American Contractors Indemnity Co. v. Carolina Realty & Development Co. , 529 F. App'x 346 ( 2013 )

UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 12-1952
AMERICAN CONTRACTORS INDEMNITY COMPANY,
Plaintiff - Appellant,
v.
CAROLINA REALTY AND DEVELOPMENT COMPANY INCORPORATED; JOHN
PAUL BAEHR; KIMBERLY BAEHR; WILLIAM LAMAR BAEHR; DUFFY
BAEHR; JOHN BAEHR; JANIS BAEHR,
Defendants – Appellees,
and
MILLICENT BOZEMAN; WILLIAM S. BOZEMAN; CHAD CLARK;
MARY CLARK,
Defendants.
Appeal from the United States District Court for the District of
South Carolina, at Spartanburg. Timothy M. Cain, District
Judge. (7:09-cv-02145-TMC)
Argued: May 15, 2013 Decided: June 19, 2013
Before TRAXLER, Chief Judge, and GREGORY and DUNCAN, Circuit
Judges.
Affirmed by unpublished per curiam opinion.
Jeff B. Slagle, THOMPSON & SLAGLE, PC, Johns Creek, Georgia, for
Appellant. John S. Simmons, SIMMONS LAW FIRM, LLC, Columbia,
South Carolina, for Appellees.
Unpublished opinions are not binding precedent in this circuit.
2
PER CURIAM:
Appellant American Contractors Indemnity Corporation
(“American Contractors”) filed the instant action in the United
States District Court for the District of South Carolina seeking
to enforce an indemnity agreement entered into with Appellee
Carolina Realty and Development Incorporated (“Carolina
Realty”). 1 The district court entered judgment in favor of
Carolina Realty, finding that the claim for indemnification was
barred by a settlement agreement entered into by the parties.
American Contractors appealed the district court’s decision.
For the reasons that follow, we affirm.
I.
American Contractors is a commercial surety that issues
construction payment and performance bonds. In accordance with
standard industry practice, American Contractors issues bonds to
general contractors or subcontractors, financially guaranteeing
the (sub)contractor will perform its contractual obligations
with an obligee. Should the bonded (sub)contractor fail to
1
The other named Appellees, John Paul Baehr, Kimberly
Baehr, William Lamar Baehr, Meredith Baehr, John Baehr, and
Janis Baehr signed the indemnity agreement in their individual
capacities as agents for Carolina Realty. Only John Paul Baehr,
Kimberly Baehr, and Duffy Baehr were represented on appeal. For
the purposes of this opinion, the parties will be referred to
collectively as Carolina Realty.
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perform its contractual obligations, such as paying laborers or
suppliers, the obligee can seek redress from American
Contractors as the surety.
Dick Corporation was named general contractor for the NAS
Pensacola, Aviation Rescue Swimmers School and Physical Fitness
Center project (the “Florida Project”). Dick Corporation in
turn hired Carolina Realty as a subcontractor for the Florida
Project to perform roofing work. The subcontract required
Carolina Realty to obtain payment and performance bonds and as
such, Carolina Realty applied to American Contractors for the
necessary bonds. In line with standard practice, before issuing
the bonds, American Contractors required Carolina Realty to
execute a General Agreement of Indemnity (“Indemnity Agreement”)
to insure against potential losses. In the Indemnity Agreement,
Carolina Realty agreed to “indemnify and hold [American
Contractors] harmless from and against any and all demands,
liabilities, losses, costs, damages, attorneys’ fees and
expenses” that arise from any bond claims. Carolina Realty
executed the Indemnity Agreement on July 6, 2006, and the
payment and performance bonds were issued on or about August 22,
2006.
Beginning in 2008, American Contractors began receiving
claims on the payment bond it had issued to Carolina Realty from
labor and material suppliers. In July of that year, one
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supplier and one subcontractor of Carolina Realty filed suit
against Dick Corporation in the United States District Court for
the Northern District of Florida, asserting a payment bond claim
against the bond that Dick Corporation had itself taken out for
the Florida Project. Dick Corporation filed third party
complaints naming American Contractors and Carolina Realty as
third-party defendants. Dick Corporation also asserted a
performance bond claim against American Contractors based on
Carolina Realty’s alleged deficient performance of the
subcontract. Carolina Realty filed a counterclaim against Dick
Corporation. American Contractors did not assert any
counterclaims. Ultimately, several lawsuits were filed by a
number of parties alleging breaches of various contracts entered
into for the Florida Project. These lawsuits were consolidated
for purposes of discovery and trial (the “Florida Litigation”). 2
In 2009, American Contractors sent a demand letter to
Carolina Realty, insisting it post $650,000.00 in collateral
security -- an amount thought sufficient at the time to
indemnify American Contractors for the expenses it had incurred
2
The other consolidated cases were captioned as United
States of America for the use and benefit of Bradco Supply Corp.
v. Dick Corp., et. al. and United States for the use and benefit
of Infinity Builders of the Emerald Coast, LLC v. Continental
Ins. Co. et al., Consolidated Civil Action No. 3:08-cv-56-MCR-MD
(N.D. Fla.).
