The Metropolitan Government of Nashville And Davidson County v. Wood Ridge Development, Inc. ( 2016 )

IN THE COURT OF APPEALS OF TENNESSEE
AT NASHVILLE
July 12, 2016 Session
THE METROPOLITAN GOVERNMENT OF NASHVILLE AND
DAVIDSON COUNTY v. WOOD RIDGE DEVELOPMENT, INC., ET AL.
Appeal from the Chancery Court for Davidson County
No. 12777I Claudia Bonnyman, Chancellor
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No. M2015-01556-COA-R3-CV – Filed November 4, 2016
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The developer of a Nashville subdivision and its surety entered into three performance
agreements by which they bound themselves to complete the infrastructure in the
subdivision. The Metropolitan Government brought an action to enforce the agreements
against both parties when the developer failed to complete the infrastructure. The surety
filed an answer as well as a cross claim against the developer and a third-party complaint
against a group of investors who had executed a separate agreement to indemnify the
surety for any amounts the surety might pay or be held liable. After settling with the
Metropolitan Government, the surety sought summary judgment against the developer
and investors; the cross and third-party defendants also sought summary judgment
asserting that, since the surety did not issue a separate bond, they had no obligation to
indemnify the surety. The court granted summary judgment to the surety upon holding
that the performance agreement operated as a bond and entitled the surety to
indemnification. The developer and investors appeal the grant of the surety‘s motion and
the denial of their motion. We hold that the surety‘s execution of the performance
agreements operated as an ―undertaking[] or other writing[] obligatory in nature of a
bond‖ as contemplated by the indemnity agreement and, accordingly, affirm the
judgment of the trial court.
Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Chancery Court Affirmed
RICHARD H. DINKINS, J., delivered the opinion of the court, in which ANDY D. BENNETT
and W. NEAL MCBRAYER, JJ., joined.
Arthur E. McClellan, Gallatin, Tennessee, for the appellants, Wood Ridge Development,
Inc., et al.
Lora Barkenbus Fox and Catherine J. Pham, Nashville, Tennessee, for the appellee, the
Metropolitan Government of Nashville and Davidson County.
Philip L. Robertson, Franklin, Tennessee, for the appellee, Lexon Insurance Company.
OPINION
I. FACTUAL AND PROCEDURAL HISTORY
Wood Ridge Development, Inc. (―WRD‖) was the developer of Carothers
Crossing Subdivision, located in Davidson County. In order to receive approval of the
subdivision plat for Carothers Crossing, WRD was required by the Metropolitan
Government of Nashville and Davidson County (―Metro‖) to construct the roadways,
sidewalks, water facilities, drainage facilities, sewer infrastructure, and other
improvements in the subdivision. To fulfill this obligation, WRD, as principal, and
Lexon Insurance Company (―Lexon‖), as surety, executed three performance agreements
wherein they bound themselves to Metro to complete all required public infrastructure in
the subdivision. Each agreement covered a different phase of construction within the
subdivision and bore a different number, identified as a ―Bond #.‖ The first agreement
was executed on May 24, 2007; it bore the bond number 1021035, covered improvements
in Phase I of the subdivision, and required ―the execution of a bond or other surety in the
sum of . . . $1,186,900‖ and that the infrastructure construction be completed by June 1,
2008. The second and third agreements were both executed on July 23 and covered
Phase 2, Section 1 and Phase 2, Section 2; both required ―a bond or other surety‖ in the
amount of $764,850 and $645,425, respectively, and the completion of infrastructure
construction by August 1, 2008. They bore bond numbers 1021050 and 1021049,
respectively.
WRD did not complete the infrastructure by the deadlines in the performance
agreements, and in August 2009 WRD was administratively dissolved by the State of
Tennessee. Metro sent three letters to Lexon in October 2009, demanding payments of
$309,500 for WRD‘s default with respect to Phase 1; $318,850 for Phase 2, Section 1;
and $450,425 for Phase 2, Section 2. When payment was not made, Metro filed suit in
Davidson County Chancery Court on May 31, 2012, naming WRD and Lexon as
defendants and seeking ―injunctive relief, specific performance under the Agreements,
and a declaration of the parties‘ rights under the Agreements, and/or damages, costs, and
fees, including attorneys‘ fees.‖
Lexon answered, generally denying the allegations that it was liable to Metro.
