JB Contracting Servs. v. UNIVERSAL SUR.

• Decision Date: 06 April 2001
• Docket Number: No. S-00-041.,S-00-041.
• Citation: 624 N.W.2d 13,261 Neb. 586
• Parties: J.B. CONTRACTING SERVICES, INC., a Nebraska corporation, Appellee, and Nebraska Beef, Ltd., a Nebraska limited partnership, as assignee of J.B. Contracting Services, Inc., Appellant, v. UNIVERSAL SURETY COMPANY, a Nebraska corporation, Appellee.
• Court: Nebraska Supreme Court

624 N.W.2d 13

261 Neb. 586

J.B. CONTRACTING SERVICES, INC., a Nebraska corporation, Appellee, and Nebraska Beef, Ltd., a Nebraska limited partnership, as assignee of J.B. Contracting Services, Inc., Appellant, v. UNIVERSAL SURETY COMPANY, a Nebraska corporation, Appellee.

No. S-00-041.

Supreme Court of Nebraska.

April 6, 2001.

William M. Lamson, Jr., and Robert A. Mooney, of Lamson, Dugan & Murray, L.L.P., Omaha, and, on brief, Cletus W. Blakeman and David A. Domina, of Domina Law, P.C., Norfolk, for appellant.

David A. Hecker, of Kutak Rock, L.L.P., Lincoln, for appellee.

HENDRY, C.J., WRIGHT, CONNOLLY, GERRARD, STEPHAN, and MILLER-LERMAN, JJ.

STEPHAN, J.

Nebraska Beef, Ltd., as the assignee of J.B. Contracting Services, Inc. (J.B. Contracting), asserted claims in this action against Universal Surety Company (Universal) based upon a performance bond pursuant to which ABC Electric, Inc., as principal, and Universal, as surety, undertook certain obligations to J.B. Contracting in connection with a construction project on property owned by Nebraska Beef. The district court for Douglas County sustained Universal's demurrer, denied leave to amend, and dismissed the action. Nebraska Beef perfected this timely appeal which we moved to our docket on our own motion pursuant to our authority to regulate the dockets of the appellate courts. See Neb.Rev.Stat. § 24-1106(3) (Reissue 1995). We affirm the judgment of the district court.

BACKGROUND

FACTUAL ALLEGATIONS

We summarize the facts alleged by Nebraska Beef in its petition as follows: On or about April 28, 1995, Nebraska Beef, a Nebraska limited partnership, engaged J.B. Contracting to provide construction management and general contractor services in connection with the remodeling and expansion of facilities located at 4501 South 36th Street in Omaha, Nebraska, which were owned by Nebraska Beef. On or about that same date, J.B. Contracting entered into a "Standard Sub Contract Agreement" with ABC Electric, an Iowa corporation. Under this subcontract, ABC Electric was to provide labor and material for the project. Pursuant to the subcontract, ABC Electric was required to obtain, effect, maintain, and furnish a performance bond to J.B. Contracting. On May 16, Universal, a Nebraska corporation, executed and delivered to J.B. Contracting a "Subcontract Performance Bond Form A" that designated ABC Electric as principal, Universal as surety, and J.B. Contracting as obligee.

Nebraska Beef alleged that while J.B. Contracting complied at all times with its obligations under the subcontract, ABC Electric failed to perform its obligations in a timely and workmanlike manner. Thereafter, J.B. Contracting timely notified ABC Electric and Universal of ABC Electric's failure to perform its obligations. On November 15, 1995, both J.B. Contracting and Nebraska Beef sent a letter to ABC Electric and Universal specifically identifying ABC Electric's failure to perform. This letter was received by ABC Electric and Universal on November 16. Nebraska Beef alleged that Universal then began to make arrangements to perform ABC Electric's obligations under the subcontract, but failed to properly and timely remedy the deficiencies.

According to the petition, on March 11, 1997, J.B. Contracting filed an action in Douglas County District Court alleging that Nebraska Beef had failed to pay it for services rendered pursuant to the agreement. Nebraska Beef responded that J.B. Contracting was responsible to it for damages it sustained due to ABC Electric's failure to perform under the subcontract. On November 14, J.B. Contracting and Nebraska Beef entered into an agreement settling their dispute. The settlement included an agreement by Nebraska Beef to pay $45,000 to J.B. Contracting in exchange for an assignment by J.B. Contracting of its right to pursue any claim that J.B. Contracting had against ABC Electric or Universal.

