coverage to its customers. Selective filed a Verified Complaint1
in this Court against the above-named Defendants for damages alleged to have resulted from the
breach of several indemnity agreements. Within the Complaint, Selective asserted claims for
specific performance of the contracts, enforcement of collateral security requirements, notification
requirements to third parties, indemnification, exoneration and breach of contract against the
Defendants. [ECF #1]. All of these claims are alleged to have arisen out of the conditions set
forth under two indemnity agreements executed by Defendants.2 On July 19, 2018, Selective filed
its First Motion for Partial Summary Judgment as to liability only. [ECF #22]. On August 2,
2018, Defendant James C. Hester and Shannon E. Hester filed a Suggestion of Bankruptcy,

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The Complaint is verified by Gerald N. Carozza, Jr. who is the Assistant Vice President, Bond Counsel, and
Claims Manager for Plaintiff. [ECF #1-1].

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Only Defendant Shannon E. Hester denies signing either of the agreements in question.

arguing that this action has been stayed by operation of 11 U.S.C. § 362. [ECF #23]. On October
9, 2018, this Court issued an Order staying this case pursuant to 11 U.S.C. § 362 as to Defendant
James C. Hester and Shannon E. Hester only. [ECF #26]. Accordingly, the Motion for Partial
Summary Judgment is stayed as to these two Defendants. As to the other Defendants, Selective
asserts that, as a matter of law, Defendants Hester Drywall, LLC; HW Glass, LLC a/k/a HWGlass,
LLC; and Hester Properties Village, LLC (the “Hester Defendants”), are liable to Selective for
damages and other remedies under the express terms of the two indemnity agreements in question.
The Hester Defendants did not file a response to the Motion for Partial Summary Judgment.
However, all parties have had the opportunity to brief the issues raised in the motions, and this
Court has thoroughly considered all pleadings filed in this case, including the Answer filed by all
Defendants.3 This Court now issues the following Order.
Factual Background and Procedural History
According to the allegations within the Verified Complaint, and as admitted in the Answer,
Hester Drywall is a construction company engaged in contracting business related to public and
private construction. [ECF #1, ¶ 24; ECF #11, ¶ 8]. On or about February 5, 2013, Defendants
Shannon and James C. Hester executed a General Agreement of Indemnity (the “2013 Indemnity
Agreement”) with Selective in order to obtain surety bonds for Defendant Hester Drywall. [ECF
#1, ¶ 24; ECF #11, ¶ 8]. The 2013 Indemnity Agreement is executed by Mr. and Ms. Hester in
their individual capacities, as well as by James C. Hester, in his capacity as the President of

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Under Local Civil Rule 7.08 (D.S.C.), “hearings on motions may be ordered by the Court in its
discretion. Unless so ordered, motions may be determined without a hearing.” Upon review of the briefs, the
Court finds that a hearing is not necessary.

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Hester Drywall, Inc., the managing member of HW Glass, LLC and as a member of Hester
Properties Village, LLC (collectively, the “Indemnitors”). [ECF #22-2, Ex. 1]. The 2013 Indemnity
Agreement, is attached as Exhibit A to the Verified Complaint [ECF #1-2, Ex. A], and is also
attached to the Motion as Exhibit 1. [ECF #22-2, Ex. 1]. On January 25, 2017, the Indemnitors
executed another General Agreement of Indemnity (the “2017 Indemnity Agreement”). The 2017
Indemnity Agreement is attached to the Complaint as Exhibit B [ECF #1-3, Ex. B] and to the
Motion as Exhibit 1. [ECF #22-2, Ex. 1]. Defendant Shannon Hester denies executing either of
these Agreements. [ECF #11, ¶¶ 6-7]. The remaining Defendants admit to the execution of these
Agreements. [ECF #11, ¶¶ 6-7]. According to the allegations within the Complaint, and as
admitted by the Hester Defendants, Under both the 2013 and the 2017 Indemnity Agreements
(collectively, the “Indemnity Agreements”), the Indemnitors agreed to be held jointly and severally
liable to deposit collateral security with Selective in an amount equal to any reserve amount
established by Selective in connection with surety bonds issued by Selective on behalf of Hester
Drywall. [ECF #1; ECF #22-2, Ex. 1; ECF #11, ¶¶ 8, 21, 34]. The Hester Defendants further
admit that the Indemnity Agreements also contain terms and conditions stating that the
Indemnitors agreed that, “their failure to provide collateral as demanded by Surety [Selective] shall
constitute irreparable harm to Surety.” [ECF #1; ECF #22-2, Ex. 1; ECF #11, ¶ 8]. The Hester
Defendants acknowledge that the Indemnity Agreements provide that Selective, as surety, may
obtain a judgment against each or any of the indemnitors for the amount of the collateral demand
plus the cost of obtaining the judgment. [ECF #22-2; Ex 1; ECF #11, ¶ 8].4 Selective’s Motion
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In their Answer, the Hester Defendants admit that the 2013 and 2017 Indemnity Agreements provide that they
agreed jointly and severally to the majority of the terms found within the Agreements.