Lexon filed a cross claim against WRD and a third-party complaint against Wood Ridge
Investments, LLC, and its members Don Smithson, Susan Smithson, Ed Richey, and
Candy Richey (collectively, ―Wood Ridge Investments‖) for breach of contract arising
under a General Agreement of Indemnity (―indemnity agreement‖), which had been
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executed on May 10, 2007 and in which WRD, Wood Ridge Investments, and its
members (collectively the ―Indemnitors‖) agreed to indemnify Lexon for any amounts
Lexon was required to pay for executing ―certain bonds, undertakings, and other writings
obligatory in the nature of a bond‖ on behalf of the Indemnitors.
In due course, Lexon filed a motion for summary judgment on both its cross-claim
and third party complaint, and the Indemnitors filed a motion for summary judgment
seeking dismissal of Lexon‘s claim. The court granted summary judgment to Lexon and
denied the Indemnitors‘ motion; the court subsequently certified the order as final
pursuant to Rule 54.02 of the Tennessee Rules of Civil Procedure.
The Indemnitors appeal, articulating the following issues for our review:
1. Whether the trial court erred in failing to conform with Tennessee
Rules of Civil Procedure, Rule 56.04, by stating legal grounds for
its holdings.
2. Whether the trial court erred in holding that the three (3)
performance agreements were surety bonds.
3. Whether the trial court erred in holding that cross/third-party
defendants were liable under the indemnity agreement without a
finding that Wood Ridge Development, Inc. had defaulted pursuant
to the performance agreements.
II. STANDARD OF REVIEW
The resolution of this appeal turns upon the interpretation and application of the
indemnity agreement, a contract; this is a matter of law and thus appropriate for
resolution by summary judgment. Pitt v. Tyree Org. Ltd., 90 S.W.3d 244, 252 (Tenn. Ct.
App. 2002). The lower court‘s interpretation of a contractual document is not entitled to
a presumption of correctness on appeal. Guiliano v. Cleo, Inc., 995 S.W.2d 88, 95 (Tenn.
1999); Angus v. Western Heritage Ins. Co., 48 S.W.3d 728, 730 (Tenn. Ct. App. 2000).
On appeal, we must ―review the contract anew and make our own independent
determination of the agreement‘s meaning.‖ Hillsboro Plaza Enters. v. Moon, 860
S.W.2d 45, 47 (Tenn. Ct. App. 1993)).
We review the trial court‘s ruling on a motion for summary judgment de novo,
without a presumption of correctness. Rye v. Women’s Care Ctr. of Memphis, MPLLC,
477 S.W.3d 235, 250 (Tenn. 2015) (citing Abshure v. Methodist Healthcare-Memphis
Hosp., 325 S.W.3d 98, 103 (Tenn. 2010); Bain v. Wells, 936 S.W.2d 618, 622 (Tenn.
1997)). Our review requires ―a fresh determination of whether the requirements of Rule
56 of the Tennessee Rules of Civil Procedure have been satisfied.‖ Id. (citing Estate of
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Brown, 402 S.W.3d 193, 198 (Tenn. 2013)). Under Rule 56, summary judgment is
appropriate when ―the pleadings, depositions, answers to interrogatories, and admissions
on file, together with the 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.‖
Tenn. R. Civ. P. 56.04. ―Cross-motions for summary judgment are no more than claims
by each side that it alone is entitled to a summary judgment,‖ and each must be ruled on
in an ―individual and separate basis.‖ CAO Holdings, Inc. v. Trost, 333 S.W.3d 73, 83
(Tenn. 2010) (citing Rains v. Cascade Indus., Inc., 402 F.2d 241, 245 (3d Cir. 1968);
Rossignol v. Voorhaar, 316 F.3d 516, 523 (4th Cir. 2003); Morales v. Quintel Entm't,
Inc., 249 F.3d 115, 121 (2d Cir. 2001); Philip Morris, Inc. v. Harshbarger, 122 F.3d 58,
62 n. 4 (1st Cir. 1997); 10A Charles A. Wright, Arthur R. Miller & Mary Kay Kane,
Federal Practice and Procedure § 2720, at 335–36 (3d ed. 1998)). ―When considering
individual competing cross-motions for summary judgment, the court must take care to
resolve all factual disputes and any competing rational inferences in the light most
favorable to the party opposing each motion.‖ Id. (citing Wightman v. Springfield
Terminal Ry., 100 F.3d 228, 230 (1st Cir. 1996); Schwabenbauer v. Bd. of Educ., 667
F.2d 305, 314 (2d Cir. 1981)).