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to date on the payment and performance bonds issued to Carolina
Realty. Carolina Realty did not respond to the request. On
August 13, 2009, while the Florida Litigation was still pending,
American Contractors filed the instant action against Carolina
Realty, seeking indemnification for expenses it had incurred as
a result of the issued bonds, including repayment of the money
spent paying bond claims and attorneys’ fees for the litigation.
Meanwhile, settlement talks between the various parties to
the Florida Litigation were transpiring. In the settlement
talks, Carolina Realty did not represent itself. Instead,
American Contractors’ attorney, Frank Lanak, negotiated the
agreement on behalf of Carolina Realty pursuant to the power-of-
attorney provision in the Indemnity Agreement, as Carolina
Realty objected to settlement. On February 10, 2011, the
parties to the Florida Litigation, including Dick Corporation,
Carolina Realty, and American Contractors, entered into an
agreement settling the suits embroiled in the Florida Litigation
and releasing all claims between the parties arising out of the
Florida Project (“Settlement Agreement”). In total, American
Contractors paid Dick Corporation $262,250.00 in claims against
the bonds taken out by Carolina Realty.
Once the Florida Litigation settled, discovery ensued in
the instant action, as American Contractors still sought
indemnification in the amount of $677,473.59, reflecting the
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money it had paid in settlements, additional bond claims, costs,
and attorneys’ fees in connection with the bonds issued to
Carolina Realty. Following discovery, both parties moved for
summary judgment. Carolina Realty argued that the
indemnification claim was barred by the Settlement Agreement
entered into by the parties to end the Florida Litigation.
American Contractors contended that the Settlement Agreement had
no effect on its claim for indemnification.
The cross motions were referred to a magistrate judge, who
concluded that the Settlement Agreement was not intended to
release American Contractors’ indemnification claim against
Carolina Realty. As such, the magistrate judge submitted a
report and recommendation to the district court recommending
that American Contractors’ motion for summary judgment be
granted and Carolina Realty’s motion be denied. The district
court held oral argument on the magistrate judge’s report on May
21, 2012. On July 9, 2012, the court issued an order declining
to adopt the magistrate judge’s conclusions, and instead granted
Carolina Realty’s motion to enforce settlement, or in the
alternative, summary judgment. See American Contractors Indem.
Co. v. Carolina Realty and Development Co., Inc., 2012 WL
2711802 (D.S.C. 2012). American Contractors timely appealed.
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II.
The district court heard this case pursuant to its
diversity jurisdiction. See 28 U.S.C. § 1332. Therefore, we
have jurisdiction under 28 U.S.C. § 1291. There is no choice of
law provision in the Indemnity Agreement. As such, because the
action was filed in the United States District Court for the
District of South Carolina, South Carolina law, including its
choice-of-law rules, applies to this action. Erie R.R. Co. v.
Tompkins, 304 U.S. 64 (1938); Volvo Const. Equip. N. Am., Inc.
v. CLM Equip. Co., Inc., 386 F.3d 581, 599-600 (4th Cir. 2004).
Under South Carolina law, “a contract is controlled by the laws
of the State in which it is made and to be performed.” Doctors
Hosp. of Augusta, LLC v. CompTrust AGC Workers’ Comp. Trust
Fund, 636 S.E.2d 862, 864 (S.C. 2006). As all relevant acts
regarding the settlement transpired in Florida, we employ
Florida law to resolve the dispute, 3 and review the grant of
summary judgment de novo. Blair v. Defender Servs., Inc., 386
F.3d 623, 625 (4th Cir. 2004).
A.
The pertinent part of the Settlement Agreement reads:
[the parties] fully and forever settle, release and
discharge, each other, each of their predecessors,
successors, assigns, agents, insurers, sureties,
3
All parties agree that Florida law governs this matter.
