Cincinnati Ins. Co. v. B&B Paving, Inc.
| Decision Date | 25 September 2017 |
| Docket Number | Case No. 1-16-cv-340 |
| Parties | The Cincinnati Insurance Company, an Ohio Corporation, Plaintiff, v. B & B Paving, Inc. d/b/a B & B Dirtworks, Michael Baumgartner, Nancy Baumgartner, Defendants. |
| Court | U.S. District Court — District of North Dakota |
Before the court is The Cincinnati Insurance Company's ("Cincinnati") "Motion for Summary Judgment," (Doc. No. 31), wherein Cincinnati seeks summary judgment as to its claims for breach of contract and quia timet. B & B Paving, Inc., Michael Baumgartner, and Nancy Baumgartner (collectively "the Defendants") have not responded to the motion.
Unless otherwise noted, the following facts are undisputed and straight-forward. As is represented to the court, Michael and Nancy Baumgartner own and operate B & B. B & B entered into two separate contracts for grading services at separate construction sites in North Dakota. These contracts required B & B to secure surety bonds (the "Surety Bonds"), which B & B obtained from Cincinnati. As a requirement for execution of these bonds, Cincinnati required B & B, with both Michael Baumgartner and Nancy Baumgartner as signatories, to sign corresponding indemnity contracts ("the Indemnity Agreements") which, generally speaking, required B & B to indemnify Cincinnati for any claims paid out under the bonds.
As is relevant in the current motions, the two Indemnity Agreements track one another verbatim. In relevant part, the agreements provide that B & B agreed to:
Indemnify the Surety and hold it harmless from and against any and all liability, losses, costs, damages, attorneys' fees, disbursements and expenses of whatever kind or nature which the Surety may sustain or incur by reason or in consequence of having executed or procured the execution of the Bond or Bonds aforementioned and/or which the Surety may sustain or incur in making any investigation, in settling any claims or in defending or prosecuting any actions, suits or other proceedings which may be made or brought under or in connection therewith, and/or in recovering or attempting to recover salvage or any unpaid Bond premium in obtaining or attempting to obtain release from liability, or in enforcing any of the covenants of this Agreement. The Undersigned will pay over, reimburse and make good to the Surety, its successors or assigns, all money which the Surety or its representative shall pay, or cause to be paid or become liable to pay, by reason of the execution of any such Bond or Bonds, such payment to be made to the Surety as soon as it shall become liable, whether the Surety shall have paid out such sum or any part thereof or not.
(Doc. Nos. 1-1, 1-2). The agreements contain prima facie evidence clauses providing:
Surety shall have the right to handle or settle any claim or suit arising out of or related to either or both any Bond and/or this Agreement. An itemized statement of loss and expense incurred by the Surety, sworn to by an officer of the Surety shall be prima facie evidence of the facts and extent of the Undersigned's liability under this Agreement.
(Doc. Nos. 1-1, 1-2). The agreements conclude with severability clauses providing that the "partial or complete invalidity of any one or more provisions of this Agreement shall not effect the validity or continuing force and effect of any other provision." (Doc. Nos. 1-1, 1-2).
Cincinnati received four claims under the bonds totaling $82,064.95. Cincinnati received one claim under the first surety bond in the amount of $25,992.87. (Doc. No. 33-1). Cincinnati received three claims under the second surety bond in the amounts of $12,172.80, $13,374.20, and$30,525.08, for a total of $56,072.08. (Doc. No. 33-1). After hiring counsel to investigate the claims, Cincinnati paid these claims. (Doc. No. 33-1). Cincinnati sent a demand letter seeking indemnification under the Indemnity Agreements. (Doc. No. 1-3). Although acknowledging they received this letter, (Doc. No. 33-6), the Defendants did not remit payment. (Doc. Nos. 33-1; 33-6).
The current motion for summary judgment focuses on Cincinnati's breach of contract claim. Cincinnati argues the undisputed facts demonstrate the Defendants breached their obligations under the Indemnity Agreements. As to damages, Cincinnati requests the court enter judgment in the amount of $96,050.65, which represents the $82,064.95 paid under the Surety Bonds and $13,985.70 for costs and expenses associated with discharging its obligations under the Surety Bonds and enforcing the Indemnity Agreements. The court and the parties are well-versed in the standard for summary judgment and the court will not repeat it here.
