Safety National Casualty Corporation et al v. United States Department of Homeland Security et al

Filing 325

MEMORANDUM AND ORDER denying 314 Motion for repayment (Proposed Order of Final Judgment due by 11/23/2015)(Signed by Judge Keith P Ellison) Parties notified.(arrivera, 4)

United States District Court
Southern District of Texas

ENTERED
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF TEXAS
HOUSTON DIVISION
AAA BONDING AGENCY, INC.,
Plaintiff,
V.
UNITED STATES DEPARTMENT OF
HOMELAND SECURITY, et al.,
Defendants.

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November 12, 2015
David J. Bradley, Clerk

Civ. No. 4:05-cv-2159

MEMORANDUM AND ORDER
In this Court’s Memorandum and Order of September 24th, 2015 and Order of November
2nd, 2015, the parties were asked to submit supplemental briefing regarding AAA Bonding
Agency, Inc.’s (“AAA Bonding”) Motion for Repayment. After considering all the submissions
of the parties and the applicable law, the Court concludes that the Motion for Repayment (Doc.
No. 314) should be denied.

As all the bond breaches before this Court have now been

adjudicated, the parties are ordered to submit a proposed order of final judgment, consistent with
this ruling and the prior rulings of this Court and the Fifth Circuit, no later than November 23rd,
2015.
AAA Bonding seeks reimbursement for $1,008,310.51 that it paid to the United States
Department of Homeland Security (“DHS”) in four installments, between October of 2012 and
January of 2013, in connection with the Agreed Procedures established in the alternative dispute
resolution process.

The payments were made before DHS and Safety National Casualty

Corporation (“Safety National”) executed their Settlement Agreement. AAA Bonding claims,
however, that the payments were made while DHS and Safety National were involved in secret
negotiations over the resolution of the bonds. As a result, AAA Bonding argues (1) that the
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payments were made “without full knowledge of the facts at the onset and also without
knowledge of the later contingency that emulated from the settlement between Safety and DHS,”
and (2) that the concealment of those negotiations from AAA Bonding constituted fraud. Doc.
No. 320 at 5.
Absent a mistake of fact, voluntary payments made as final settlement of debts cannot be
recovered, even if the debts were not legally due at the time of payment. Genesis Ins. Co. v.
Wausau Ins. Cos., 343 F.3d 733, 736 (5th Cir. 2003); see also Gulf Oil Corp. v. Lone Star
Producing Co., 322 F.2d 28, 31 (5th Cir. 1963) (“Gulf Oil does not and cannot dispute the
principle that, even though it was under no legal obligation to make the overpayments, if the
money was voluntarily paid, with full knowledge of all the facts, it cannot be recovered.”). This
rule applies with equal force to payments made to the federal government. United States v.
Edmondston, 181 U.S. 500, 510–11 (1901).

Money paid under a mistake of fact can be

recovered, see Gulf Oil Corp., 322 F.2d at 31, but money paid under a mistake of law is not
recoverable unless a party demonstrates that the money was paid under fraud, duress, or
compulsion. “[U]ncertainty about the facts, irrespective of the reason for such uncertainty, is not
the equivalent of a mistake of fact.” Chris Albritton Const. Co. v. Pitney Bowes Inc., 304 F.3d
527, 531–32 (5th Cir. 2002).
Based on the evidence submitted, this Court finds that DHS’s behavior did not constitute
fraud. When AAA Bonding asked DHS “whether the bond review process [was] continuing
with Safety” in January of 2013, counsel for DHS replied: “Safety National’s current
participation in the Agreed Procedures is part of the government’s ongoing negotiations with
Safety. Safety does not wish it disclosed, and I cannot comment on it.” Doc. No. 320-8 at 1.
The evidence does not show any material misrepresentations by DHS, and DHS did not have a

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duty to disclose details of its negotiations with Safety National to AAA Bonding. Furthermore,
neither the future settlement between DHS and Safety National nor uncertainty about the other
parties’ negotiations constituted a mistake of fact at the time AAA Bonding made the payments.
For the foregoing reasons, AAA Bonding’s Motion for Repayment is DENIED.
IT IS SO ORDERED.
SIGNED on this the 11th day of November, 2015.

KEITH P. ELLISON
UNITED STATES DISTRICT JUDGE

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