Fid. & Deposit Co. of Md. v. Blanton
| Decision Date | 26 April 2023 |
| Docket Number | 4:21-CV-1074 JAR |
| Parties | FIDELITY AND DEPOSIT COMPANY OF MARYLAND, Plaintiff, v. JEFF BLANTON, et al, Defendants. |
| Court | U.S. District Court — Eastern District of Missouri |
This matter is before the Court on Plaintiff Fidelity and Deposit Company of Maryland's (“Fidelity”) Motion for Summary Judgment. on Count I of its Complaint (ECF No. 45). This matter is fully briefed and ready for disposition. For the reasons stated herein, the Court grants Fidelity's Motion for Summary Judgment on Count I of its Complaint.[1]
This case involves the issuance of bonds related to the construction of the Vue in Creve Coeur Missouri.[2]
On or about June 1, 2006, Defendants Jeff Blanton, Jody L. Blanton Midwest Asbestos Abatement Corporation, Blanton Holding, LLC Coastline Construction Services, LLC, and CenMech, LLC (collectively, “Indemnitors”) executed an Agreement of Indemnity (hereinafter “Indemnity Agreement”, ECF No. 46-2) in favor of Zurich American Insurance Company and its subsidiaries and affiliates including but not limited to Fidelity, with respect to construction surety bonds issued on behalf of Ben F. Blanton Construction, Inc. (“Blanton Construction”).
(Plaintiff's Statement of Uncontroverted Material Facts (“PSUMF”), ECF No. 46, ¶ 1).[3]In Paragraph SECOND of the Indemnity Agreement, the Indemnitors agreed to indemnify Fidelity for losses and/or expenses that Fidelity might incur because of issuing the bonds on behalf of Blanton Construction:
(ECF No. 46-2; PSUMF, ¶ 2). In Paragraph SECOND, Indemnitors agreed that Fidelity could recover all disbursements made in good faith:
In the event of any payment by the Surety the Contractor and Indemnitors further agree that in an accounting between the Surety and Contractor, or between the Surety and the Indemnitors, or either or both of them, the Surety shall be entitled to charge for any and all disbursements made by it in good faith in and about the matters herein contemplated by this Agreement under the belief that it is or was liable for the sums and amounts so disbursed, or that it was necessary or expedient to make such disbursements, whether or not such liability, necessity or expediency existed; . . .
(ECF No. 46-2; PSUMF, ¶ 3). Paragraph SECOND further agreed that vouchers or evidence of Fidelity's payment would constitute prima facie evidence of the amount Indemnitors would be liable to Fidelity. The Indemnity Agreement provides that “the vouchers or other evidence of any such payments made by the Surety shall be prima facie evidence of the fact and amount of the liability to the Surety.” (ECF No. 46-2; PSUMF, ¶ 4). The Indemnity Agreement also gives Fidelity the right to settle any claim or demand, unless the Indemnitors request that Fidelity litigate such claim and deposit the cash or collateral that Fidelity requires:
THIRTEENTH: The Surety shall have the right to adjust, settle or compromise any claim, demand, suit or judgment upon the Bonds, unless the Contractor and the Indemnitors shall request the Surety to litigate such claim or demand, or to defend such suit, or to appeal from such judgment, and shall depot with the Surety, at the time of such request, cash or collateral satisfactory to the Surety in kind and amount, to be used in paying any judgment or judgments rendered or that may be rendered, with interest, costs, expenses and attorneys' fees, including those of the Surety.
Thereafter and in reliance on the Indemnity Agreement, Fidelity issued performance and payment bonds, as well as various permit and licensing bonds on behalf of Blanton Construction. (PSUMF, ¶ 6). On or about June 25, 2015, Fidelity issued Performance Bond No. 9183624 (“Performance Bond”) in the penal sum of $24,461,157.50 with BCC Partners, LLC (“BCC”) as the Obligee, and Blanton Construction, as Principal for the project (“the Project”), commonly referred to as “The Vue,” located at 10545 Old Olive Road, Creve Coeur, Missouri. (PSUMF, ¶ 7). On the same date, Fidelity issued Labor and Material Payment Bond No. 9183624 (“Payment Bond”) in the penal sum of $24,461,157.50, with BCC as the Obligee and Blanton Construction was the principal for the Project. (PSUMF, ¶ 8). The Performance Bond and Payment Bond are referred to collectively as the “Bonds.”
