Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-2_03-cv-01351/USCOURTS-caed-2_03-cv-01351-1/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 28:1332 Diversity-Account Receivable

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1

UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF CALIFORNIA

----oo0oo----

GULF INSURANCE COMPANY, a

Missouri corporation,

NO. CIV. S 03-1351 MCE KJM

Plaintiff,

v. MEMORANDUM AND ORDER

HI-VOLTAGE WIRE WORKS, INC.

dba POWER PROVIDERS, a

California corporation; STEVE

K. ZINNEL, an individual;

MICHELLE M. ZINNEL, an

individual,

Defendant.

----oo0oo----

Plaintiff Gulf Insurance Company has asked the Court to

grant summary adjudication against Defendant Steve K. Zinnel

(“Defendant”) on its claims for express indemnity and breach of

contract. For the reasons stated below, Plaintiff’s motion is

DENIED.

///

///

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1 Some of the factual allegations as set forth in this

section are disputed by the parties. To the extent either party

has interposed evidentiary objections to said allegations, those

objections are overruled unless otherwise noted. 

2

BACKGROUND1

 The present dispute arises out of a general agreement of

indemnity (hereinafter the “Indemnity Agreement”) involving

Plaintiff and Defendant. The Indemnity Agreement was entered

into on July 15, 1996. (Mot. for Summ. J., Ex. B at 1.) 

According to Plaintiff, the Indemnity Agreement was partially

based on Plaintiff’s execution of bonds in favor of Defendant. 

(Mot. for Summ. J. at 4:7-8.)

On January 12, 2000, two third-party subcontractors brought

an action against a bond issued on Defendant’s behalf. (Mot. for

Summ. J. at 5:13-14.) Plaintiff allegedly incurred $496,024.77

in expenses and losses in settling this third-party lawsuit. 

(Pl.’s Mot. for Summ. J. at 8:23-24, 9:12.) Plaintiff claims

that by virtue of the Indemnity Agreement, Defendant is liable

for the resulting expenses and losses.

On June 25, 2003, Plaintiff brought suit against Defendant

for (1) express indemnity, (2) specific performance, (3) breach

of contract, and (4) reimbursement. For purposes of this motion,

the Court is only concerned with Plaintiff’s first and third

causes of action, express indemnity and breach of contract,

respectively.

On March 4, 2005, Plaintiff brought the present motion for

summary adjudication of its express indemnity and breach of

contract claims. Plaintiff contends that the Indemnity

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2 Unless otherwise stated, all further references to a

“Rule” or “Rules” are to the Federal Rules of Civil Procedure.

3

Agreement, as well as the other evidence presented with the

present motion, establishes that no genuine issue of material

fact exists with regard to Defendant’s liability for express

indemnity and breach of contract. 

In opposition, Defendant argues that genuine issues of

material fact exist with regard to (1) the existence of a

contract between Plaintiff and Defendant and (2) whether

Plaintiff reasonably incurred the losses related to the thirdparty suit against the payment bond. (Def.’s Opp. to Pl.s’ Mot.

for Summ. J. at 6:1, 7:4.) 

STANDARD

The Federal Rules of Civil Procedure2 provide for summary

judgment when “the pleadings, depositions, answers to

interrogatories, and admissions on file, together with

affidavits, if any, show that there is no genuine issue as to any

material fact and that the moving party is entitled to a judgment

as a matter of law.” Fed. R. Civ. P. 56(c). One of the

principal purposes of Rule 56 is to dispose of factually

unsupported claims or defenses. Celotex Corp. v. Catrett, 477

U.S. 317, 325 (1986).

Rule 56 also allows a court to grant summary adjudication on

part of a claim or defense. See Fed. R. Civ. P. 56(a) (“A party

seeking to recover upon a claim . . . may . . . move . . . for a

summary judgment in the party’s favor upon all or any part

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thereof.”); see also Allstate Ins. Co. v. Madan, 889 F. Supp.

374, 378-79 (C.D. Cal. 1995); France Stone Co., Inc. v. Charter

Township of Monroe, 790 F. Supp. 707, 710 (E.D. Mich. 1992).

The standard that applies to a motion for summary

adjudication is the same as that which applies to a motion for

summary judgment. See Fed. R. Civ. P. 56(a), 56(c); Mora v.