From the outset, the court notes that the Defendants have not responded to the current motion, and their time for doing so has lapsed. See D.N.D. Civ. L. R. 7.1(A)(1); Fed.R.Civ.P. 6(d). Under D.N.D. Civ. L. R. 7.1(F), a "party's failure to serve and file a memorandum or a response within the prescribed time may subject a motion to summary ruling. . . An adverse party's failure to serve and file a response to a motion may be deemed an admission that the motion is well taken." There is a question, however, about whether this court's local rule can bypass Fed.R.Civ.P. 56(a)'s requirement that the court make a determination that there is no genuine dispute of material fact and that the movant is entitled to judgment as a matter of law. Given this uncertainty, the court will make the required evaluation. In doing so, the court may engage in this inquiry based solely uponthe documents provided by the movant, with the local rules deeming the adverse party's failure to respond as forfeiting the right to have the court consider any argument the adverse party might proffer as to the inappropriateness of summary judgment.
By failing to respond to the instant motion, the local rules deems Cincinnati's motion to be well taken to the extent the court will gauge the merits of the motion solely on the information Cincinnati has proffered to the court. The Defendants' failure to respond, in effect, deprives them of their opportunity to be heard on the motion.
As another preliminary matter, the court notes each of the Indemnity Agreements contain forum selection and choice of law clauses providing the agreements "shall be governed by the laws of the State of Ohio, with proper venue being Butler County." However, neither party has cited nor relied upon this provision, raising the issue of whether the parties waived their contractual right to have this provision apply. Staying true to the choice of law clauses, the court must look to applicable Ohio law, under which "[w]aiver of a contractual right can occur when a party intentionally acts in a manner inconsistent with claiming that right." Bldg. Servs. Inst. v. Kirk Williams Serv.s Co., L.L.C., No. 07AP-686, 2008 WL 747657 at *2 (Ohio Ct. App. 2008); see also Cromeans v. Morgan Keegan & Co., Inc., 303 F.R.D. 543 (W.D. Mo. 2014) ().
Both parties thus far have intentionally acted in a manner inconsistent with their contractual right to have this action forumed in Butler County, Ohio and governed by Ohio law. By bringing this action in federal court in North Dakota, and by arguing it is entitled to summary judgment by invoking North Dakota law, the court concludes Cincinnati waived its contractual rights under thisclause. By continuing with this litigation in North Dakota without objection, and by defending itself in this action by invoking North Dakota law, the court likewise concludes the Defendants waived their contractual rights under this clause. Without direction to the contrary, this court will apply North Dakota law as it normally would sitting in diversity jurisdiction.
Cincinnati argues it is entitled to summary judgment because the Defendants undisputedly breached the Indemnity Agreements by not remitting payment for claims Cincinnati paid out under the Surety Bonds. It is undisputed that Cincinnati paid out claims made under the Surety Bonds. It is also undisputed that the Defendants have not compensated Cincinnati for those paid claims. The question is whether this failure to do so constituted a breach of the Indemnity Agreements.
With regard to indemnity contracts, the North Dakota Supreme Court has said:
An indemnity is "a contract by which one engages to save another from a legal consequence of the conduct of one of the parties or of some other person." N.D.C.C. § 22-02-01. " 'Indemnification is a remedy which allows a party to recover reimbursement from another for the discharge of a liability which, as between them, should have been discharged by the other.' " Olander Contracting Co. v. Gail Wachter Inv., 2002 ND 65, ¶ 15, 643 N.W.2d 29 (quoting Mann v. Zabolotny, 2000 ND 160, ¶ 7, 615 N.W.2d 526). We have recognized that "indemnity is an equitable doctrine, which is not amenable to hard and fast rules." Mann, at ¶ 7.
Specialized Contracting, Inc. v. St. Paul Fire & Marine Ins. Co., 2012 ND 259, ¶ 14, 825 N.W.2d 872. In interpreting these contracts, the court has further said:
Construction of a written contract to determine its legal effect is a question of law, which is fully reviewable on appeal. Hoge v. Burleigh Cnty. Water Mgmt. Dist., 311 N.W.2d 23, 27 (N.D.1981). An indemnity contract is interpreted applying the general rules for contract interpretation. Id. The indemnity provision should be interpreted to give effect to the parties' mutual intentions if it can be done consistently with legal principles. Id.; see also N.D.C.C. § 9-07-03. The parties' intent is to be ascertained from the writing alone if possible. Hoge, at 27; see also N.D.C.C. §...
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