Travelers Casualty and Surety Company of America v. Winmark Homes, Inc. , 518 F. App'x 899 ( 2013 )

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[DO NOT PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT
________________________
No. 11-15950
________________________
D.C. Docket No. 1:09-cv-03582-SCJ
TRAVELERS CASUALTY AND SURETY COMPANY OF AMERICA,
Plaintiff- Counter Defendant -
Appellee,
versus
WINMARK HOMES, INC., et al.,
Defendants-Counter
Claimants - Appellants.
__________________________
Appeal from the United States District Court
for the Northern District of Georgia
_________________________
(May 20, 2013)
Before BARKETT, JORDAN, and RIPPLE, * Circuit Judges.
PER CURIAM:
*
Honorable Kenneth F. Ripple, United States Circuit Judge for the Seventh Circuit, sitting by
designation.
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Travelers initiated this action against several entities and individuals to
recover under a general indemnity contract in connection with the execution of
surety bonds. Having reviewed the record, and with the benefit of oral argument,
we affirm the district court’s grant of summary judgment in favor of Travelers.
I
In 2005, a number of developers 1 started building eight residential
subdivisions in Gwinnett and Forsyth Counties in Georgia. Pursuant to various
development performance and maintenance agreements, the developers agreed
that, as a condition precedent to county approval of the subdivision plats, they
would construct and maintain certain improvements (i.e., roads, sidewalks,
landscaping, and drainage facilities). In July of 2007, Travelers and the Winmark
defendants executed a general contract of indemnity (the “indemnity agreement”);
Travelers agreed to issue surety bonds on behalf of the developers and other
individuals,2 all of whom agreed to indemnify Travelers for any loss that it might
incur as a result of issuing the bonds. We refer to the developers and the
individuals collectively as the Winmark defendants. Travelers subsequently issued
22 subdivision maintenance/performance surety bonds. Following a collapse in the
real estate market, all of the subdivisions were ultimately abandoned.
1
The developers are Winmark Homes, Inc., D.G. Jenkins Development Corporation, D.G.
Jenkins Management Corporation, Ascenture Homes, LLC, JSA, Inc., and Oakland Trace, LLC.
2
The individuals are David G. Jenkins, Chris D. Jenkins, and Clifford L. Sandoz.
2
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Gwinnett County gave notice to the developers and to Travelers that the
bonded obligations on some of the bonds had not been completed and that
additional work was needed. When the developers refused to perform the
additional maintenance, Travelers demanded that the Winmark defendants provide
either the full and complete discharge of Travelers from all outstanding bonds or
an irrevocable letter of credit in the amount of $924,348.47 (the alleged amount of
undischarged liability under the bonds). The Winmark defendants did neither. A
few weeks later, Travelers issued another demand under the indemnity agreement,
requiring once again discharge from all outstanding bonds or an irrevocable letter
of credit in the amount of $659,348.47. Travelers subsequently revised its position
and demanded a letter of credit in the amount of $223,846.00, which reflected the
low-end estimate of Robert Colby, a professional engineer and construction
consultant, of the cost of completing the bonded work remaining at the
subdivisions. 3 The Winmark defendants failed to meet Travelers’ demands,
prompting it to file this action. The Winmark defendants filed counterclaims
alleging breach of contract, breach of the covenant of good faith and fair dealing,
and breach of fiduciary duty.
Travelers moved for summary judgment on its claim for specific
performance and indemnification, and on the counterclaims. The district court
3
This reduced amount, $223,846.00, does not include the cost of placing sidewalks on vacant
lots and excavating the retention ponds.
3
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granted Travelers’ motions. The Winmark defendants appeal from the district
court’s grant of summary judgment. They contend that the district court erred in
(1) requiring them to provide an irrevocable letter of credit in the amount of
$223,846.00; (2) awarding Travelers attorneys’ fees and expenses in the amount of
$107,048.21; and (3) rejecting their counterclaims.
