Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-2_04-cv-00836/USCOURTS-caed-2_04-cv-00836-3/pdf.json

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

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1 “The standards applicable to motions for summary judgment

are well known, see, e.g., Rodgers v. County of Yolo, 889 F. Supp.

1284 (E.D. Cal. 1995), and need not be repeated here.” Reitter v.

City of Sacramento, 87 F. Supp. 2d 1040, 1042 (E.D. Cal. 2000).

1

IN THE UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF CALIFORNIA

FIRST NATIONAL INSURANCE ) CIV-S-04-0836 GEB JFM

COMPANY OF AMERICA, )

)

Plaintiff, ) ORDER

)

v. )

)

MBA CONSTRUCTION, et al. )

)

Defendants. )

 )

Plaintiff seeks partial summary judgment on its right to

specific performance of the collateral security provisions of a

General Agreement for Indemnity (“Indemnity Agreement”) between the

parties. The Indemnity Agreement was entered in connection with bonds

for a construction project performed by Defendants for the Redding 

School District (“District”). Defendants oppose the motion.1

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2 Defendants argue that First National “does not have

standing to ask this Court for relief” since the Indemnity

Agreement was “made in favor of Safeco Insurance, not First

National Insurance Company of America.” (Defs.’ Opp’n to Pl.’s Mot.

(“Opp’n”) at 6.) However, the Indemnity Agreement lists First

National in the definition of “Surety,” and the Joint Status Report

(“JSR”) states that “Defendants . . . are indemnitors to First

National under [the Indemnity Agreement].” (Hyslop Decl. Ex. A.

(“Indemnity Agreement”); JSR at 3.)

Defendants also object to the admissibility of the Indemnity

Agreement as an exhibit to the Hyslop Declaration on the grounds of

hearsay, authentication, and improper conclusion of fact or law.

Defendants’ hearsay objection is overruled since “[Federal] Rule

[of Evidence] 803(6) allows the admission of business records when

‘two foundational facts are proved: (1) the writing is made or

transmitted by a person with knowledge at or near the time of the

incident recorded, and (2) the record is kept in the course of

regularly conducted business activity.’” Sea-Land Service, Inc. v.

Lozen Intern., LLC, 285 F.3d 808, 819 (9th Cir. 2002) (quoting

United States v. Miller, 771 F.2d 1219, 1237 (9th Cir. 1985).

Plaintiffs have declared that “[Hyslop] generally supervise[s] the

maintenance of First National’s files relating to [Defendants.]”

(Hyslop Decl. ¶ 4.) 

Defendants’ authentication objection is also overruled since

the Indemnity Agreement is self-authenticating; it is “accompanied

by a certificate of acknowledgment executed in the manner provided

by law by a notary public. . . .” Fed. R. Evid. 902(8); see e.g.

Remington Investments, Inc. v. Berg Product Design, Inc., 172 F.3d

876 (9th Cir. 1999). 

Finally, Defendants’ objection based on improper conclusions

of fact or law is also overruled since the statement is not a

conclusion of fact or law but rather a statement of the contents of

the Indemnity Agreement.

2

Plaintiff argues, “The Defendants are in breach of the . . .

[I]ndemnity [A]greement, as they have failed to post collateral

security demanded of them by [Plaintiff] pursuant to the terms of that

contract.”2 (Pl.’s Mot. for Partial Summ. J. (“Pl.’s Mot.”) at 1.) 

“Sureties are ordinarily entitled to specific performance of

collateral security clauses.” Safeco Ins. Co. of Am. v. Schwab, 739

F.2d 431, 433 (9th Cir. 1984). “[T]he Defendants agreed in the

Indemnity Agreement “to pay to [Plaintiff] upon demand an amount

sufficient to discharge any claim made against any Bond.” (Indemnity

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3 Defendants object to the admissibility of the evidence

supporting these statements on the grounds of hearsay, lack of

foundation, and unsupported conclusion of fact. The hearsay and

foundation objections are overruled for the reasons stated in

footnote 1, supra. Furthermore, the statements do not contain

unsupported conclusions of fact. 

4 Defendants object to the admissibility of the evidence

supporting this statement on the basis of hearsay, lack of

foundation, and unsupported conclusion of fact or law. However,

the statement fits within the business records exception to the

hearsay rule (see Federal Rule of Evidence 803(6)), the proper

foundation has been laid, and the statements do not contain

unsupported conclusions of fact or law. Therefore, the objections

are overruled.

3

Agreement at 1; Pl.’s Statement of Undisputed Facts (“PSUF”) ¶ 8.) 

