National Sur. Corp. v. Prairieland Const. Inc.

• Decision Date: 30 November 2004
• Docket Number: No. 4:03CV73 CDP.,4:03CV73 CDP.
• Citation: 354 F.Supp.2d 1032
• Parties: NATIONAL SURETY CORP., Plaintiff, v. PRAIRIELAND CONSTRUCTION INC., et al., Third-Party Defendants.
• Court: U.S. District Court — Eastern District of Missouri

354 F.Supp.2d 1032

NATIONAL SURETY CORP., Plaintiff, v. PRAIRIELAND CONSTRUCTION INC., et al., Third-Party Defendants.

No. 4:03CV73 CDP.

United States District Court, E.D. Missouri, Eastern Division.

November 30, 2004.

COPYRIGHT MATERIAL OMITTED

Bernard A. Reinert, John W. Rourke, Aaron G. Weishaar, Reinert & Rourke, P.C., St. Louis, MO, for National Surety Corporation.

Joe D. Jacobson and Matthew R. Fields, Green, Schaaf & Jacobson, P.C., St. Louis, MO, for Peter E. Libbra, Jr. and Linda K. Libbra.

Gerald M. Dunne, Kodner, Watkins, Muchnick, Dunne & Weigley, LC, St. Louis, MO, for Prairieland Construction, Inc.

Chester A. Vogt and JoAnne Vogt, pro se.

Memorandum and Order

PERRY, District Judge.

National Surety Corp. provided construction bonds for work done by Prairieland Construction Inc. As part of the bonding process, National Surety required Prairieland and its owners and their wives to indemnify National Surety for any claims or other amounts it might be required to pay out on the bonds. When Prairieland failed, this litigation resulted. National Surety now seeks summary judgment on its claims for indemnification. There are no genuine disputes of material fact, and National Surety is entitled to judgment as a matter of law against Prairieland, and against the individual indemnitors, Peter and Linda Libbra, Gerald and Carrie Dunn, and Chester and Joanne Vogt.

1. Claims at Issue

The procedural history of this case is complicated, in part because of the consolidation of this case with 4:03CV93CDP. At various times parties have sought emergency relief, and there have been several hearings in the case. Multiple motions for summary judgment are pending. To clarify what I am ruling on and what will remain after this ruling, I will summarize the claims and list those to which the summary judgment motions are directed.

National Surety has brought a four-count claim against Prairieland, the Dunnes, the Vogts, and the Libbras. This claim (docket entry # 7 in 4:03CV93 CDP) seeks recovery from all parties under the following theories: Indemnification (Count I); Specific Performance of Indemnity Agreements (Count II); to Declare and Enforce National Surety's Special Equity Interest in the Bonded Contract Funds (Count III); and for Exoneration and Quia Timet Relief (Count IV). National Surety has filed its motion for summary judgment against all third-party defendants on Count I of this claim, but has not so moved on the remaining Counts. Only the Libbras have responded to this motion. The Libbras, but not the other third-party defendants, have also filed their own motion for summary judgment on all of National Surety's claims against them.

Prairieland has brought a Crossclaim against National Surety in three counts: Breach of Indemnity Agreement (Count I); Tortious Interference (Count II); and Declaratory Judgment (Count III). (Docket entry # 23). National Surety has filed two different summary judgment motions directed to this crossclaim, but Prairieland has not responded to either motion for summary judgment.

All of Mehlville School District's claims and all other parties' claims against Mehlville were dismissed by stipulation dated January 13, 2004 (docket entry # 156).

The Libbras dismissed their counterclaims against National Surety by stipulation filed on May 17, 2004 (docket entry # 188; 189), without prejudice to their rights to raise the same arguments as defenses to National Surety's claims against them. Thus, the pending motion for summary judgment related to the Libbras' counterclaims will be denied as moot.

2. Facts

This case arises out of the failure of Prairieland Construction Inc. to perform certain construction contracts, including contracts with Mehlville School District and the City of St. Louis. These projects required payment and performance bonds, and National Surety bonded the jobs. Prairieland began having financial difficulties and started falling behind on the jobs and in paying its subcontractors. Eventually, National Surety was notified by owners and subcontractors that Prairieland was not meeting its obligations. National Surety received numerous claims against its bonds. It attempted to resolve both the payment and performance issues with Prairieland, but the problems persisted. On October 23, 2002, National Surety sent a letter to the various bonded property owners and obligees requesting that no further payments be made to Prairieland without National Surety's consent. Prairieland and its owners contend that it was this letter, not Prairieland's failure to meet its own obligations, that caused it ultimately to fail. National Surety eventually paid significant sums under the bonds.