III. ANALYSIS
A. Compliance with Rule 56.04
The Indemnitors first contend that the order on the motions for summary judgment
fails to comply with Rule 56.04 of the Tennessee Rules of Civil Procedure, which
requires the court to ―state the legal grounds upon which the court denies or grants the
motion, which shall be included in the order reflecting the court‘s ruling.‖ Tenn. R. Civ.
P. 56.04. The Indemnitors assert that the court failed to state the factual and legal
grounds for denying their motion for summary judgment and for granting Lexon‘s motion
for summary judgment.
We do not agree with the argument that the order contains no findings of fact or
conclusions of law. The order reads in pertinent part:
The Court finds the following material facts to be undisputed and
makes the following conclusions of law:
1. Lexon, as surety, issued and delivered the Performance
Agreement at issue in this lawsuit in favor of Plaintiff Metropolitan
Government of Nashville and Davidson County (―Metro‖), as obligee, and
on behalf of Indemnitor Wood Ridge Development, LLC, as principal;
2. The Performance Agreement is a surety bond and an undertaking
in the nature of a surety bond;
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3. Indemnitors signed the indemnity agreements at issue in this
lawsuit in consideration for Lexon issuing the Performance Agreement
(collectively, the ―Indemnity Agreement‖);
4. A claim was made upon Lexon by Metro under the Performance
Agreement;
5. The Indemnity Agreement affords Lexon the sole right to
determine for itself and the Indemnitors whether to defend or compromise
claims;
6. The Indemnity Agreement further requires Indemnitors to post
collateral sufficient to cover any reserve created by Lexon, and Lexon did
in fact set up a reserve;
7. The Indemnity Agreement requires Indemnitors to defend,
exonerate, and indemnify Lexon from and against any and all loss, costs,
expenses, and attorneys[‘] fees, incurred by it as a result of having executed
any surety bond or undertaking in the nature of a bond, and to further pay
all premiums;
8. Lexon made demand upon Indemnitors to defend, exonerate, and
indemnify it from Metro‘s claim, to collateralize Lexon in the amount of
$1,078,775, and to pay premiums, all of which Indemnitors failed to do;
9. Lexon reasonably determined to defend and to ultimately
compromise Metro‘s claim and entered into an agreed order with Metro
dated December 9, 2013, whereby Lexon agreed to perform a certain scope
of work encompassed by the Performance Agreement;
10. Lexon has incurred losses of not less than $31,150 towards the
performance of said scope of work, $31,754.85 in attorney‘s fees in
defending claims arising by reason of the Performance Agreement and in
pursuing its claims under the Indemnity Agreement, and $133,044 in
unpaid premiums, for a total loss to date of not less than $195,948.85;
11. Lexon reasonably estimates the remaining costs to complete the
scope of work under the agreed order with Metro to be $616,751.25; and
12. Indemnitors are jointly and severally liable to Lexon as a matter
of law, pursuant to the indemnity agreement.‖
Rule 56 does not require that factual findings and conclusions of law be stated in
separate sections but that the trial court state the legal grounds upon which it denies or
grants a motion for summary judgment. Both motions for summary judgment called for
the court to resolve the same legal issue, i.e., whether the indemnity agreement rendered
the Indemnitors liable to Lexon. The 12 statements contained factual findings,
conclusions of law, or a mixture of the two and, viewed in their entirety and in context,
provide the legal grounds for the grant of Lexon‘s motion and the denial of the
Indemnitors‘ motion. Thus, the order complies with Rule 56.04.
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B. Lexon’s Motion for Summary Judgment
Lexon‘s motion was premised on the interpretation and application of the
indemnity agreement, which is a contract between Lexon and the Indemnitors; as such,
our consideration of its meaning and effect is governed by the canons of construction set
forth in Eatherly Const. Co. v. HTI Mem’l Hosp.:
The cardinal rule for interpretation of contracts is to ascertain the intention
of the parties and to give effect to that intention consistent with legal
principles. A primary objective in the construction of a contract is to
discover the intention of the parties from a consideration of the whole
contract. In construing contracts, the words expressing the parties‘
intentions should be given their usual, natural and ordinary meaning, and
neither party is to be favored in the construction. The court, at arriving at
the intention of the parties to a contract, does not attempt to ascertain the
parties‘ state of mind at the time the contract was executed, but rather their
intentions as actually embodied and expressed in the contract as written.
