I N T H E SUPR EM E C O UR T O F M I SS I SS I PPI NO. 2 0 0 9 - CA- 0 0 4 4 6 - S CT FI DEL I T Y & DEP OS

I T COM P AN Y OF M AR YLAN

D v. RA L P H McKN

IGHT & S ON C ONS T

RU CT ION, I NC . , TOM M Y L. McKN

IGH T AN

D VON DA L. McK NIGH T
D A T E O F JU D G M E N T : 12/ 05/ 2008 TRI AL J UD GE: HO N. CY NTH I A L. BREW ER COURT F ROM W HI CH APP EAL ED: ATT ALA COUNTY CHAN CER Y COURT AT T OR NE YS F OR AP P E L L ANT : AL E C M. T AYL OR D A V I D J . K RE BS E L L I E B. W OR D ATT ORNEYS F OR APP EL LE ES : R. ADA M KI RK AND REW J . KI LP ATRI CK, J R. NATURE OF THE CAS E: CI VI L - CONTRACT D I SPO SI T I O N : R E V E R SE D A N D R E M A N D E D - 02/ 25/ 2010 M OT I ON F OR RE HE AR I NG F I L E D: M ANDAT E I S S UE D:

B E F O R E W A L L E R , C . J. , L A M A R A N D P I E R C E , JJ. W ALLER, CH I EF J UST I CE, FOR TH E COU RT: ¶1. Fi del i ty and D epos i tC om pany of M aryl and f

i l ed s ui tagai ns tR al ph M cK ni ght& Son C ons truct i on, I nc. , T om m y L . M cK ni ght , and V onda L. M cK ni ght( col l e ct i vel y “M cK ni ght ”) in th e C h a n c e ry C o u rt o f A ttala C o u n ty . F id e lity so u g h t in ju n c tiv e re lief a n d sp e c ific p e rfo rm an ce o f an ind em n ity ag ree m en t entere d w ith M cK n igh t i n co n jun cti o n w ith F id e lity ’s is su a n c e o f a p e rfo rm a n c e b o n d . T h e c h a n c e llo r d ism iss e d th e ca se o n th e b a sis

### McKni ght’ s s uit agains t C&I, along with C&I ’s count ercl aim, is pre se ntly ongoing. 1 

### C& I initiallyfiledsu it again st Fid elity inthe C ircuit C ourt of A ttala Co unty. T his 2 

### suit w as remov ed to federal co urt where it remain s pen din g. 2 th a tM i s s i s s i p p i Co d e S e c t i o n 3 1
- 5
- 4 1 p r o h i b i t s F i d e l i ty f r o m s e e k i n g i n d e mn i ty f o ri t s o wn negl i gence . Fi del i ty now appea l s . W e f i nd thatSect i on 31- 5- 41 does notappl y t o thi s cas e. T h e re fo re , w e re v e rs e a n d re m a n d
. FACTS ¶2. C & I E n tert ai nm ent, L L C , con tr ac ted w ith M cK n igh t f o r t h e c o n stru cti o n o f a theat er/ s kat i ng r i nk i n K os ci us ko, M i s s i s s i ppi
. C & I r equi r ed M cK ni ghtt o obt ai n a p e rfo rm a n c e b o n d fo r th e p rojec t. M c K n ig h t th e n e n ter e d in to a n in d e m n ity a g re e m e n t w ith F i d e l i ty wh i c h , i n tu rn , i s s u e d a p e r f o r m a n c e b o n d n a m i n g M c Kn i g h ta s p r i n c i p a l a n d C &I
a s o b lig e e . ¶ 3
. F o l l o wi n g c o m p l e t i o n o f th e p r o j e c t , a d i s p u t e a r o s e b e t we e n Mc Kn i g h ta n d C &I aboutt he qual i ty of cons truct i on and w arr anty obl i gat i ons . C & I w i thhel d i t s f i nal payment
a n d litig a tio n e n s u e d
. ¶4. M cK ni ghtf

i l ed s ui ta gai ns tC& I t o r ecove runpa i d f unds
. C & I c ount er cl ai m ed f or 1 damages as s oci at ed w i t h M cK ni ght ’ s al l eged c ons truct i on def ect s . C & I f

ur thernot i f

i ed F id e lity a b o u t M c K n ig h t’s a lleg e d b re a c h o f c o n tra c t an d d e m a n d e d th a t F id e lity fu lfill its obl i gat i ons unde rthe per f or m ance bond. Fi del i ty, how ever , de ni ed C & I ’ s dem and on t he bond. A s a r es ul t , C & I s ued Fi del i ty f orbr eac h of

