Hightower and Co., Inc. v. U.S. Fidelity and Guar. Co.
| Decision Date | 13 May 1988 |
| Citation | 527 So.2d 698 |
| Parties | HIGHTOWER AND COMPANY, INC. v. UNITED STATES FIDELITY AND GUARANTY COMPANY. 86-1499. |
| Court | Alabama Supreme Court |
W. Joseph McCorkle, Jr., of Balch & Bingham, Montgomery, for appellant.
John N. Pappanastos of Pappanastos & Samford, Montgomery, for appellee.
Hightower and Company, Inc. (Hightower), appeals from a summary judgment awarding United States Fidelity and Guaranty Company (USF & G) $1,135,079.75, plus other relief, against Hightower for its failure to exonerate and indemnify USF & G from obligations under payment and performance bonds issued by USF & G.
Hightower contracted with the United States Government on March 18, 1985, to construct housing units at Maxwell Air Force Base. The contract, being in excess of $2,000, was subject to the "Miller Act," 40 U.S.C. §§ 270a et seq., which required Hightower to provide the Government with payment and performance bonds from an acceptable surety to secure proper performance of the contract and prompt payment to all suppliers and subcontractors. As Hightower's surety on the Maxwell project, USF & G provided a performance bond of $3,887,900 and a payment bond of $1,555,160 in favor of the Government with Hightower as principal.
Hightower encountered difficulties on the project, and the Government issued "deficiency cure" notices on November 15, 1985, and January 6, 1986. Each notice stated that, unless the deficiency was cured within 10 days, the Government would be entitled to terminate the contract under its default clause. The Government issued a third deficiency notice on April 10, 1986, and requested that Hightower accelerate its work and submit a revised completion schedule. Hightower responded that it would be unable to complete the project within the time remaining, and the Government declared Hightower in default on May 13, 1986.
USF & G demanded that Hightower place it "in funds" before any payments under the bonds were made to the Government and suppliers and subcontractors. Hightower replied that it considered the termination unjustified and would treat payments by USF & G pursuant to the bonds as not made in good faith. In response to USF & G's request, however, Hightower either acknowledged the amounts due subcontractors and suppliers or asserted that the amounts were not presently payable because Hightower had not received progress payments from the Government after termination of the contract.
USF & G entered into payment agreements with the subcontractors and suppliers on the project, but declined to become contractor of record. The Government awarded a new contract after it had inventoried stored materials and prepared a bid solicitation. Based on additional engineering costs, amounts payable under the new contract, remedial work, and costs incurred by the Government, USF & G settled with the Government for $865,071.46 under the performance bond and with suppliers and subcontractors for $264,750.99 under the payment bond.
USF & G sued in July 1986, asking that Hightower be required to exonerate and indemnify USF & G for amounts paid pursuant to the bonds. Hightower denied liability and counterclaimed against USF & G for breach of duty of good faith, wanton breach of good faith, interference with contract, breach of contract, negligence, and wantonness. The court granted USF & G a summary judgment as to its complaint and granted USF & G a summary judgment as to Hightower's counterclaim (upon conversion of USF & G's motion to dismiss into a summary judgment motion); Hightower appeals the denial of its motion to alter, amend, or vacate those summary judgments.
Three issues are presented: First, whether the trial court erred in converting USF & G's motion to dismiss Hightower's counterclaim into a motion for summary judgment; second, whether Hightower's counterclaim presented genuine issues of material fact so as to defeat a motion for summary judgment; and third, whether as to USF & G's complaint there were raised genuine issues of material fact so as to defeat a motion for summary judgment.
In reviewing a summary judgment, we must determine whether the evidence, when viewed in a light most favorable to the nonmoving party, will support any one of the nonmoving party's theories of liability, and thus defeat summary judgment. Tolbert v. Gulsby, 333 So.2d 129 (Ala.1978). The granting of summary judgment is a nondiscretionary function of the trial court, and no presumption of correctness attaches to its decision upon appellate review. Tolbert, supra.
The first issue involves the procedure by which a Rule 12(b)(6), A.R.Civ.P., motion to dismiss is converted into a motion for summary judgment. At the hearing on USF & G's motion for summary judgment on its complaint and its motion to dismiss Hightower's counterclaim, USF & G requested that the court convert the motion to dismiss into a motion for summary judgment. Hightower objected to the conversion and stated that, with respect to the counterclaim, the only issue before the court was whether its counterclaim stated a legally cognizable claim. At the hearing, the trial court gave no indication of its intention to convert the motion to dismiss into a motion for summary judgment, but, 12 days later, granted summary judgment in favor of USF & G on its complaint and on Hightower's counterclaim.
In pertinent part, Rule 12(b), A.R.Civ.P., states:
"If, on a motion asserting the defense numbered (6) to dismiss for failure of the pleading to state a claim upon which relief can be granted, matters outside the pleading are presented to and not excluded by the court, the motion shall be treated as one for summary judgment and disposed of as provided in Rule 56, and all parties shall be given reasonable opportunity to present all material made pertinent to such a motion by Rule 56." (Emphasis added.)
In pertinent part, Rule 56(c), A.R.Civ.P., states:
(Emphasis added.)
In Hales v. First Nat. Bank of Mobile, 380 So.2d 797, 799 (Ala.1980), this Court stated:
Hales cites with approval the following language from Davis v. Howard, 561 F.2d 565 (5th Cir.1977):
Hales, 380 So.2d at 799. (Emphasis added.)
USF & G first asserts that the trial court's treatment of the motion to dismiss the counterclaim as a motion for summary judgment was mandated by Hightower's pleadings. In other words, because Hightower adopted and incorporated by reference its counterclaim as an affirmative defense to USF & G's complaint, USF & G argues that, in ruling on USF & G's motion for summary judgment on the main claim, the court was forced to consider and adjudicate all of the issues in the counterclaim. Hightower's incorporation and adoption of the terms of the counterclaim does not, however, relieve the trial court of its duty to provide notice to the parties upon conversion of a motion to dismiss into one for summary judgment. USF & G cites no authority derived from the Alabama Rules of Civil Procedure to persuade us otherwise.
USF & G also asserts that, at the hearing, the trial court made clear its intention to treat the motion to dismiss as one for summary judgment and that Hightower then had a 12-day period in which to submit materials in opposition to the motion. At the June 4 hearing, however, in response to USF & G's statement that the motion to dismiss should be treated as one for summary judgment, the court vaguely replied, "Okay." When Hightower objected to any such conversion, the court did not reply and did not indicate to the parties, either by oral or written order, its intentions with respect to the conversion. It is clear from the transcript of the hearing that Hightower proceeded to argue against a motion to dismiss and had no knowledge that the court contemplated a change in the procedural posture of the case.
When the trial court is called upon to consider a Rule 12(b)(6) motion, it must examine the allegations in the complaint, or, as in the instant...
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