M2003-02313-COA-R3-CV, 2005 WL 2217078, at *4–5 (Tenn. Ct. App. Sept. 12, 2005)
(internal citations omitted). Neither party has argued that any provision of the indemnity
agreement is ambiguous, and upon our review, we discern no ambiguity. ―If clear and
unambiguous, the literal meaning of the [contract‘s] language controls the outcome of
contract disputes.‖ Planters Gin Co. v. Fed. Compress & Warehouse Co., Inc., 78
S.W.3d 885, 890 (Tenn. 2002).
Relevant to our resolution of the question of the Indemnitors‘ liability are the
following provisions of the indemnity agreement:
GENERAL AGREEMENT OF INDEMNITY
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WHEREAS, in the transaction of business, certain bonds, undertakings and
other writings obligatory in nature of a bond have heretofore been, and may
hereafter be, required by, for or on behalf of Indemnitors or any one or
more of the parties included in the designation Indemnitors, and application
has been made and will hereafter be made to the company to execute such
bonds and as a prerequisite to the execution of such bond or bonds, the
Company requires complete Indemnification.
***
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2. The Indemnitors will Indemnify and save the Company harmless from
and against every claim, demand, liability, cost, charge, suit, judgment and
expense which the Company may pay or incur in consequence of having
executed, or procured the execution of, such bonds, or any renewals or
continuation, thereof or substitutes therefore, including fees of attorneys, . .
. and the expense of procuring, or attempting to procure, release from
liability, or in bringing suit to enforce the obligation of any of the
Indemnitors under this Agreement. In the event of payment by the
Company, the Indemnitors agree to accept the voucher or other evidence of
such payment as prima facie evidence of the propriety thereof, and of the
Indemnitors liability therefore to the Company.
***
5. The Company shall have the exclusive right to determine for Itself and
the Indemnitors whether any claim or suit brought against the Company or
the Principal upon any such bond shall be settled or defended and its
decision shall be binding and conclusive upon the Indemnitors.
***
9. The Company at its option may decline to execute or participate in, or
procure the execution of, any such bonds without impairing the validity of
this General Agreement of Indemnity.
***
18. In the event of any breach, delay or default asserted by the obligee in
any said Bonds, or the Contractor has suspended or ceased work on any
contract or contracts covered by any said Bonds . . . , the Surety shall have
the right, at its option and in its sole discretion, and is hereby authorized,
with or without exercising any other right or option conferred upon it by
law or in the terms of this Agreement, to take possession of any part or all
of the work under any contract or contacts covered by any said Bonds, and
at the expense of the Contractor and Indemnitors to complete or arrange for
the completion of the same, and the Contractor and Indemnitors shall
promptly upon demand pay to the Surety all losses, and expenses so
incurred. . . .
In the introductory paragraph, the parties recognize that ―certain bonds,
undertakings, or other writings obligatory in nature of a bond‖ would be executed by
Lexon on behalf of the Indemnitors; in the same paragraph, that language is shortened to
―such bonds.‖ The paragraph also recognizes Lexon‘s requirement that it be indemnified
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as a prerequisite to executing ―such bonds.‖ The scope of indemnification includes
―every claim, demand, liability, cost, charge, suit, judgment and expense which [Lexon]
may pay or incur in consequence of having executed, or procured the execution of, such
bonds, or any renewals or continuation, thereof or substitutes therefore.‖ In addition, if a
claim was made or suit brought relative to the underlying work, Lexon is authorized to
defend or settle the claim and take possession of the work or contract; in such an event,
the Indemnitors are bound by Lexon‘s decision.
The parties disagree whether the performance agreement constituted a ―bond‖
within the meaning of the indemnity agreement. The Indemnitors assert that the trial
court erred in holding that ―the Performance Agreement[] constituted a performance bond
under Chapter 6-1 and 2 of Metro‘s subdivision regulations,‖ and that since no separate
bond was issued by Lexon, they had no obligation to indemnify Lexon.1 The indemnity
agreement contemplates that Lexon would issue ―certain bonds, undertakings and other
writings obligatory in nature of a bond‖ (emphasis added), and Lexon‘s execution of the
three performance agreements constituted such an undertaking and obligated Lexon to
guarantee WRD‘s performance. It does not matter whether the performance agreement
complies with the subdivision regulations to invoke the obligation to indemnify. See
Nat’l Sur. United States Fid. & Guar. Co. v. Rainey, 113 S.W. 397, 407 (Tenn. 1908)
(noting that ―although the instrument may not conform to the special provisions of a
statute or regulation in compliance with which the parties executed it, nevertheless it is a
contract voluntarily entered into upon a sufficient consideration, for a purpose not
contrary to law, and therefore it is obligatory on the parties to it in like manner as any
other contract or agreement is held valid at common law‖ (quoting President, etc., of
Bank of Brighton v. Smith, 87 Mass. 413, 415 (Mass. 1862)).2
1
This argument is premised in part on words that are not in the order, which actually reads, ―The
performance agreement is a surety bond and an undertaking in the nature of a surety bond.‖ The trial
court did not hold that the performance agreement constituted a ―performance bond,‖ as that term is
defined term in Metro‘s subdivision regulations; neither does the order refer to the regulations.