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for Partial Summary Judgment as to liability is based upon the terms and conditions found within
the 2013 and 2017 Agreements.
According to Selective, on or about November 19, 2015, an entity known as Metcon/TA
Loving A Joint Venture (“Metcon”) entered into four AIA Document A142-2014 construction
contracts with FirstFloor Energy Positive, LLC for the purpose of constructing several public
schools for the Horry County School District (the “School Project”). [ECF #22, p. 3.]. One of the
conditions of the contracts was for Metcon to post surety performance/payment bonds in favor of
FirstFloor Energy Positive, LLC. [ECF #22, p. 3]. Metcon therefore entered into a number of
subcontracts with various subcontractors, one of which was Defendant Hester Drywall. [ECF #22,
p. 3]. In total, Hester Drywall entered into five subcontract agreements with Metcon related to the
School Project, three of which were executed on June 28, 2016, and two of which were executed
on August 18, 2016. [ECF #1, ¶¶ 27-32; ECF #11, ¶ 11] Among other requirements, the five
subcontract agreements all required Defendant Hester Drywall to procure subcontract performance
and payment bonds in favor of Metcon for the work being performed on the School Project. [ECF
#1, ¶ 32; ECF #11, ¶ 11].
At Defendant Hester Drywall’s request, and pursuant to the 2013 and 2017 Indemnity
Agreements, Selective, as surety, issued several payment bonds and performance bonds (the
“Selective Bonds”) in favor of Metcon for Defendant Hester Drywall’s work to be performed on
the School Project. [ECF #1, ¶ 33; ECF #11, ¶ 12];5 [ECF #22-3, Aff. of Jonathan Panico, the
Senior Bond Claim Representative of Selective, ¶ 6]. A copy of the Selective Bonds are attached

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In the Answer, Mrs. Hester denies this allegation; however the other Defendants admit this allegation.

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to the Motion as Exhibit 5. [ECF #22-6, Ex. 5]. The Selective Bonds covered the performance
of Hester Drywall’s drywall work. [ECF #22-3, Aff. of Panico, ¶ 9]. Hester Drywall then set out
to comply with the subcontract agreements and to perform certain drywall work in connection
with the School Project. [ECF #1, ¶ 35; ECF #11, ¶ 14]. According to the discovery responses
provided by the Hester Defendants, at some point in the construction of the School Project, the
scheduled timeline for the construction of the School Project changed, such that rather than
working on one school at a given point in time, Hester Drywall would be expected to perform
drywall work on more than school at the same time. [ECF #22-7; Ex. 6]. According to the
discovery responses, Hester Drywall became unable to timely pay its employees their earned
wages due to the failure of Metcon to timely execute and pay promised change orders related to
the School Project. [ECF #22-7; Ex. 6, p.5]. This resulted in Hester Drywall’s eventual default
under the subcontract agreements with Metcon. [ECF #22-7; Ex. 6, p. 5]. On or around July 31,
2017, Metcon sent Defendant Hester Drywall several Notices of Termination, terminating the
subcontract agreements under which Defendant Hester Drywall was performing work on the
School Project. ECF #1,¶ 36; ECF #11, ¶ 14].

Selective attached copies of the Notices of

Termination to its Motion. [ECF #22-12, Ex. 11]. Metcon sent these Notices of Termination due
to Hester Drywall’s default of work obligations under the terms of the subcontract agreements in
place. [ECF #22-12, Ex. 11; ECF #11, ¶ 14].
Once Selective was advised that Hester Drywall had ceased operations and defaulted on
the Hester Drywall subcontract agreements and Metcon had terminated the company from
performing work on the project, Selective sought to minimize any disruption to the progress of

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the School Project. [ECF #1; ¶ 37; ECF #11; ¶ 14]. Selective brought suit against the Hester
Defendants for, among other things, breach of the 2013 and 2017 Indemnity Agreements, and now
seeks summary judgment as to liability under these Indemnity Agreements.
Standard of Review
Summary judgment “shall be rendered forthwith if the pleadings, depositions, answers to
interrogatories, and admissions on file, together with affidavits, if any, show that there is no
genuine issue as to any material fact and that the moving party is entitled to a judgment as a
matter of law.” Fed. R. Civ. P. 56(c). The moving party has the burden of proving that summary
judgment is appropriate. Once the moving party makes the showing, however, the opposing party
must respond to the motion with “specific facts showing there is a genuine issue for trial.” Fed.
R. Civ. P. 56(e).