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attorneys, officers, directors and employees from any
and all past and present claims, demands, damages,
debts, or causes of action, in law or in equity,
damages and losses of any and all kind or nature,
whether contingent or fixed, known and unknown claims
for known and unknown damages and which arise or may
arise out of acts, omissions or events which occurred
prior to the date hereof, arising out of or related to
[the Florida Litigation], all other matters between
the Parties relating to the [Florida] Project.
The Settlement Agreement goes on:
Not withstanding anything in this Settlement Agreement
to the contrary, this Settlement Agreement and the
releases contained here are strictly limited to the
Federal Action, Bradco Action, Infinity Action, Dick
Claims, Carolina Work, Carolina Claims, and all other
matters between the parties relating to or arising out
of the [Florida] Project.
Under Florida law, “[w]here the terms of a contract are
clear and unambiguous, the parties’ intent must be gleaned from
the four corners of the document.” Crawford v. Baker, 64 So. 3d
1246, 1255 (Fla. 2011). Further, when the language of a
contract “is clear and unambiguous[,] a court cannot entertain
evidence contrary to its plain meaning.” Sheen v. Lyon, 485
So. 2d 422, 424 (Fla. 1986).
We find the Settlement Agreement to be clear. Using broad
and unequivocal language, American Contractors decided to “fully
and forever settle . . . any and all past and present claims
. . . between the Parties relating to or arising out of the
[Florida] Project.” American Contractors and Carolina Realty
are named parties to the Settlement Agreement; they clearly fall
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within its broad scope. The instant action was pending at the
time the parties entered into the Agreement; it was most
certainly a “present claim.” American Contractors’
indemnification claim “arose out of” the Florida Project. When
the term “arising out of” is used as an exclusionary term, as it
was here, Florida courts have looked to the plain dictionary
definition of the term “arise” to conclude it means to
“originate” or “result from.” Westmoreland v. Lumbermens Mut.
Cas. Co., 704 So. 2d 176, 181-83 (Fla. Dist. Ct. App. 1997).
American Contractors seeks repayment for the money it paid out
on the bonds it issued Carolina Realty; these costs “resulted
from” Carolina Realty’s allegedly deficient performance on the
Florida Project and were therefore “fully and forever” settled
by the Agreement. American Contractors also requests
reimbursement for attorneys’ fees incurred during the course of
litigation; these fees “originated” in the Florida Litigation
and are thereby foreclosed by the Settlement Agreement. In
short, the plain and unambiguous language of the Settlement
Agreement forecloses American Contractors’ request for
indemnification. 4
4
Even if we were to find the Settlement Agreement to be
ambiguous, under Florida law any ambiguity is construed against
American Contractors as drafter of Agreement. See Hurt v.
Leatherby Ins. Co., 380 So. 2d 432, 434 (Fla. 1980).
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B.
Despite the clear language of the Settlement Agreement,
American Contractors argues the above Agreement does not cover
indemnification claims because: (1) the context of the
Settlement Agreement evinces indemnity claims were not intended
to be released; (2) Carolina Realty was not a true party to the
Settlement Agreement as the Agreement was signed by American
Contractors on Carolina Realty’s behalf; (3) the instant action
is not mentioned in the Settlement Agreement, showing that it
was not included under the purview of the Settlement; and (4)
the asserted indemnification claim does not “arise out of” the
Florida Project. We find these arguments unpersuasive.
i.
American Contractors argues that indemnification provisions
are essential to the successful operation of the construction
bond industry. Therefore, it asserts that putting the
Settlement Agreement in context, it is unreasonable to conclude
that a commercial surety in the construction industry would
waive its ability to bring an indemnification claim after having
to pay out on an issued bond.
We have noted indemnification is critical to the successful
operation of the construction bond industry. See Fidelity &
Deposit Co. of Md. v. Bristol Steel & Iron Works, Inc., 722 F.2d
1160, 1163 (4th Cir. 1983). This general premise does not
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render any provision of the Settlement Agreement ambiguous, such
that we may consider evidence outside of the four corners of the
contract. See Sheen, 485 So. 2d at 424. In accordance with
Florida law, we cannot consider this context evidence. The
general nature of the construction bond industry has no bearing
on our resolution of this appeal.