ChemTronics, 16 F. Supp. 2d 1192, 1200 (S.D. Cal. 1998).

Under summary judgment practice, the moving party

always bears the initial responsibility of

informing the district court of the basis for its

motion, and identifying those portions of ‘the

pleadings, depositions, answers to

interrogatories, and admissions on file together

with the affidavits, if any,’ which it believes

demonstrate the absence of a genuine issue of

material fact.

Celotex Corp. v. Catrett, 477 U.S. at 323 (quoting Rule 56(c)).

If the moving party meets its initial responsibility, the

burden then shifts to the opposing party to establish that a

genuine issue as to any material fact actually does exist. 

Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574,

585-87 (1986); First Nat’l Bank v. Cities Serv. Co., 391 U.S.

253, 288-89 (1968).

In attempting to establish the existence of a factual

dispute, the opposing party must tender evidence of specific

facts in the form of affidavits or admissible discovery material

in support of its contention that the dispute exists. Fed. R.

Civ. P. 56(e). As the Supreme Court explained, “[w]hen the

moving party has carried its burden under Rule 56(c), its

opponent must do more that simply show that there is some

metaphysical doubt as to the material facts . . . Where the

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record taken as a whole could not lead a rational trier of fact

to find for the nonmoving party, there is no ‘genuine issue for

trial.’” Matsushita, 475 U.S. at 586-87.

In resolving a summary judgment motion, the evidence of the

opposing party is to be believed, and all reasonable inferences

that may be drawn from the facts placed before the court must be

drawn in favor of the opposing party. Anderson, 477 U.S. at 255. 

Nevertheless, inferences are not drawn out of the air, and it is

the opposing party’s obligation to produce a factual predicate

from which the inference may be drawn. Richards v. Nielsen

Freight Lines, 602 F. Supp. 1224, 1244-45 (E.D. Cal. 1985),

aff’d, 810 F.2d 898 (9th Cir. 1987). 

ANALYSIS

1. Plaintiff’s Breach of Contract Claim.

Plaintiff contends that Defendant is liable for breaching

the July 15, 1996 Indemnity Agreement. To establish a breach of

contract under California law, Plaintiff must show the following:

(1) existence of a contract, (2) performance by the plaintiff or

excuse for nonperformance, (3) breach by the defendant, and (4)

damages. First Commercial Mortgage Co. v. Reece, 89 Cal. App.

4th 731, 745 (2001); Lortz v. Connell, 273 Cal. App. 2d 286, 290

(1969). For purposes of this motion, the Court need only address

the first and third elements: (1) whether a contract exists, and

(3), whether defendant breached the contract. 

With regard to the first element, the existence of a

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contract, the Court finds that a contract exists and that

Plaintiff can enforce the contract against Defendant. The

Indemnity Agreement states that it is “executed and delivered . .

. by the principal . . . in favor of Surety.” (Pl.’s Mot. for

Summ. Adjud., Ex. B at 1.) Defendant signed the Indemnity

Agreement under the headings titled “PRINCIPAL” and “INDIVIDUAL

INDEMNITORS.” (Mot. for Summ. Adjud., Ex. B at 3, Ex. C at 3:14-

18.) Furthermore, “Surety” is defined under the terms of the

contract to include “Gulf Insurance Company.” (Pl.’s Mot. for

Summ. Adjud., Ex. B at 3.) Therefore, the Court finds that the

agreement was executed by Defendant in favor of Plaintiff. As

such, Plaintiff is a third-party beneficiary to the Indemnity

Agreement. 

 Under California Law, a third-party beneficiary can enforce

a contract made expressly for its benefit. Cal. Civ. Code §

1559; San Diego Housing Com'n v. Industrial Indem. Co., 95 Cal.

App. 4th 669, 685 (2002); Shell v. Schmidt, 126 Cal. App. 2d 279,

290 (1954). Thus, Plaintiff can enforce the Indemnity Agreement

against Defendant.