When no genuine issue of any material fact exists, summary judgment is

appropriate. Shealy v. Winston, 929 F.2d 1009, 1011 (4th Cir. 1991). The facts and inferences
to be drawn from the evidence must be viewed in the light most favorable to the non-moving
party. Id. However, “the mere existence of some alleged factual dispute between the parties will
not defeat an otherwise properly supported motion for summary judgment; the requirement is that
there be no genuine issue of material fact.” Id. (quoting Anderson v. Liberty Lobby, Inc., 477
U.S. 242, 247–48 (1986)).
The moving party “bears the initial burden of pointing to the absence of a genuine issue
of material fact.” Temkin v. Frederick Cnty. Comm’rs, 945 F.2d 716, 718 (4th Cir. 1991) (citing
Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986)). If the moving party carries this burden, “the
burden then shifts to the non-moving party to come forward with facts sufficient to create a triable

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issue of fact.” Id. at 718–19 (citing Anderson, 477 U.S. at 247–48).
Moreover, “once the moving party has met its burden, the nonmoving party must come
forward with some evidence beyond the mere allegations contained in the pleadings to show there
is a genuine issue for trial.” Baber v. Hosp. Corp. of Am., 977 F.2d 872, 874–75 (4th Cir. 1992).
The nonmoving party may not rely on beliefs, conjecture, speculation, or conclusory allegations
to defeat a motion for summary judgment. See id; Doyle v. Sentry, Inc., 877 F. Supp. 1002, 1005
(E.D. Va. 1995). Rather, the nonmoving party is required to submit evidence of specific facts
by way of affidavits, depositions, interrogatories, or admissions to demonstrate the existence of
a genuine and material factual issue for trial. See Fed. R. Civ. P. 56(c), (e); Baber, 977 F.2d at
875 (citing Celotex, 477 U.S. at 324)).

Moreover, the nonmovant’s proof must meet “the

substantive evidentiary standard of proof that would apply at a trial on the merits.” Mitchell v.
Data Gen. Corp., 12 F.3d 1310, 1316 (4th Cir. 1993); DeLeon v. St. Joseph Hosp., Inc., 871 F.2d
1229, 1223 n.7 (4th Cir. 1989).
Discussion
Selective argues it is entitled to summary judgment as a matter of law with respect to the
issue of liability under the 2013 and 2017 Indemnity Agreements. Selective argues that because
the Hester Defendants have either admitted or failed to deny all of the relevant allegations, the
only real dispute existing between the parties is the amount of damages, if any, which will
ultimately be assessed against Defendants in this case.
Selective has asserted several claims against all Defendants. As previously stated, this
Court will consider this Motion only as it pertains to the Hester Defendants, as this action against

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James and Shannon Hester is stayed pursuant to 11 U.S.C. § 362 of the bankruptcy code. The
claims brought by Selective all arise out of the terms, conditions, and requirements under the 2013
and 2017 Indemnity Agreements. Here, the Hester Defendants filed an Answer admitting to the
relevant allegations regarding their liability under the 2013 and 2017 Indemnity Agreements.
Within Defendants’ responses to the interrogatories propounded by Selective, Defendants admit
that Hester Drywall defaulted on its obligations under the subcontract agreements. Defendants
further state that they do not contend that they are not in default of the 2013 and 2017 Indemnity
Agreements. [ECF #22-7, Ex. 6, p. 7]. Therefore, a review of the pleadings and the record before
this Court show there are no disputed facts as to the enforcement and applicability of the 2013
and 2017 Indemnity Agreements.
Defendants are generally bound by their admission in pleadings of the relevant allegations
addressing liability. See Fed. R. Civ. P. 8(b)(1)-(6); Congaree Riverkeeper, Inc. v. Carolina Water
Service, Inc., 248 F. Supp.3d 733, 750 (D.S.C. 2017) (citing Lucas v. Burnley, 879 F.2d 1240,
1242 (4th Cir. 1989). To date, the Hester Defendants have not filed a response to this Motion.
Nor have they otherwise claimed that their admissions in the Answer should not be binding. The
only affirmative defense raised in the Answer was that the Complaint failed to state sufficient
facts to constitute a claim for recovery of expenses of litigation and/or attorney’s fees. [ECF #11].
The Hester Defendants have admitted to the execution of the 2013 and 2017 Indemnity
Agreements, which were attached to Plaintiff’s Verified Complaint, and cited within the Verified
Complaint. [ECF #1]. The Hester Defendants do not contend that they are not in default under
the terms of the 2013 and 2017 Indemnity Agreements. Accordingly, this Court finds that there

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is no genuine issue of material fact as to liability of the Hester Defendants under the 2013 and
2017 Indemnity Agreements. Plaintiff’s Motion is therefore granted as to the Hester Defendants
only.
Conclusion
The Court has thoroughly reviewed the entire record, including all pleadings and motions
filed in this case. For the reasons stated above, Plaintiff’s Partial Motion for Summary Judgment
as to Liability [ECF #22] is GRANTED as to Defendants Hester Drywall, LLC; HW Glass, LLC
a/k/a HWGLASS, LLC; and Hester Properties Village, LLC only.
IT IS SO ORDERED.
Florence, South Carolina
January 30, 2019

s/ R. Bryan Harwell
R. Bryan Harwell
United States District Judge

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