2
The Indemnitors also ―take the position that without Lexon issuing the ‗surety bond‘ mandated by
Chapter 6-1 and 2 of Metro‘s Subdivision Regulations, the Indemnity Agreement failed for lack of
consideration.‖ This argument is without merit. ―[C]onsideration must be measured at the time the
parties enter into their contract.‖ GuestHouse Int’l, LLC v. Shoney’s N. Am. Corp., 330 S.W.3d 166, 188
(Tenn. Ct. App. 2010) (citing 17A Am.Jur.2d Contracts § 114 (Supp. 2008)). ―Courts ‗will not inquire
into the adequacy or inadequacy of the consideration for a compromise fairly and deliberately made.‘‖ Id.
(quoting Canonie Energy, Inc. v. King, No. 03A01-9506-CH-00200, 1996 WL 87440, at *6 (Tenn. Ct.
App. Mar.1, 1996)). ―It is well-settled that consideration exists when the promisee does something that it
is under no legal obligation to do or refrains from doing something which it has a legal right to do.‖ Id.
(quoting Brown Oil Co. v. Johnson, 689 S.W.2d 149, 151 (Tenn. 1985); Pearson v. Garrett Fin. Servs.,
Inc., 849 S.W.2d 776, 779 (Tenn. Ct. App.1992)). The indemnity agreement was supported by the
parties‘ mutual promises to perform, i.e., Lexon would issue a surety bond or other writing in the nature
of a bond, which it did when it signed the three performance agreements as surety, and the Indemnitors
agreed to indemnify Lexon for any costs arising out of a claim made with respect to the ―bonds,
8
In support of its motion, Lexon relied on a statement of undisputed facts, the
indemnity agreement, the sworn declarations of its attorney, Michael Belinski, and the
agreed order of settlement between Lexon and Metro. Lexon argued that it was entitled
to summary judgment because the undisputed facts showed that the Indemnity
Agreement had been signed by the Indemnitors; WRD had failed to complete the
infrastructure; a claim had been made by Metro; Lexon had agreed to complete the
infrastructure; and the Indemnitors had failed to indemnify, defend, and exonerate Lexon
and had failed to post collateral, pay monthly premiums, and reimburse Lexon.
Lexon‘s statement of material facts consisted of 17 statements that, consistent with
Rule 56.03 of the Tennessee Rules of Civil Procedure,3 cited to the sworn declarations of
Mr. Belinski. In his declaration, he stated that: Metro had ―made demand under certain
surety bonds‖; that those bonds were issued, in part, in consideration of the execution of a
certain General Agreement of Indemnity; that ―despite demand, Indemnitors have failed
to indemnify, exonerate, or defend Lexon from such claims and all loss, costs, expenses,
and premiums incurred, as they are obligated under the Indemnity Agreement‖; that the
Indemnitors had failed to post collateral despite Lexon‘s demand; that Lexon and Metro
executed an agreed order in which ―Lexon agreed to an order of the Court requiring it to
complete the remaining public infrastructures to the Carothers Crossing subdivision‖; that
the Agreed Order was entered ―in good faith and under a belief that such agreement was
expedient and justified under the circumstances‖; and that Lexon had spent $31,150 in
construction, estimated the completion cost to be $616,751.25, was owed $133,044 by
the Indemnitors in past due premiums and incurred $31,754.85 in attorneys‘ fees to the
date of the declaration.
The Indemnitors disputed 10 of the 17 statements of fact; in support of their
disputes, they cited allegations of the complaint, answers, cross/third-party complaint,
and the following statements from the affidavit of Don B. Smithson, the President of
WRD and the Chief Manager of Wood Ridge Investments:
8. That Lexon Insurance Company (―Lexon‖) and Defendants have
each admitted in their pleadings in this matter that no bond was issued as
required in Chapter 6, subsections 1 and 2, of the Metropolitan Government
Subdivision Regulations and this is a fact.