After issues on the Project arose, Blanton Construction and BCC submitted their claims to a two-part arbitration. Phase 1 claims included all claims not in Phase 2; Phase 2 addressed structural claims, specifically “Non-balcony framing deficiencies and Non-corrected framing deficiencies.” (PSUMF, ¶ 15). After a hearing on Phase 1, BCC was awarded $7,800,780.23, plus interest, and $201,039.97 in arbitration costs, fees, and expenses against Blanton Construction. (PSUMF, ¶ 18). On July 16, 2020, Blanton Construction filed a voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code. (PSUMF, ¶ 34).
After arbitration of the Phase 1 claims, BCC demanded the full penal sum of the Performance Bond from Fidelity, with BCC ultimately filing suit against Fidelity. (PSUMF, ¶¶ 19-26); see BCC Partners, LLC v. Fidelity and Deposit Company of Maryland, 4:20CV01497. Fidelity and BCC settled their disputes, with Fidelity paying $22,800,000 and paying investigation costs to BCC and its affiliates in the amount of $335,079.89. (PSUMF, ¶¶ 30-35).
In addition to the Performance Bond claim, several subcontractors made claims on the Payment Bond. Fidelity hired attorneys and consultants to assist in investigating and defending against claims made by BCC and the subcontractors on the Bonds. Fidelity incurred attorneys' fees, costs and expenses, which continue to accrue. Fidelity ultimately paid $2,055,827.63 to subcontractors and $2,950.00 in attorneys' fees incurred to defend BCC in a mechanics lien claim filed by a subcontractor. (PSUMF, ¶¶ 38-42).
On August 30, 2021, Fidelity filed a Complaint against Indemnitors. (ECF No. 1). Fidelity's Motion for Summary Judgment is as to Count I for Breach of Written Indemnity Agreement. In total, Fidelity seeks $25,708,623.39, pus pre-judgment interest from the date of each payment.[4] (ECF No. 47 at 12)
The Court may grant a motion for summary judgment 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 judgment as a matter of law.” Fed.R.Civ.P. 56(c); Celotex Corp. v. Citrate, 477 U.S. 317, 322 (1986); Torgerson v. City of Rochester, 643 F.3d 1031, 1042 (8th Cir. 2011). The substantive law determines which facts are critical and which are irrelevant. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). Only disputes over facts that might affect the outcome will properly preclude summary judgment. Id. Summary judgment is not proper if the evidence is such that a reasonable jury could return a verdict for the nonmoving party. Id.
A moving party always bears the burden of informing the Court of the basis of its motion. Celotex Corp., 477 U.S. at 323. Once the moving party discharges this burden, the nonmoving party must set forth specific facts demonstrating that there is a dispute as to a genuine issue of material fact, not the “mere existence of some alleged factual dispute.” Fed.R.Civ.P. 56(e); Anderson, 477 U.S. at 248. The nonmoving party may not rest upon mere allegations or denials of his pleading. Id.
In passing on a motion for summary judgment, the Court must view the facts in the light most favorable to the nonmoving party, and all justifiable inferences are to be drawn in his favor. Celotex Corp., 477 U.S. at 331. The Court's function is not to weigh the evidence but to determine whether there is a genuine issue for trial. Anderson, 477 U.S. at 249.
“Because this is a diversity case, the Court applies state substantive law and federal procedural law.” Russo v Frasure, 371 F.Supp.3d 586, 589 (E.D. Mo. 2018) (citing Gasperini v. Center for Humanities, Inc., 518 U.S. 415, 427 (1996); see also Erie R. Co. v. Tompkins, 304 U.S. 64 (1938). “Because the Court sits in diversity, Missouri law governs.” Id. (citing Burger v. Allied Prop. & Cas. Ins. Co., 822 F.3d 445, 447 (8th Cir. 2016)). “Under Missouri law, the rules applicable to the construction of contracts also apply to indemnity agreements.” Nat'l Sur. Corp. v. Prairieland Const. Inc., 354 F.Supp.2d 1032, 1037 (E.D. Mo. 2004) (citing Chehval v. St. John's Mercy Medical Center, 958 S.W.2d 36, 38 (Mo.Ct.App. 1997)).
To succeed on a claim for breach of contract in Missouri, Fidelity must establish: (1) the existence of a valid contract; (2) the rights and obligations of the respective parties; (3) a breach; and (4) damages. Nat'l Sur. Corp., 354 F.Supp.2d at 1039 (citing Rhodes Engineering, Inc. v. Public Water Supply District No. 1, 128 S.W.3d 550, 560 (Mo.Ct.App. 2004)).
Here Fidelity asks the Court to grant summary judgment in its favor in the amount of $25,708,623.39, which constitutes the amounts incurred by...
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