The evidence presented by Plaintiff demonstrates as a matter

of law that the Indemnity Agreement is enforceable against

Defendant. Defendant’s bare, self-serving allegations to the

contrary are not sufficient to raise a genuine issue of material

fact. F.T.C. v. Publishing Clearing House, Inc., 104 F.3d 1168,

1171 (9th Cir. 1997) (noting that “[a] conclusory, self-serving

affidavit, lacking detailed facts and any supporting evidence, is

insufficient to create a genuine issue of material fact.”). See

Fed. R. Civ. P. 56(e) (2005); Celotex, 477 U.S. at 324. 

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3 The Court finds that Defendant did not violate Rule

(continued...)

7

With regard to the third element, whether defendant breached

the Indemnity Agreement, the Court finds that a genuine issue of

material fact exists. Under the terms of the Indemnity

Agreement, Defendant is only bound by Plaintiff’s settlement of a

third-party suit against the bonds if certain conditions are

satisfied:

A. Surety may pay or compromise any claim, demand,

suit, judgment or expense arising out of any

Bond(s), and any such payment or compromise shall

be binding upon the Undersigned and included as a

liability, loss or expense covered by this

Agreement, provided the same was made by Surety in

the reasonable belief that it was liable for the

amount disbursed, or that such payment or

compromise was reasonable under all the

circumstances.

(Pl.’s Mot. for Summ. Adjud., Ex. B at 1 (emphasis added))

Thus, in order to determine whether Defendant is obligated

to indemnify Plaintiff, the Court must ascertain whether (1)

Plaintiff reasonably believed liability existed, or (2)

Plaintiff’s settlement of the third-party suit was reasonable. 

Questions of reasonableness are questions of fact, to be decided

by a jury. Brasher's Cascade Auto Auction v. Valley Auto Sales

and Leasing, 119 Cal. App. 4th 1038, 1059 (2004). See also

Barth-Wittmore Ins. v. H. R. Murphy Enterprises, Inc., 169 Cal.

App. 3d 124, 131 (1985). 

Moreover, Defendant has presented evidence disputing the

reasonableness of Plaintiff’s underlying settlement of the thirdparty lawsuit.3 Specifically, Defendant states in his

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3(...continued)

26(e)(2). However, even if Defendant were in violation of Rule

26(e)(2), his “failure is harmless” because the substance of any

new information in his declaration was conveyed to Plaintiff

through Defendant’s answer. Fed. R. Civ. P. 37(c)(1)(2005). See

also (Def.’s answer at 6:21.)

8

declaration that “[e]ven though POWER PROVIDERS [Defendant]

maintained its position that ABB had defaulted on the Project and

thus was not entitled to receive any more money than POWER

PROVIDERS already paid, Gulf [Plaintiff] wanted to unilaterally

settle the matter.” (Decl. of Steve K. Zinnel at ¶ 18.) Without

knowing whether Plaintiff acted reasonably in settling the thirdparty suit, the Court cannot determine whether Defendant breached

the contract at issue. As such, the Court finds that a genuine

issue of material fact exists. Consequently, Plaintiff’s motion

for summary adjudication is denied with regard to its breach of

contract claim.

2. Plaintiff’s Express Indemnity Claim

Plaintiff contends that Defendant is liable for express

indemnity. To establish a claim for express indemnity under

California law, Plaintiff must show the following:(1) fault on

behalf the indemnitor and (2) resulting damages to indemnitee for

which the indemnitor is contractually liable. Expressions at

Rancho Niguel Assoc. v. Ahmanson Dev., Inc., 86 Cal. App. 4th

1135, 1139 (2001). For purposes of this motion, the Court need

only address whether Defendant is contractually liable for

Plaintiff’s damages.

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The Court finds that there is a genuine issue of material

fact as to whether Defendant is contractually liable for

Plaintiff’s damages. In order to determine contractual

liability, the Court must determine whether Defendant breached

the Indemnity Agreement. As discussed in Section One above, the

Court finds that there exists a genuine issue of material fact as

to whether Defendant breached the Indemnity Agreement. 

Consequently, Plaintiff’s motion for summary adjudication is

denied with regard to its express indemnity claim.

CONCLUSION

For the aforementioned reasons, Plaintiff’s motion for

summary adjudication against Defendant with regard to its express

indemnity and breach of contract claims is DENIED. 

IT IS SO ORDERED.

DATED: April 28, 2005.

__________________________________

MORRISON C. ENGLAND, JR

UNITED STATES DISTRICT JUDGE

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