Surety Underwriters v. E & C TRUCKING, INC.

• Decision Date: 29 August 2000
• Docket Number: No. 990148.,990148.
• Citation: 2000 UT 71,10 P.3d 338
• Court: Utah Supreme Court
• Parties: SURETY UNDERWRITERS, a Utah corporation, and Certified Surety Group, Ltd., a Delaware corporation, Plaintiffs and Appellants, v. E & C TRUCKING, INC., a Utah corporation, Demar Egbert, Steve Chiang, and Eva Yu Chiang, Defendants and Appellees.

10 P.3d 338

2000 UT 71

SURETY UNDERWRITERS, a Utah corporation, and Certified Surety Group, Ltd., a Delaware corporation, Plaintiffs and Appellants, v. E & C TRUCKING, INC., a Utah corporation, Demar Egbert, Steve Chiang, and Eva Yu Chiang, Defendants and Appellees.

No. 990148.

Supreme Court of Utah.

August 29, 2000.

David C. Anderson, Salt Lake City, for plaintiffs.

David M. McGrath, Salt Lake City, for defendants.

WILKINS, Justice:

¶ 1 Plaintiffs Surety Underwriters (Surety) and Certified Surety Group, Ltd. (Certified), appeal from the trial court's order granting summary judgment in favor of defendants Steve Chiang and Eva Yu Chiang and denying plaintiffs' motion for summary judgment. We affirm.

BACKGROUND

¶ 2 E & C Trucking, Inc. (E & C), is a Utah corporation with three shareholders: Demar Egbert, Steve Chiang, and Eva Yu Chiang. Egbert is E & C's president.

¶ 3 Certified is a Delaware corporation.¹ Surety is a Utah corporation with its principal office in Salt Lake City. Pete Buffo is Certified's president, sole director, and secretary. Buffo is also Surety's president and director. At no time relevant to this dispute was Certified licensed in Utah, nor did Certified have a certificate of authority to transact an insurance business in Utah.

¶ 4 E & C used ComData Corporation, a Tennessee business, to pay its drivers. In 1995, a judgment was entered against E & C. To prevent default of its obligations to ComData for payroll reimbursement, E & C sought to obtain a bond in ComData's favor. Egbert contacted Buffo, a business acquaintance who maintained an office in Salt Lake City, regarding E & C's need of a bond. Buffo told Egbert that he was aware of a California company — referring to Certified — that could probably issue a bond. Egbert negotiated the bond with Buffo² and applied for the bond with Certified.

¶ 5 Certified approved a $50,000 bond on condition that E & C, Egbert, and the Chiangs sign a general indemnity agreement. The signed general indemnity agreement would enable Certified to recover money it paid ComData under the bond from those who signed the general indemnity agreement.

¶ 6 On May 18, 1995, Egbert, the Chiangs, and E & C, through Egbert, signed the general indemnity agreement in Salt Lake City.³ Egbert then took the general indemnity agreement to Buffo's office in Salt Lake City, where he delivered it to Buffo. At that office, Egbert paid for and executed the payment bond. That same day, Egbert, acting on E & C's behalf, and Buffo, acting on Certified's behalf, signed the bond.⁴

¶ 7 At the time the bond and general indemnity agreement were executed, Certified was not licensed or otherwise authorized to conduct an insurance business in Utah. The Chiangs did not know Certified was not so licensed when they signed the general indemnity agreement.

¶ 8 E & C failed to honor its contractual agreement with ComData and defaulted under the bond. ComData then placed a claim under the bond with Certified. As a result, Certified performed under the bond and paid ComData $50,000, the amount of the bond. ¶ 9 In October 1995, plaintiffs Surety and Certified initiated this action against defendants E & C, Egbert, and the Chiangs. Plaintiffs sought $50,000, plus interest, and attorney fees, costs, and expenses. In November 1995, the Chiangs filed a motion to dismiss. The trial court denied the Chiangs' motion to dismiss in May 1996.

¶ 10 In June 1996, based on E & C and Egbert's failure to respond to plaintiffs' action, the trial court entered a default judgment for $50,000 against E & C and Egbert. In May 1998, plaintiffs filed a motion for summary judgment against the Chiangs.

¶ 11 The Chiangs filed their own motion for summary judgment in June 1998. In their memorandum supporting their motion and opposing plaintiffs' motion, the Chiangs argued that in issuing the bond and general indemnity agreement, Certified was conducting an insurance business in Utah. The Chiangs argued that because Certified was not properly licensed to carry on an insurance business in Utah nor was it a qualified foreign corporation, the Utah Insurance Act prohibited Certified from collecting on the general indemnity agreement.