9. That no bond has been issued as provided for in Chapter 6,
Subsections 1 and 2, of the Metropolitan Government Subdivision
Regulations to secure the completion of the Carothers Crossing
Development.
undertakings and other writings obligatory in nature of a bond‖ issued by Lexon. Thus, the indemnity
agreement is valid and enforceable.
3
That rule reads in pertinent part: ―Each fact shall be supported by a specific citation to the record.‖
Tenn. R. Civ. P. 56.03.
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10. That the Defendants do not owe Lexon the claimed premiums for
bonds since no bond was issued.
11. That I have requested that Lexon provide me with a copy of any
bond issued insuring the Defendants performance and they have been
unable to provide me a copy of the same.
12. That I have requested that Metropolitan Nashville Government
provide me with a copy of any bond issued insuring the Defendants
performance and they have been unable to provide me a copy of the same.
***
16. That I and each Defendant submit that they have no obligation
under the General Agreement of Indemnity as their entry into this
agreement and obligations arising there under were conditional upon the
issuance of a bond.
***
20. That the Defendants have no remaining obligations to
Metropolitan Government of Nashville and Davidson County (―Metro‖) to
complete any public improvements required by Metro under an Agreed
Order entered into between Lexon.
In six of the disputed statements, the Indemnitors admit they entered into the three
performance agreements, but assert that Lexon did not issue separate bonds. In the
remaining four responses, the Indemnitors admit that Lexon made demand pursuant to
the indemnity agreement, but deny that they had any obligation to post collateral,
exonerate, indemnify, or reimburse Lexon, or pay past due premiums, attorney‘s fees, or
costs to Lexon. The Indemnitors‘ responses to these statements are all premised upon the
fact that Lexon did not issue a separate document evidencing its obligation as surety
which the Indemnitors contend relieves them of any obligations under the indemnity
agreement.
―A disputed fact is material if it must be decided in order to resolve the substantive
claim or defense at which the motion is directed.‖ Mills v. CSX Transp., Inc., 300
S.W.3d 627, 632 (Tenn. 2009) (citing Martin v. Norfolk S. Ry. Co., 271 S.W.3d 76, 84
(Tenn. 2008)); see also Green v. Green, 293 S.W.3d 493, 514 (Tenn. 2009) (citing Eskin
v. Bartee, 262 S.W.3d 727, 732 (Tenn. 2008); Luther v. Compton, 5 S.W.3d 635, 639
(Tenn. 1999)). We have held that Lexon was not required to issue a separate bond
document in addition to signing the performance agreement to trigger the Indemnitors‘
obligations under the indemnity agreement; in light of that holding, the statements which
the Indemnitors‘ dispute are not material for purposes of determining whether Lexon was
entitled to summary judgment.
In that regard, we consider the following two undisputed facts to be dispositive:
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9. Claims have been made against Lexon under the alleged Bonds or other
undertakings of Lexon on behalf of WRD and Metro and Capital Bank[ 4]
seeks recovery from Lexon in this action. Complaint at ¶ 13; Lexon‘s
Cross/Third-Party Complaint at ¶ 15; Defendants‘ Answer to Lexon‘s
Cross/Third-Party Complaint at ¶ 15; Decl. of Michael Belinski at 115.
RESPONSE: Admitted for purposes of summary judgment only.
***
17. Defendants have failed to indemnify, exonerate, or defend Lexon from
such claims and all loss, costs, expenses, and premiums incurred. Lexon‘s
Cross/Third-Party Complaint at ¶ 12; Defendants‘ Answer to Lexon‘s
Cross/Third-Party Complaint at 12; Decl. of Michael Belinski at ¶ 7.
RESPONSE: Defendants admit for purposes of summary judgment only.
When the claim was made by Metro to enforce WRD‘s obligations under the
performance agreements, Lexon performed its function as surety by initially defending
and then settling the claim and working to complete construction. The Indemnitors have
failed to perform their reciprocal obligation under the agreement to indemnify Lexon, and
Lexon was entitled to judgment as a matter of law.
C. The Indemnitors’ Motion for Summary Judgment
To support their motion, the Indemnitors relied upon a memorandum of law,
statement of undisputed facts, the declaration of Don B. Smithson, the Metro Subdivision
regulations, and the declaration of Michael Belinski.
The motion and supporting material, like their response to Lexon‘s motion, are
premised upon and reflective of their theory that, because Lexon did not issue a separate
bond, no obligation to indemnify arose. The facts which they contend are undisputed and
which should result in summary judgment in their favor addressed the execution of the
indemnity agreement; the language of the subdivision regulations; the execution and
construction5 of the performance agreement; that no separate bond was issued; and
certain allegations of the pleadings. Lexon disputed only one statement of fact, which
4
Capital Bank was permitted to intervene as Defendant in this action; it is not involved in this appeal.