II
We review a grant of summary judgment de novo and apply the same legal
standards as the district court. See Citizens for Smart Growth v. Sec’y of the Dep’t
of Transp., 669 F.3d 1203, 1210 (11th Cir. 2012). “The court shall grant summary
judgment if the movant shows that there is no genuine dispute as to any material
fact and the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P.
56(a). We view the evidence and all factual inferences in the light most favorable
to the party opposing the motion. See Prickett v. DeKalb County, 349 F.3d 1294,
1296 (11th Cir. 2003) (citations and quotations omitted). Plenary review applies to
the construction of written contracts. See Nat’l Fire Ins. Co. of Hartford v. Fortune
Constr. Co., 320 F.3d 1260, 1267 (11th Cir. 2003).
A
A federal court in a diversity case is required to apply the choice of law rules
of the state in which that court sits. See Klaxon Co. v. Stentor Electric Mfg. Co.,
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313 U.S. 487, 496 (1941); O’Neal v. Kennamer, 958 F.2d 1044, 1046 (11th Cir.
1992). Here it is undisputed that Georgia contract law applies.
When interpreting indemnity agreements under Georgia law, we apply the
ordinary rules of contract construction. See Anderson v. U.S. Fid. & Guar. Co.,
600 S.E.2d 712, 715 (Ga. Ct. App. 2004). No construction is required or even
permissible when the language employed by the parties in the contract is plain,
unambiguous and capable of only one reasonable interpretation. See id. See also
Reliance Ins. Co. v. Romine, 707 F. Supp. 550, 552 (S.D. Ga. 1989) (“Under
Georgia law, where the language of a contract is definite and unambiguous, a court
must give it effect.”), aff’d, 888 F.2d 1344 (11th Cir. 1989) (per curiam).
The indemnity agreement requires the Winmark defendants to provide
Travelers with an irrevocable letter of credit if they fail to obtain Travelers’
discharge from bond liability. The indemnity agreement states, in ¶ 5, as follows:
(a) Indemnitors shall, within thirty (30) days of receipt of Company’s
[Travelers] written demand (“Discharge Demand”), procure the full
and complete discharge of the Company from any and all Bond(s) . . .
If Indemnitors fail to provide the aforementioned discharge
Indemnitors shall, within an additional seven (7) days, provide
Company with an irrevocable letter of credit in form, content and by a
bank acceptable to Company. The letter of credit shall be in an
amount equal to the total of all undischarged liability under said
Bond(s), which liability shall be determined at the time of the
Company’s Discharge Demand.
[D.E. 58-5 at 2, ¶ 5] (emphasis added).
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We agree with the district court that the Winmark defendants’ promise to
provide an irrevocable letter of credit is enforceable by its terms through an order
of specific performance. See Anderson, 600 S.E.2d at 715 (recognizing that the
Georgia court of appeals “consistently has upheld the validity and enforceability of
indemnification agreements executed in connection with the issuance of surety
bonds”); Hanover Ins. Co. v. Holley Constr. Co. & Assocs., Inc., 2012 WL 398135,
at *7 (M.D. Ga. Feb. 7, 2012) (enforcing an indemnity agreement’s collateral
security provision through an order of specific performance); Romine, 707 F. Supp.
at 553 (holding that, pursuant to terms of the indemnification agreement, plaintiff
was entitled to be indemnified by defendant). The indemnity agreement expressly
states that the letter of credit “shall be in an amount equal to the total of all
undischarged liability under said Bond(s),” which means exactly what it says—the
amount under the bonds that has not been discharged or paid. The district court
certainly did not err in determining that the total undischarged liability on the
bonds was $223,846.00, consistent with Mr. Colby’s low-end estimate, and in
awarding the irrevocable letter of credit in that amount.
Additionally, having reviewed the record, we are not persuaded by the
Winmark defendants’ argument that Travelers acted in bad faith in demanding the
letter of credit in accordance with the indemnity agreement. Similarly, we find no
merit to the Winmark defendants’ counterclaims that Travelers breached any
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fiduciary duties to them or breached its contract. Having found that Travelers’
demand was expressly authorized by the indemnity agreement, the Winmark
defendants’ counterclaims fail as a matter of law.
