Westchester Fire Insurance Company v. City of Brooksville , 465 F. App'x 851 ( 2012 )


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  •                                                                        [DO NOT PUBLISH]
    IN THE UNITED STATES COURT OF APPEALS
    FOR THE ELEVENTH CIRCUIT           FILED
    ________________________ U.S. COURT OF APPEALS
    ELEVENTH CIRCUIT
    MARCH 8, 2012
    No. 10-14075
    JOHN LEY
    ________________________
    CLERK
    D. C. Docket No. 8:09-cv-00062-SDM-TBM
    WESTCHESTER FIRE INSURANCE
    COMPANY, a New York corporation,
    Plaintiff-Counter-
    Defendant-Appellee,
    versus
    CITY OF BROOKSVILLE,
    Defendant-Counter-
    Claimant-Appellant.
    _________________________________________
    Appeal from the United States District Court
    for the Middle District of Florida
    _________________________________________
    (March 8, 2012)
    Before EDMONDSON and PRYOR, Circuit Judges, and BOWDRE,* District Judge.
    *
    Honorable Karon O. Bowdre, United States District Judge for the Northern District of Alabama,
    sitting by designation.
    PER CURIAM:
    This state-law case is about performance bonds and an abandoned single-
    family housing development in the City of Brooksville, Florida (the “City”). The
    City is attempting to recover $5.3 million from the Westchester Fire Insurance
    Company (“Surety”), which issued two performance bonds to indemnify the City
    from damage if the developer failed to complete agreed-upon infrastructure for the
    development. The developer filed for bankruptcy and failed to begin construction
    of the agreed-upon infrastructure; this dispute followed. Surety sought a
    declaratory judgment that the City is not entitled to the proceeds of the
    performance bonds; the City counterclaimed to collect the face value of the bonds.
    On appeal from the district court’s grant of summary judgment for Surety,
    the City argues that Surety is required to pay the City the full value of the bonds
    even if no construction on the development began. We conclude that the bonds
    impose no obligation on Surety to pay the City to complete the agreed-upon
    infrastructure improvements because no construction of the pertinent
    2
    improvements commenced. We affirm the district court’s granting summary
    judgment for Surety.1
    I. BACKGROUND
    Levitt and Sons of Hernando County (“Levitt”), a developer, purchased
    property in Brooksville and planned to develop a five-phase, single-family
    residential subdivision known as the “Cascades.” Levitt and the City entered into
    a Utility Services Agreement, in which the City agreed to provide, among other
    things, potable water and sewer services to the Cascades. As part of the Utility
    Services Agreement, Levitt and the City agreed to a Development Schedule, which
    includes five phases for development of the Cascades. Construction of Phase One
    of the Development Schedule is nearly completed. This case is about Phase Two.
    The three remaining phases of the Cascades development have not been platted,
    and no plans exist for development of these phases.
    1
    We deny the City’s motion to certify questions of state law to the Supreme Court of Florida.
    3
    The City approved Levitt’s final plan for the construction of Phase Two (the
    “plat”), and the plat was recorded in March 2006. The plat requires Levitt (or its
    successors) to construct certain improvements on Phase Two, which would be
    necessary for the City to supply utility services promised to future residents of
    Phase Two. These improvements include storm lines, potable water lines,
    reclaimed water lines, sanitary sewer lines, earthwork, and roadways.
    The City, before approving a final plat, must “be satisfied that all
    improvements . . . have been constructed.” CITY OF BROOKSVILLE CODE OF
    ORDINANCES § 129-3(c) (2006). But, “[i]n lieu of completion of the
    improvements, a bond . . . shall be furnished” equal to the cost of constructing the
    improvements. Id. For Phase Two, in lieu of completing the improvements before
    obtaining the City’s approval of a final plat (and in accordance with the
    Brooksville Ordinance), Levitt furnished a bond to secure completion of the
    improvements.2
    Before beginning construction of the Phase Two improvements, and before
    the estimated completion date stated on the bonds, Levitt petitioned for
    2
    Levitt commissioned Coastal Engineering to determine the construction cost of the Phase Two
    improvements and the value of the bonds Levitt would need to post. Based on Coastal Engineering’s
    estimate, Levitt asked Surety to issue two performance bonds on behalf of Levitt and in favor of the
    City as security for Levitt’s obligation to complete the improvements. For Phase Two the total value
    of the two bonds delivered by Levitt (as principal) and Surety to the City (as obligee) is
    $5,366,454.75.
    4
    bankruptcy and abandoned the Cascades. When Levitt filed for bankruptcy, Levitt
    had removed some trees and cleared some of the land for Phase Two. Levitt had
    begun no construction of the pertinent improvements, marketed and sold no lots in
    Phase Two, and built no home in Phase Two.3
    Shortly after Levitt abandoned the Cascades, the City demanded payment
    from Surety on the surety bonds. Surety denied payment. The City then sued
    Surety in state court to foreclose the bonds; the parties later voluntarily dismissed
    the state-court action and agreed to a one-year forbearance to allow for the
    possibility that a new developer would purchase the Cascades and begin
    construction. On the day the City planned to terminate the forbearance agreement,
    Surety filed this suit in district court for a declaratory judgment of its obligations
    to the City. The City counterclaimed to foreclose on the bonds.4
    The Phase Two property remains undeveloped land in a vegetated state. A
    principal of CaSHP2 stated that, if the City does not recover on the bonds, “there
    3
    The parties stipulated that “there are no disputes of fact and that the claims should be decided
    by the Court as a matter of law.” (emphasis in original). We have seen in the record a mention of
    a box culvert between Phase One and Phase Two. From the record we cannot say that this culvert
    is a Phase Two improvement of any kind; moreover, we cannot conclude that the culvert represents