The subject of all the claims now pending is the obligation of Prairieland, the Dunnes, the Vogts, and the Libbras to indemnify National Surety under two indemnification agreements that they signed. The first agreement is dated July 6, 1999. In it Prairieland and its shareholders Chester Vogt and Peter Libbra, and their spouses Joanne Vogt and Linda Libbra, executed a General Indemnity Agreement in consideration of National Surety's issuance of the payment and performance bonds. In September 2001, Peter Libbra sold all his stock in Prairieland to Gerald Dunne. The second agreement followed this sale, and was executed in October of 2001. It was executed by Prairieland, Dunne and Vogt, and their spouses. The Libbras were not parties to the second agreement. On November 20, 2001, Peter Libbra sent William Knoblauch, an agent for National Surety, a letter requesting that he and his wife be removed from indemnifying any future bonds issued on behalf of Prairieland. The letter does not mention any bonds that were already issued. On November 27, 2001, Knoblauch sent a responsive letter indicating that the Libbras would not be liable on any bonds issued after December 20, 2001, but that their obligation on all previously issued bonds continued. All expenses claimed by National Surety in this case relate to bonds executed before December 20, 2001.

3. Summary Judgment Standards

To determine whether to grant summary judgment, I must view the facts and inferences from the facts in the light most favorable to the plaintiff. Matsushita Elec. Indus. Co. Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986). The defendant has the burden to establish both the absence of a genuine issue of material fact and that it is entitled to judgment as a matter of law. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986); Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). Once the defendant has met this burden, the plaintiff may not rest on the allegations in his pleadings but by affidavit or other evidence must set forth specific facts showing that a genuine issue of material fact exists. See Fed.R.Civ.P. 56(e).

F.R.C.P. 56(e) provides that if the adverse party does not respond with specific facts showing that there is a genuine issue for trial, summary judgment, if appropriate, shall be entered against that party. In addition, Local Rule 4.01 provides that "All matters set forth in the statement [of uncontroverted material facts] of the movant shall be deemed admitted for the purposes of summary judgment unless specifically controverted by the opposing party." Even where, as here, a motion for summary judgment stands unopposed, I must still determine whether the moving party is entitled to judgment as a matter of law based on the uncontested facts. Interstate Power Co. v. Kansas City Power & Light Co., 992 F.2d 804, 807 (8th Cir.1993).

4. National Surety's Claims for Indemnification

National Surety seeks summary judgment on Count I of its own claim against Prairieland, the Dunnes, the Vogts and the Libbras. This claim seeks indemnification for the amounts that National Surety has paid various claimants under the bonds, along with interest, attorneys fees and expenses. Only the Libbras have responded to this motion. The undisputed evidence shows that National Surety is entitled to summary judgment on Count I against all parties.

The contract of a principal to indemnify his surety is valid and will be enforced in accordance with its terms. American Ins. Co. v. Gilbert, 319 F.Supp. 1315, 1317 (E.D.Mo.1970). In this case, the indemnity agreements provide that:

The Indemnitors will indemnify the Surety against all liability, loss, costs, damages, fees of attorneys and other expenses which the Surety may sustain or incur by reason of, or in consequence of the execution of such Bonds ... including but not limited to sums paid or liabilities incurred in settlement of and expenses paid or incurred in connection with the claims, suits or judgments under such Bonds, expenses paid or incurred in enforcing the terms hereof, in procuring or attempting to procure release from liability, or in recovering or attempting to recover losses or expenses paid or incurred, as aforesaid...

In addition, both agreements contain the following:

The Surety shall have the exclusive right to decide and determine whether any claim, liability, suit or judgment made or brought against the Surety or the Indemnitors or any one of them on any such Bond shall or shall not be paid, compromised, resisted, defended, tried or appealed, and the Surety's decision thereon, if made in good faith, shall be final and binding upon the Indemnitors. An itemized statement of payments made by the Surety for any of the purposes specified herein, sworn to by an officer of the Surety, or the voucher or vouchers for payments, shall be prima facie evidence of the liability of the Indemnitors to reimburse the Surety for such amounts, with interest.

Courts have upheld the validity of provisions such as these, but have noted that any action of the surety in making payment must have been made in good faith. American Insurance Co., 319 F.Supp. at 1318; Central Surety...