National American Ins. Co. v. Hogan

• Decision Date: 08 April 1999
• Docket Number: No. 98-1087,98-1087
• Parties: NATIONAL AMERICAN INSURANCE COMPANY, a Nebraska Corporation, Appellant, v. Brenda H. HOGAN, Individually, Appellee.
• Court: U.S. Court of Appeals — Eighth Circuit

Page 1097

173 F.3d 1097

NATIONAL AMERICAN INSURANCE COMPANY, a Nebraska Corporation, Appellant, v. Brenda H. HOGAN, Individually, Appellee.

No. 98-1087.

United States Court of Appeals Eighth Circuit.

Submitted Jan. 15, 1999.

Filed April 8, 1999.

Scott A. Frick, Memphis, Tennessee, argued, for Appellant.

Peter B. Heister, Little Rock, Arkansas, argued, for Appellee.

Before BOWMAN, Chief Judge, MURPHY, Circuit Judge, and VIETOR, ¹ Senior District Judge.

VIETOR, Senior District Judge.

National American Insurance Company ("National") brought suit against Brenda H. Hogan ("Brenda Hogan") for breach of contract and fraudulent conveyance, contending that she breached a General Agreement of Indemnity ("GAI") and conspired with her husband, Ben Miles Hogan, Jr. ("Ben Hogan"), to defraud National through the improper transfer of assets. The case went to trial before a jury on November 24-25, 1997. ² The trial court ³ directed the jury to answer four interrogatories that formulated the factual issues before the court--the first three related to the breach of contract claim, and the fourth, treated by the court as advisory in nature, related to the fraudulent conveyance claim. Based upon the jury's answers to the first three interrogatories, the trial court entered judgment in favor of Brenda Hogan on the breach of contract claim. The trial court also agreed with the jury's advisory answer to the fourth interrogatory and entered judgment in favor of Brenda Hogan on the fraudulent conveyance claim. On Brenda Hogan's motion, the trial court awarded her $41,084.71 in attorney's fees. National appeals the trial court's entry of judgment in Brenda Hogan's favor on both claims, and the award of attorney's fees, and we now affirm.

I.

A.

The facts established at trial concerning the breach of contract claim, viewed in a light most favorable to the jury's findings of facts, are as follows. At all times relevant In order to induce National to provide the surety bonds, as is the custom in the construction industry, Hogan Construction executed several General Agreements of Indemnity ("GAIs"). A GAI is a personal guarantee to the bonding company that the contractor will do the job according to plans and specifications, pay all subcontractor and supplier bills, and reimburse the bonding company for any funds the bonding company has to pay pursuant to the terms of the bonds. The validity and effect of three particular GAIs are relevant to National's breach of contract cause of action against Brenda Hogan. Each of these GAIs was a generic form document with appropriate blanks for the names of the contracting parties--the construction company, the bonding company or indemnitee, and the individual indemnitors. The first GAI named Midwest Indemnity Corporation as the indemnitee and was executed on May 16, 1988 by Ben Hogan, individually and as president of Hogan Construction, and Brenda Hogan. The second GAI, signed on October 15, 1991 by Ben Hogan, individually and as president of Hogan Construction, and Brenda Hogan, did not name an intended indemnitee or bonding company. ⁴ The third GAI was executed on February 18, 1994, for the benefit of National as the indemnitee, by Ben Hogan, individually and as president of Hogan Construction. Brenda Hogan did not execute the February 18, 1994 GAI.

to this action, Ben Hogan owned and was president of Hogan Construction Co., Inc. ("Hogan Construction"), an Arkansas highway construction company. During 1993 and 1994, Hogan Construction contracted with the Arkansas State Highway Commission ("ASHC") to perform work on different projects in Arkansas. Pursuant to these contracts, Hogan Construction was required to obtain a surety bond for each project. A surety bond is a tri-party agreement among a principal (the contractor), the surety (the bond or insurance company), and the obligee (the owner). In the surety bond agreement, the surety ensures that either the principal will satisfy the terms of the construction contract or the surety will pay the obligee for the expenses caused by the principal's failure to do so. Hogan Construction used Babb Bonding, a general agent, to obtain surety bonds for these ASHC projects. Babb Bonding, in turn, went through Midwest Indemnity Corporation, a managing general agent, to acquire the necessary bonds from National. National issued bonds covering the ASHC projects.