¶ 12 In January 1999, following arguments on the cross-motions for summary judgment, the trial court granted the Chiangs' motion and denied plaintiffs' motion. The trial court found that plaintiffs "essentially admit" in their affidavits "that they engaged in certain conduct in the State of Utah, including entering into negotiations regarding said insurance contracts in the State of Utah, and execution of the same within this State." The court also found that plaintiffs' conduct in Utah constituted "engaging in the insurance business under Title 31 and 31(a) of the Utah Code." The court concluded that plaintiffs' conduct violated the Utah Code and that the contract of indemnity and suretyship between plaintiffs and the Chiangs is void and unenforceable. The trial court then entered an order dismissing, with prejudice, the case against the Chiangs. Plaintiffs appeal.

STANDARD OF REVIEW

¶ 13 Plaintiffs appeal both of the trial court's summary judgment rulings. We first review the trial court's grant of the Chiangs' summary judgment motion. We then review the court's denial of plaintiffs' summary judgment motion.

¶ 14 We review the trial court's summary judgment rulings for correctness. See Aurora Credit Servs., Inc. v. Liberty W. Dev., Inc., 970 P.2d 1273, 1277 (Utah 1998)

; Certified Sur. Group, Ltd. v. UT Inc., 960 P.2d 904, 905-06 (Utah 1998). "We consider only whether the trial court correctly applied the law and correctly concluded that no disputed issues of material fact existed." Aurora Credit Servs.,

970 P.2d at 1277. This is the standard of review we apply because summary judgment is appropriate only "if 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." Utah R. Civ. P. 56(c).

¶ 15 In reviewing a grant of summary judgment, we view the facts and all reasonable inferences drawn therefrom in the light most favorable to the nonmoving party. See Tretheway v. Miracle Mortgage, Inc., 2000 UT 12, ¶ 2, 995 P.2d 599

; Higgins v. Salt Lake County, 855 P.2d 231, 233 (Utah 1993); see also Estate Landscape & Snow Removal Specialists, Inc. v. Mountain States Tel. & Tel. Co., 844 P.2d 322, 324 n. 1 (Utah 1992) (clarifying that reviewing court should view facts in light most favorable to nonmoving party, not losing party). In this case, both parties moved for summary judgment. We therefore view the facts somewhat differently when reviewing the trial court's rulings on the separate summary judgment motions. When reviewing the trial court's order granting the Chiangs' summary judgment motion, we view the facts and reasonable factual inferences in the light most favorable to plaintiffs, the nonmoving party. However, when reviewing the trial court's order denying plaintiffs' summary judgment motion, we view the facts and reasonable inferences drawn therefrom in the light most favorable to the Chiangs, the nonmoving party.

ANALYSIS

¶ 16 We first review plaintiffs' appeal of the trial court's order granting summary judgment to the Chiangs. ¶ 17 The trial court granted the Chiangs summary judgment because it concluded that in obtaining the contract of indemnity and suretyship, Certified had violated the Utah Code by engaging in the insurance business in Utah. Plaintiffs argue that the trial court's conclusion was erroneous because the transaction at issue here does not fall within the Utah Insurance Act's scope or purpose. In other words, plaintiffs argue that they did not engage in the insurance business in Utah. The Chiangs counter that the Utah Insurance Act does apply. The Chiangs assert that this suit is brought under the general indemnity agreement, which, the Chiangs argue, is a Utah insurance contract. That insurance contract was made in Utah and the Utah Insurance Act applies, the Chiangs argue, because the general indemnity agreement was signed by Utah residents in Utah, and the signing was the last act necessary to make the insurance contract binding.

¶ 18 To review the trial court's grant of summary judgment to the Chiangs, we must determine whether plaintiffs violated the Utah Insurance Act in obtaining the contract of indemnity and suretyship. To make this determination, we first examine the Chiangs' argument that the general indemnity agreement is an insurance contract.

¶ 19 The Chiangs point to section 31A-1-301(75)(a) of the Utah Code to support their argument that the general indemnity agreement is an insurance contract. That section provides:

(75) Subject to Subsection (40)(b), "surety insurance" includes:

(a) a guarantee against loss or damage resulting from failure of principals to pay or perform their obligations to a creditor or other obligee.

Utah Code Ann. § 31A-1-301(75)(a) (Supp. 1995) (emphasis added).⁵ The Chiangs argue that this section of the code describes the general indemnity agreement they signed and thus defines the agreement as insurance.

¶ 20 However, the Chiangs overlook subsection (40)(b), which provides:

(40) "Insurance" means any arrangement, contract, or plan for the transfer of a risk or risks from one or more persons to one or more other persons, or any arrangement, contract, or plan for the distribution of a risk or risks among a group of persons that includes the person seeking to distribute his risk. "Insurance" includes:

...

(b) contracts of guaranty or suretyship entered into by the guarantor or surety as a business and not as merely incidental to a business transaction.

Id. § 31A-1-301(40)(b) (emphasis added). Thus, according to section 31A-1-301(40)(b), the general indemnity agreement is not an insurance contract if it was entered into...