Similarly, American Contractors argues that we should put
ourselves in the shoes of the parties and consider the contract
in light of their individual perspectives. See 11 Fla. Jur. 2d
Contracts § 149. We can only do this, however, when the
contract is ambiguous or the meaning of the contract is
doubtful. See Ungaro v. West Palm Beach Biltmore Apartments, 61
So. 2d 642 (Fla. 1952). As we just stated, American Contractors
has not identified a single ambiguity in the Settlement
Agreement. Therefore, regardless of how important
indemnification is to sureties in the bond business, surety
relationships were considered under the Settlement Agreement and
all claims covered therein were still released.
ii.
American Contractors next argues that because Carolina
Realty was represented by an American Contractors’ attorney in
the settlement talks, Carolina Realty is not a true party to the
Settlement Agreement.
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To accept this argument would mean the Settlement Agreement
in toto has no effect as to claims asserted by or against
Carolina Realty. This cannot be. The Settlement Agreement
specifically lists Carolina Realty as a party to the Agreement.
The Indemnity Agreement gave American Contractors the option of
exercising power-of-attorney to represent Carolina Realty in
settlement talks. American Contractors chose to exercise its
power-of-attorney to settle the Florida Litigation on Carolina
Realty’s behalf over Carolina Realty’s objection. American
Contractors knowingly bound both itself and Carolina Realty by
the deal reached.
iii.
American Contractors also argues that this action does not
fall under the purview of the Settlement Agreement as it is not
specifically mentioned in the Agreement. American Contractors
reasons that this litigation was pending at the time the
Settlement Agreement was entered into, and had it wished to
include it in the Agreement, it would have done so expressly.
Again, this argument has no grounding in the words of the
Agreement. The Settlement Agreement expressly released all
involved parties from “any and all past and present claims”
relating to/arising from the Florida Litigation and the Florida
Project (emphasis added). To repeat, this indemnification
action was a “present claim” at the time of the Settlement
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Agreement. That it was not individually mentioned in the
Agreement is of no moment. Moreover, while there is a carve-out
provision in the Settlement Agreement exempting personal injury
and property damage claims, there is no similar provision for
indemnification claims. And the exclusion of indemnification
claims from the Settlement Agreement’s carve-out provision is
evidence that the parties did not intend to “contract with
respect to that matter.” See Gulf Cities Gas Corp. v. Tangelo
Park Svc. Co., 253 So. 2d 744, 748 (Fla. Dist. Ct. App. 1971).
It is important to remember that American Contractors
helped draft the Settlement Agreement. This is not a case of
parties having lopsided legal acumen -- the Settlement Agreement
was drafted and agreed to by American Contractors’ attorneys,
who are (presumably) well-apprised of the construction bond
business and basic contract principles. If American Contractors
wanted to exempt indemnification claims from the Settlement
Agreement it had the ability and knowledge to do so, as
evidenced by the fact that it expressly exempted other claims
from the Agreement. American Contractors’ attempt to carve out
this indemnification action from the Settlement Agreement is
contrary to the clear terms of the contract, and therefore
contrary to Florida law.
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iv.
American Contractors’ final argument is that the
indemnification claim did not “arise out of” or “relate to” the
Florida Litigation or the Florida Project. American Contractors
asserts that the claim arose from the Indemnity Agreement
itself, and therefore, does not fall under the plain language of
the Settlement Agreement.
The Settlement Agreement specifically includes the
subcontract entered into by Dick Corporation and Carolina
Realty, which required the payment and performance bonds at
issue. These bonds are specifically mentioned in the recitals
to the Settlement Agreement, and there is no dispute that bond
claims were settled by the Agreement. As the district court
reasoned, American Contractors would have no claim for
indemnification had it not been for Carolina Realty’s alleged
lack of performance in relation to the Florida Project.
Additionally, the attorneys’ fees sought by American Contractors
are for reimbursement for having to partake in the Florida
Litigation -- this is exactly what the Settlement Agreement
forecloses. The Indemnity Agreement was only activated when the
Florida Project was alleged not to have been performed
adequately by Carolina Realty. American Contractors’ claim for
indemnification arose from the Florida Project and the Florida
Litigation; it is therefore barred by the Settlement Agreement.
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III.
American Contractors drafted and executed a Settlement
Agreement with extremely broad language. It must now live by
the terms of the contract. For the reasons detailed herein,
clear principles of Florida contract law require us to affirm
the district court’s judgment granting summary judgment in
Carolina Realty’s favor. 5
AFFIRMED
5
Agents of the named corporate entities were also parties
to the Settlement Agreement. The Settlement Agreement therefore
covers the individual indemnitors who are parties to this
appeal. Our holding today applies to all named Appellees with
equal force.
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