In the portion of its petition designated as "First Cause of Action," Nebraska Beef alleged that Universal breached a covenant of good faith and fair dealing to J.B. Contracting which was implied in the performance bond. Specifically, Nebraska Beef alleged that Universal breached the covenant by (1) failing to inform J.B. Contracting that ABC Electric had defaulted on other construction projects; (2) failing to acknowledge communications regarding claims from both J.B. Contracting and Nebraska Beef; (3) failing to adequately investigate ABC Electric's default and the scope of work completed under the subcontract; (4) failing to adopt and implement reasonable standards to investigate the claim of J.B. Contracting and Nebraska Beef on the performance bond; (5) failing to pay claims without conducting reasonable investigation; (6) failing to comply with standards in the industry for investigating the claim; (7) failing to, in good faith, effectuate prompt, fair, and equitable settlements of claims for which liability had become reasonably clear; (8) allowing ABC Electric to represent Universal in investigating, negotiating, and litigating the claim; (9) compelling ABC Electric to proceed with litigation; (10) failing to reasonably and adequately explain its failure to remedy ABC Electric's defaults under the performance bond; and (11) filing a lawsuit against Nebraska Beef on a subrogation claim of a construction lien which arose due to the nonpayment by ABC Electric of one of its subcontractors for labor and materials. Nebraska Beef alleged that as a direct and proximate result of Universal's breach, it sustained damages in that it was required to pay another contractor to complete ABC Electric's deficient work and that such completion delayed the operation of the facility, thus causing it to lose profits.

In that portion of its petition designated "Second Cause of Action," Nebraska Beef alleged that Universal violated the Unfair Insurance Claims Settlement Practices Act (UICSPA), codified at Neb.Rev.Stat. § § 44-1536 to 44-1544 (Reissue 1993 & Cum.Supp.1994), by (1) failing to acknowledge the claims of Nebraska Beef and J.B. Contracting with reasonable promptness, (2) refusing to pay J.B. Contracting's claim without first making reasonable investigation, (3) failing to adopt and implement reasonable standards to investigate the claim, and (4) making payment on the claim of J.B. Contracting without identifying the coverage under which each payment was being made. Nebraska Beef alleged that as a direct and proximate result of these violations, it and J.B. Contracting suffered the aforementioned damages.

PROCEDURAL BACKGROUND

Universal filed a demurrer in which it asserted that the petition failed to state a cause of action. Specifically, Universal asserted that the petition was deficient because (1) it failed to allege any recoverable damage sustained by J.B. Contracting; (2) "Nebraska does not recognize claims by third-parties for bad faith against an insurer or surety"; and (3) the UICSPA does not afford a private right of action and that even if it did, "Universal is not an `insurer' as defined in § 44-1538(1)(c) of such act." A hearing on the demurrer was scheduled for October 22, 1999. However, because no bill of exceptions was filed in this appeal, we have no verbatim record of that proceeding.

On December 8, 1999, the district court entered its order sustaining the demurrer and dismissing the petition with prejudice. Relying upon Dalition v. Langemeier, 246 Neb. 993, 524 N.W.2d 336 (1994), and State Security Savings Co. v. Pelster, 207 Neb. 158, 296 N.W.2d 702 (1980), the court took judicial notice of an order that it had entered on June 29, 1999, in "the related case of J.B. Contracting Services, Inc. v. Universal Surety Company, Doc. 966, No. 988." The district court characterized that case as "certainly interwoven and interdependent" with the instant case in that both cases

arise out of the same subject matter (i.e. the performance bond), and both involve the same parties, save Nebraska Beef. Since Nebraska Beef's claims, however, are based solely on J.B. Contracting's right to take legal action against Universal, and the former proceeding decided the issue of whether J.B. Contracting could in fact state a claim against Universal, the cases are very closely interwoven and interdependent.

The district court further stated:

The Order in Doc. 966 No. 988 granted summary judgment for Universal on the grounds that J.B. Contracting failed to prove the existence of any damages, therefore J.B. Contracting could not bring a breach of contract action against Universal and the Amended Petition was then dismissed with prejudice.

A careful examination of the Petition then reveals that all of Nebraska Beef's claims are based on the claims of J.B. Contracting regarding the performance bond and/or subcontract. Nebraska Beef was not a party to either contract and does not request relief on the basis of any third-party rights. Rather, Nebraska Beef's alleged sole right to a claim lies in the assignment of rights from J.B. Contracting to Nebraska Beef in the agreement between those two parties dated November 14, 1997. See Exhibit F, Plaintiff's Petition.

However, in the previous case the Court found that J.B. Contracting did not suffer any damages and therefore could not sue Universal for a breach of contract. Since all of Nebraska Beef's claims are based on the assignment from J.B. Contracting, and J.B. Contracting has nothing to assign, then Nebraska Beef has nothing to claim.

The district court provided an alternative ground for sustaining the demurrer with respect to the UICSPA claim by determining that contracts of suretyship are not covered under the UICSPA. The district court reasoned that the purpose of the UICSPA was to "`set forth standards for the disposition of claims arising under policies issued to residents of this state,'" see § 44-1537, and that § 44-1538(e), defining "policy," states specifically that "`policy or certificate shall not include...