B
The indemnity agreement, again in ¶ 5, specifically states that the Winmark
defendants waive their right to contest the requirement to provide an irrevocable
letter of credit:
(b) Indemnitors waive, to the fullest extent permitted by law, each and
every right that they may have to contest this requirement.
Indemnitors stipulate and agree that Company will not have an
adequate remedy at law should Indemnitors fail to post said letter of
credit and further agree as a result that Company is entitled to specific
performance of this provision.
(emphasis added). The district court found that, pursuant to the plain language of
the indemnity agreement, the Winmark defendants had agreed to waive any right to
challenge the requirement for a letter of credit and that the waiver provision was
not unconscionable. Because the Winmark defendants do not appeal this ruling, 4
the district court’s order on this point stands. “This circuit has consistently held
that issues not raised on appeal are abandoned.” North Am. Med. Corp. v. Axiom
Worldwide, Inc., 522 F.3d 1211, 1217 n.4 (11th Cir. 2008). See also Greenbriar,
Ltd. v. City of Alabaster, 881 F.2d 1570, 1573 n. 6 (11th Cir. 1989).
4
Although not briefed in their response to the motions for summary judgment, at one of the
hearings below, the Winmark defendants argued that the waiver provision was unconscionable.
See Transcript of Motions Hearing at 37 [D.E. 85]. But on appeal they make no such argument,
or any other argument, challenging the waiver provision.
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C
With respect to attorneys’ fees, the indemnity agreement specifically
provides as follows:
In consideration of the furnishing of any such bond . . . Indemnitors . .
. promise . . . To indemnify and exonerate Company [Travelers] from
and against any and all loss . . . including . . . court costs and counsel
fees, as well as any expense incurred or sustained by reason of making
any investigation . . . with the furnishing of Bond(s) . . . and the
enforcement of this Agreement . . . To this end Indemnitors promise . .
. [t]o promptly reimburse Company . . . it is agreed that (1) originals
or photocopies of claim drafts, or of payment records, kept in the
ordinary course of business, including computer printouts, verified by
affidavit, shall be prima facie evidence of the fact and amount of loss,
(2) Company shall be entitled to reimbursement for any and all
disbursements made by it.
(emphasis added). Travelers submitted payment records of its attorneys’ fees in
the form of a computer printout verified by affidavit, thereby meeting its prima
facie burden. See Wilson Affidavit ¶¶ 41-42 [D.E. 58-3]; Exhibit M to Wilson
Affidavit [D.E. 58-16]. By signing the indemnity agreement, the Winmark
defendants expressly agreed that computer printouts, verified by affidavit, would
be prima facie evidence of the fact and amount of loss. Nevertheless, the Winmark
defendants did not submit any evidence disputing the fees requested. Based on the
record before us, we agree with the district court that Travelers is entitled to an
award of attorneys’ fees and expenses under the indemnity agreement because it
presented prima facie evidence of its loss and because the Winmark defendants did
not provide any rebuttal evidence. See Cagle Constr., LLC v. Travelers Indemnity
8
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Co., 700 S.E.2d 658, 661 (Ga. Ct. App. 2011) (affirming trial court’s grant of
summary judgment to surety for attorneys’ fees); Anderson, 600 S.E.2d at 716
(affirming trial court’s award of attorneys’ fees, on summary judgment, to surety
based on affidavits that qualified as prima facie evidence pursuant to indemnity
agreement); Romine, 707 F. Supp. at 553 (finding that plaintiff was entitled to
reasonable attorney’s fees incurred in the enforcement of an indemnification
agreement).
III
The Winmark defendants’ promise to provide a letter of credit upon demand
to Travelers in the Indemnity Agreement is enforceable according to its terms.
Travelers is entitled to specific performance in the form of an irrevocable letter of
credit and to its attorneys’ fees. The Winmark defendants’ counterclaims fail as a
matter of law.
AFFIRMED.
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