“[A]n itemized statement of loss and expense incurred by [Plaintiff],

sworn to by an officer of [Plaintiff], shall be prima facie evidence

of the fact and extent of liability of [Defendants] to [Plaintiff] 

. . . .” (Indemnity Agreement at 1; PSUF ¶ 13.)

Plaintiff avers that “certain claims have been made on

[Plaintiff’s] Bonds” and it “has paid Bond claimants,” but “[t]he

Defendants have continued to fail to provide the required indemnity

and reimbursement owed to [Plaintiff] . . . .”3 (PSUF ¶¶ 33, 34, 95.) 

“[Plaintiff] has filed . . . an itemized statement of the loss and

expense incurred by it,” sworn to by at least one of Plaintiff’s

officers.4 (Id. ¶ 14.) Since the Indemnity Agreement requires

Defendants to collateralize Plaintiff when Plaintiff has shown that

demands have been made, Plaintiff has made a prima facie showing that

it is entitled to specific performance of the collateral security

provisions of the Indemnity Agreement.

However, Defendants argue Plaintiff’s action “is barred by

the Doctrine of Unclean Hands” since “Plaintiff breached the implied

covenant of good faith and fair dealing” by “meddl[ing] in

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4

[Defendants’] relationship with subcontractors and ma[king] legal

threats to the District which ultimately disrupted [Defendants’]

ability to get all subcontractors paid.” (Opp’n at 8, 9, 10.) “There

is an implied covenant of good faith and fair dealing in every

contract that neither party will do anything which will injure the

right of the other to receive the benefits of the agreement.” 

Comunale v. Traders & Gen. Ins. Co., 50 Cal. 2d 654, 658 (1958). 

Defendants aver, “the Surety and its agents made every step difficult

resulting in extensive attorneys fees and costs” and “Plaintiff

continually interfered and thwarted efforts to resolve sub-contractor

claims.” (Defs.’ Statement of Undisputed Facts (“DSUF”) ¶¶ 168, 175.)

Specifically, “on April 14, 2004, [Plaintiff’s attorney] called [the]

District’s attorney, and requested that funds be withheld.” (Id. 

¶ 137.) 

“[W]henever a party, who . . . seeks to set the judicial

machinery in motion and obtain some remedy, has violated conscience,

or good faith, or other equitable principle, in his prior conduct,

then the doors of the court will be shut against him . . . .” 

Dickson, Carlson & Campillo v. Pole, 83 Cal. App. 4th 436, 446 n.7

(2000) (citation omitted). “[T]he extent of actual harm caused by the

conduct in question, either to the defendant or to the public

interest, is a highly relevant consideration.” Republic Molding Corp.

v. B.W. Photo Utils., 319 F.2d 347, 349-50 (9th Cir. 1963). “[T]he

court must weigh the substance of the right asserted by [P]laintiff

against the transgression which, it is contended, serves to foreclose

that right. The relative extent of each party's wrong upon the other

and upon the public should be taken into account, and an equitable

balance struck.” Id. at 350.

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5 Defendants’ objections are overruled for the reasons

stated in footnote 4, supra.

6 Defendants’ objections are overruled for the reasons

stated in footnote 4, supra.

5

On April 8, 2004, Plaintiff paid a claim by Partition

Specialty, Inc. for $77,728.00.5 (Id. ¶ 41.) Since Plaintiff’s

alleged interference with Defendants’ efforts to resolve subcontractor claims did not occur until April 14, 2004, when Plaintiff’s

attorney allegedly called the District’s attorney, the Partition

Specialty, Inc. claim could not have been “actual harm caused by the

conduct in question.” (Id.; DSUF ¶ 137; Republic Molding Corp., 319

F.2d at 349.) Therefore, Plaintiff is entitled to collateralization

in the amount of $77,728.00. 

Plaintiff also seeks collateralization of the claim paid to

Tina’s Interior Design Resource on August 31, 2004, in the amount of

$25,237.36, and seeks $28,792.64 in legal fees and $709.62 in travel

expenses.6 (PSUF ¶¶ 40, 46, 48). However, since there is a genuine

issue of material fact as to whether Plaintiff’s alleged interference

on April 14, 2004, at least in part caused Plaintiff to have to pay

the Tina’s Interior Design Resource claim, and because Plaintiff does

not identify the dates on which it incurred the legal fees and travel

expenses, Plaintiff’s motion for partial summary judgment on its right

to collateralization for the Tina’s Interior Design Resource claim,

legal fees, and travel expenses is denied.

IT IS SO ORDERED.

Dated: July 22, 2005

/s/ Garland E. Burrell, Jr.

GARLAND E. BURRELL, JR.

United States District Judge

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