5
Lexon correctly observes in its response that construction of the performance agreement and of the
regulations are questions of law rather than fact.
11
sought to characterize Lexon‘s claims for recovery and which is not material to resolution
of the motion.6
We have held that Lexon‘s execution of the performance agreements was
sufficient to create the obligation to indemnify; for the same reasons, the facts relied upon
by the Indemnitors in support of their motion are immaterial. The court did not err in
denying their motion.
D. Other Matters
1. Additional Factual Findings
While the Indemnitors do not contest the factual findings or contend that an issue
of material fact precludes the grant of summary judgment, they assert that the court erred
in granting Lexon‘s motion without making factual findings ―that the Indemnitors and/or
WRD, Inc. were in default under the terms of the Performance Agreement[7] and . . . that
Lexon paid anything pursuant to a surety bond.‖
In its answer to Metro‘s Complaint, WRD admitted that ―all improvements have
not been completed.‖ In his declaration, Mr. Belinski attested to the facts that Lexon had
expended $31,150 and expected to spend $616,751.25 to complete the required
infrastructure; these amounts were not disputed by any party. In light of this admission
and statements as well as Lexon‘s settlement with Metro, taken in the context of the other
factual findings in the order, the court did not err by not making the specific findings that
the Indemnitors seek.
2. The Order
The Indemnitors argue that the order granting summary judgment to Lexon was
prepared by counsel for Lexon and ―is clearly not the product of the Trial Court‘s own
independent judgment;‖ they urge that the case be remanded for the court to enter an
order in compliance with Smith v. UHS of Lakeside, Inc.8
6
Lexon admitted as true all statements, with the exception of the following:
11. Lexon‘s claims and each count seeking recovery against Defendants seeks recovery
based upon the Defendants‘ execution of the Indemnity Agreement and not under
Lexon‘s claim that they issued a bond. Cross/Third-Party Complaint of Lexon at ¶ 6-12.
RESPONSE: Denied. The Cross/Third-party speaks for itself.
7
Only WRD, not the other Indemnitors, was listed as Principal in the performance agreement.
8
In Smith v. UHS of Lakeside, Inc., the Tennessee Supreme Court discussed a court‘s adoption of party-
prepared findings of fact and conclusions of law as follows:
12
There is nothing in the record before us that leads us to conclude that the order
does not accurately represent the court‘s own deliberation and decision, nor does it create
doubt in that regard.9 No disputed facts material to the issues of law were presented in
the motions for summary judgment and supporting documents. Neither party contends
that the court‘s factual findings are not supported by the record nor cites additional facts
pertinent to the resolution of these motions. This appeal turned upon the resolution of
matters of law, and, as noted earlier, our review is de novo; in accordance with that
standard we have made a fresh determination of the merits of both motions and have
reached the same conclusion as the trial court. Upon the record presented, the safeguards
discussed in Smith are satisfied, and we are confident that the order reflects the trial
court‘s own deliberations and decision.
3. Judicial Estoppel
Although not raised as a separate issue on appeal, the Indemnitors assert that this
Court should invoke the doctrine of judicial estoppel to prevent Lexon from taking what
they characterize as inconsistent positions in this litigation by ―us[ing] as a shield the fact
that a bond was not issued [t]hen subsequently asserting a contrary factual position that it
did issue a bond . . . as a sword to hold the Indemnitors liable.‖ A thorough search of the
record reveals that the Indemnitors did not plead judicial estoppel in the trial court as a
defense to the action brought against them; the defense is only mentioned in the
memorandum of law they filed in response to Lexon‘s motion for summary judgment.
While we are not obligated to consider a matter that has not been raised as a specific
[M]ost courts have approved, but not recommended, the practice of trial courts receiving
and using party-prepared findings of fact, conclusions of law, and orders as long as two
conditions are satisfied. First, the findings and conclusions must accurately reflect the
decision of the trial court. Second, the record must not create doubt that the decision
represents the trial court‘s own deliberations and decision.
***
Tenn. R. Civ. P. 56.04 requires the trial court, upon granting or denying a motion for
summary judgment, to state the grounds for its decision before it invites or requests the
prevailing party to draft a proposed order. Not only will this requirement assure that the
decision is the trial court‘s, it will also (1) assure the parties that the trial court
independently considered their arguments, (2) enable the reviewing courts to ascertain the
basis for the trial court‘s decision, and (3) promote independent, logical decision-making.