Also entered into evidence were three letter agreements which attempted to limit Brenda Hogan's liability under the GAIs she executed. Two of the letter agreements were dated May 16, 1988, addressed to Midwest Indemnity Corporation, and executed by Brenda Hogan and Ben Hogan, individually and as president of Hogan Construction. These letter agreements purported to limit Brenda Hogan's liability under the May 16, 1988 GAI to the value of any interest she had at the time of execution, or may have in the future, in assets owned by Ben Hogan or Hogan Construction. The third letter agreement, which also sought to limit Brenda Hogan's potential liability under a GAI, was executed by Brenda Hogan and Ben Hogan, individually and as president of Hogan Construction, on October 15, 1991. This letter agreement was not addressed to anyone, did not reference the particular GAI it was limiting, and referred only to American Bonding Company, ⁵ not National or Midwest After acquiring the necessary surety bonds from National, Hogan Construction commenced work on the ASHC projects. Hogan Construction soon failed, on one or more of the projects, to perform all of its obligations under the contract terms and to pay various subcontractors and material suppliers. National responded, pursuant to its obligations set forth in the surety bonds, by arranging for the satisfactory completion of the projects and paying the subcontractors and suppliers Hogan Construction failed to pay. National then initiated this suit seeking reimbursement for its expenditures pursuant to the GAIs executed by Ben Hogan, individually and on behalf of Hogan Construction, and Brenda Hogan.

Indemnity Corporation. There was evidence that this letter agreement was stapled together with both the ABC form GAI dated October 15, 1991 and the generic October 15, 1991 GAI that did not designate a particular indemnitee.

B.

The facts established at trial concerning the fraudulent conveyance cause of action, presented in a light most favorable to the district court's findings of facts, are as follows. Ben and Brenda Hogan married on January 24, 1976, and remained married at all times relevant to this case. Prior to her marriage to Ben Hogan, Brenda Hogan inherited a substantial amount of money from her father. When Ben Hogan's construction company, then named Ben M. Hogan Company, Inc., ran into financial difficulty in January 1987, Brenda Hogan used some of her inheritance to loan the company $100,000. On August 20, 1987, the construction company repaid Brenda Hogan $11,000 on that loan, $5191.78 in principal and $5808.22 in interest. Brenda Hogan subsequently loaned the company an additional $55,000. In repayment of those loans, in May 1990, the company deeded a parcel of land on Ross Hollow Road to Brenda Hogan. That parcel of land, known as the Boyle Place, contained a house and some outbuildings. Ben and Brenda Hogan had lived at that homestead since 1988. Ben and Brenda Hogan spent a significant amount of money remodeling their home on the Boyle Place property both before and after the company deeded ownership of the property to Brenda Hogan. In June 1990, to finance some of this remodeling, the couple took out a "Future Advance Construction" loan for $143,203, collateralled by a mortgage on the Boyle Place property.

In addition to the Boyle Place owned by Brenda Hogan, Ben Hogan and Hogan Construction each owned a tract of land on Ross Hollow Road. After the tracts of land owned by Ben Hogan and Hogan Construction, known as the "Hall Farm" and the "Gunn Farm," respectively, became encumbered by tax liens and other debts, Ben Hogan and Hogan Construction sought to sell the two farms. These two tracts of land would not sell at a price sufficient to cover the encumbrances, however, unless Brenda Hogan agreed to sell her tract along with the other two. Thus, on or about June 1, 1994, Ben and Brenda Hogan, and Hogan Construction, sold all three tracts of land for a combined price of $1.1 million to William T. Walker and Judy Walker.

After the proceeds of the sale were applied to the indebtedness of Ben Hogan, Hogan Construction, and Brenda Hogan, Brenda deposited the remaining proceeds, $235,836.22, into her personal account. In total, in exchange for the Boyle Place property, Brenda Hogan received $235,836.22 in cash, plus the absolution of the $117,943.67 debt remaining on the Future Advance Construction loan. There was testimony at trial that Brenda Hogan's On or about June 14, 1994, Brenda Hogan purchased a house at 19 Sherrill Road in Little Rock, Arkansas. Brenda Hogan both utilized the proceeds from the sale of the Boyle Place property and executed a mortgage to purchase the home.

basis in the Boyle Place had been approximately $319,000--$150,000 loaned to Ben Hogan's construction company plus $169,000 for remodeling expenses.

Between February 2, 1993, and November 20, 1996, Ben Hogan made payments directly to Brenda, or on her behalf, totaling $114,921.64. The payments made on Brenda Hogan's behalf were generally mortgage payments for property owned solely by Brenda Hogan but occupied by both Ben and Brenda Hogan, as husband and wife. The rest of the direct payments were explained by Ben and Brenda Hogan as gifts, money for living expenses, money for remodeling their home, and repayment of loans.

C.

On April 19, 1996, National filed a complaint against Hogan Construction and Ben Hogan, individually, for breach of the February 18, 1994 GAI, and against Hogan Construction and Ben and Brenda Hogan for the fraudulent conveyance of...