    commencement of a substantial (as opposed to de minimis) construction of the pertinent Phase Two
    improvements.
    4
    Before this case was filed, Key Bank purchased the property at a foreclosure sale and later
    assigned the Cascades to OREO Corp. While this case was pending in the district court, ownership
    of Phase Two of the Cascades changed hands twice. In May 2009 OREO sold the Cascades to
    Kolter Group, LLC (“Kolter”). Kolter later transferred title to Phase Two to CaSHP2, LLC.
    5
    is no chance that the improvements will even be started in the foreseeable future”
    and, if the City does recover on the bonds, there is “maybe, [a] 50-50” chance that
    development will begin on a rolling basis “between 2013 and 2017.” The City has
    neither attempted to construct the pertinent improvements nor solicited bids to
    establish a current expected cost of constructing the improvements nor asked
    CaSHP2 to construct the improvements.5 No City resident has requested the
    construction of the improvements, and no existing home requires the utility
    services that would be provided by the improvements.
    The district court granted summary judgment in favor of Surety and against
    the City, reasoning, among other things, that Surety’s obligation to pay the City on
    the bonds is subject to an implied condition that payment for the improvements is
    required only if construction commences.
    II. DISCUSSION
    A surety bond is a contract guaranteeing performance of an obligation owed
    by another party; we interpret surety bonds according to the standards that govern
    5
    The City expressly relieved OREO and its successors of the obligation to construct the pertinent
    improvements; CaSHP2’s acquisition of Phase Two was expressly conditioned on the City’s
    agreement that CaSHP2 would not be obligated to install the Phase Two improvements.
    6
    construction of contracts in general and according to the intent of the parties. See
    Amer. Home Assurance Co. v. Larkin Gen. Hosp., Ltd., 
    593 So. 2d 195
    , 197 (Fla.
    1992). The surety bonds in this case read, in part, this way:
    [T]he Developer has agreed to complete certain on-site and/or off-site
    improvements in accordance with the Project Engineer’s Certified
    Cost Estimate for Completion of Improvements . . . such that if the
    Developer promptly and faithfully completes the improvements as
    required by the City Approvals on or before the Estimated Date of
    Completion, then this obligation will be null and void; otherwise it
    will remain in full force and effect, subject only to the following
    conditions:
    ....
    2. If the Developer fails to complete the required
    Improvements in accordance with the City Approvals, applicable
    regulations and this agreement, [Surety] must, upon written demand
    by the City, promptly pay over to the City the unreleased portion of
    the bond so that the City, or its agent, can complete the unfinished
    improvements in accordance with the terms and conditions of the City
    Approvals.
    Pursuant to the City’s ordinance, and before the plat was recorded, Levitt
    purchased the bonds; Surety then issued the bonds. We construe the bonds in the
    light of that ordinance. See Glades Cnty. v. Detroit Fid. & Sur. Co., 
    57 F.2d 449
    ,
    451 (5th Cir. 1932) (“The bond is plainly given under the [Florida] statute and to
    be construed in the light of it.”). The City, per its ordinance, conditions plat
    approval on either the presence of already-completed improvements or a bond
    furnished by the developer equal to the cost to construct the improvements.
    7
    As required by the City ordinance, Levitt furnished the performance bonds
    before the City’s recording of the plat. For the City, a purpose of the bonds was to
    ensure that no future resident of Phase Two owns a home without access to City
    utilities. For Levitt, the purpose of the bonds was to be allowed to move forward
    with the development of Phase Two. These purposes no longer apply to this case.
    No lots have been marketed or sold; so no future resident of Phase Two requires
    the utilities services the improvements would provide. No construction of
    improvements has been started; so no construction of improvements can be
    completed, that is, finished.
    The City cannot “complete the unfinished improvements” -- as the bonds
    say -- because no unfinished improvements are present in this case: no
    improvements were started. The wording of the bonds and the requirements of the
    City ordinance compel the conclusion for us that the bonds were not issued to
    punish Levitt or to enrich the City, but to allow the City to complete improvements
    once a developer starts them. For these kinds of bonds, this point is to be
    highlighted: the City is not to be left with the expense and mess of half-finished
    improvements once work on the improvements has started. Surety guaranteed that
    the improvements would be finished if started but did not guarantee that the
    improvements would be both started and finished.
    8
    We agree with the district court that these bonds are subject to an implied
    condition that payment for completion of the improvements is required only if
    Levitt started construction of the pertinent improvements. Cf. River Vale
    Planning Bd. v. E & R Office Interiors, Inc., 
    575 A.2d 55
    , 59-60 (N.J. Super. Ct.
    App. Div. 1990) (installation of improvements agreed to as a condition of site plan
    approval was subject to an implied condition that the improvements were required
    only if the developer proceeded with the project that was approved).
    This implied condition was not fulfilled: no construction of the pertinent
    Phase Two improvements began. Surety’s obligation to pay the City the amount
    of the bonds has not been triggered.
    III. CONCLUSION
    Surety has no obligation to pay the City the face value of the bonds to
    complete construction of improvements that never began. The City is entitled to
    no recovery on these bonds; the grant of summary judgment in this case is
    affirmed.
    AFFIRMED.
    9
    

Document Info

Docket Number: 10-14075

Citation Numbers: 465 F. App'x 851

Judges: Edmondson, Pryor, Bowdre

Filed Date: 3/8/2012

Precedential Status: Non-Precedential

Modified Date: 11/5/2024