439 S.W.3d 303, 315–17 (Tenn. 2014) (internal citations and footnote omitted).
9
To support their argument, the Indemnitors assert that the reference in the order to WRD as an LLC
instead of as ―Inc.‖ demonstrates the court‘s supposed ―rubber-stamp[ing]‖ of a party-prepared order and
―failure to perform [its] duties under Rule 56.04 and Smith v. UHS of Lakeside.‖ WRD is referred to in
the order as ―Woodridge Development, Inc.,‖ and it appears that the second reference to that entity as an
―LLC‖ is a scrivener‘s error.
13
issue for our review on appeal10 or to consider matters that were not raised in the
appropriate manner before the trial court—such as by affirmative defense pled in the
answer or a motion in limine—the parties have fully briefed this issue on appeal;
accordingly, we will address it.
―The term ‗judicial estoppel[]‘ . . . indicates particularly that class of estoppels
arising from sworn statements made in the course of judicial proceedings, generally in a
former litigation[.]‖ Sartain v. Dixie Coal & Iron Co., 150 Tenn. 633, 266 S.W. 313, 316
(Tenn. 1924). Judicial estoppel is ―based solely upon that public policy which upholds
the sanctity of an oath, and precludes a party who has made a sworn statement—even in
another litigation—from repudiating the same when he thinks it to his advantage to do
so.‖ Id. at 317. The Tennessee Supreme Court has clarified the doctrine as follows:
[T]he doctrine of judicial estoppel is applicable only when a party has
attempted to contradict by oath a sworn statement previously made. See
Allen v. Neal, 217 Tenn. 181, 396 S.W.2d 344, 346 ([Tenn.] 1965) (noting
that ―[j]udicial estoppels arise from sworn statements made in the course of
judicial proceedings, generally in a former litigation, and are based on
public policy upholding the sanctity of an oath and not on prejudice to
adverse party by reason thereof, as in the case of equitable estoppel‖).
Cracker Barrel Old Country Store, Inc. v. Epperson, 284 S.W.3d 303, 315 (Tenn. 2009)
(emphasis in original).
The Indemnitors rely on the pleadings and the sworn declarations of Mr. Belinski
to argue that Lexon has taken contradictory positions during this litigation.11 The
Indemnitors argue that the act of settling Metro‘s claim should estop Lexon from pursing
their cross/third-party claim for indemnification under the indemnity agreement. We do
not agree; their argument misconstrues the doctrine of judicial estoppel.
10
See Rule 13(b) of the Tennessee Rules of Appellate Procedure.
11
The Indemnitors argue that using the word ―bond‖ to refer the performance agreements in the
memorandum of law filed in support of Lexon‘s motion and in Mr. Belinski‘s declaration is evidence of
an inconsistent position. We do not construe the reference in that manner, especially in light of the
language of the indemnity agreement itself, which initially uses the phrase ―certain bonds, undertakings
and other writings obligatory in the nature of a bond‖ to describe the documents to be executed by Lexon,
but later in the same paragraph shortens the language to ―such bonds.‖ The reference to the performance
agreement as a ―bond‖ does not amount to an assertion that the performance agreement is a security
document that complies with the subdivision regulations‘ requirements for a performance bond.
14
Under the facts of this case, the prerequisites for applying the doctrine of judicial
estoppel have not been met.12 Lexon‘s decision to settle Metro‘s claim is not inconsistent
with Lexon‘s denial of Metro‘s allegations that Lexon was liable under the performance
agreements. Lexon has consistently maintained that the Indemnitors are bound by the
terms of the indemnity agreement, regardless of the performance agreements‘ compliance
with the subdivision regulations. For purposes of judicial estoppel, settling a claim is not
equated with taking an inconsistent position. Lexon‘s conduct during this litigation does
not warrant the application of judicial estoppel.
IV. CONCLUSION
Based upon the foregoing analysis, we conclude that summary judgment should
have been granted to Lexon and denied to the Indemnitors. We affirm the judgment of
the trial court.
RICHARD H. DINKINS, JUDGE
12
Judicial estoppel applies to sworn statements. The only materials the Indemnitors rely on in their
arguments that can be considered for purposes of judicial estoppel are the declarations of Mr. Belinski.
We have reviewed them, and the Indemnitors‘ convoluted arguments relating to them, and conclude that
the declarations themselves contain no inconsistent positions.
15