per f or m ance bond and bad- f ai th deni al
o f C&I ’ s c l a i m. 2

### Mississip pi C od e Sectio n 3 1-5 -41 states that: 3 

### With re spe ct

to al l publ ic or privatecontra ct s or agree me nts , f

or the con structio n, alterati o n , repair o r mainten ance o f bu ildin gs, stru ctures, highway bri dges , vi aduc ts , wate r, se wer or gas dis tribution sys te ms , or othe r work de al ing with c onstruc ti on, or for any m oving, dem oli ti on or e xcavation conne ct ed therewi th, ever y cove nant , promi seand/or a gre em ent cont ained the r e i n t o ind e mni f

y o r ho l d h arm l e s s ano the r

pe r s onf r om that pe r s on ' s own negl ige nceis void a s against publi c pol ic y and whol ly une nforce abl e. This se ction doe s not

apply to c onstruc ti on bonds or ins urancecontra ct s or agreements. Miss. C od e Ann. § 31 -5-4 1 (R ev. 2 00 8). 3 ¶5 . F a c e d w ith po tential l iabili ty t o C & I, F idelity att em p ted to e n fo rc e its in d e m n ity
a g re e m e n t w ith M c K n ig h t. T h e ind e m n ity a g re e m e n t re q u ire d M c K n ig h t to p ro v id e F id e lity “r eas onabl e ac ces s ” t o M cK ni ght ’ s f i nanci al s t at ement s and t o i ndemni f y F i del i ty “as s oon
as l i abi l i ty exi s t s ori s as s ert ed aga i ns t[ Fi del i ty] , ” i n an amoun teq ual t o the r es erves s et
a sid e b y F id e lity . M c K n ig h t re fu se d to p ro v id e sw o rn fin a n c ial s tate m e n ts a n d r e fu se d to
m a tc h th e $ 4 7 5 ,0 0 0 th a t F id e lity h a d s e t a s id e in re s e rv e s . ¶6
. F idelity fi l ed thi s sui tagainstM cK night f o r q u ia tim e t r el i ef

and s peci f

i c per f or m ance . M cK ni ghtr es ponded by f i l i ng a mot i on t o di s m i s s and f ors anct i ons . M cK ni ghtas s ert ed that th e in d e m n ity a g re e m e n t d id n o t ap p ly b e c a u se F id e lity ’s p o ten tial liab ili ty a ro se o u t o f its
ow n negl i gence ; and thatM i s s i s s i ppi C ode Sect i on 31- 5- 41 pr ohi bi t s i ndemni f i cat i on for 3 one’ s ow n negl i gence i n cons truct i on contr act s . Fi del i ty fi l ed a r es pons e r eques t i ng
s u m m a ry ju d g m e n t.

### 4

¶7. Fol l ow i ng a hear i ng, the chanc el l or gr ant ed M cK night ’ s m ot i on t o di s m i s s w i thout
s anct i ons . A l though Sect i on 31- 5- 41 appl i es expl i ci t l y t o cons truct i on contr act s , not pe r f ormanc e bo nd s , the c ha nc e l l ora pp l i e d the s t a tut e be c a us e the pe r f ormanc e bo nd inco rpo rated the c o n stru cti o n co n tr ac t by refere n ce . T h e c h an ce ll o r fou n d that C & I’s p en d ing su itag ains t F idelity w as b ase d up o n F idelity ’s ne g li g en t, b ad -faith d en ial o f C & I’s cl ai m . Fi del i ty thus s oughti ndemni f i cat i on f ori t s ow n negl i gence , w hi ch Sect i on 31- 5- 41 f orbi ds ¶8
. F idelity no w ap p ea ls, asse rt ing th at th e c h a n c e llo r e rre d in g ra n ti n g M cK n igh t’ s
m o tio n to d is m is s a n d in d e n y in g F id e lity ’s m o tio n fo r s u m m a ry ju d g m e n t. DI S CU S S I ON I. W h ether the ch an cel l or err ed i n gra n ti n g M cK n i gh t’ s m oti on to dis m i ss. ¶9. T hi s C our t us es a de novo s t andar d of r evi ew w hen cons i der i ng the gr ant or deni al of
a m o tio n to d is m is s . H

ar r is v. Mis s . V

al ley State U

ni v. , 87 3 S o . 2 d 9 7 0 , 9 8 8 (M iss. 2 0 0 4 ). I n cons i der i ng s uch mot i ons , “the al l egat i ons i n the compl ai ntm us tbe t aken a s true, and the
m o ti o n sh o u ld n o t be g ran ted u n less ita p p ea rs b ey o n d a rea so n ab le do u b t th at th e p lai n ti ff
w i l l be unabl e t o prove any setof f act s i n s uppor tof

hi s cl ai m . ” I

d. ( ci t i ng T

.M . v. N o b litt , 6 5 0 S o . 2 d 1 3 4 0 , 1 3 4 2 (M is s . 1 9 9 5 ))
. ¶10. W e f

i nd thatS ect i on 31-5- 41 i s i t s el f di s pos i t i ve of

thi s cas e. T he l as ts ent ence of the
s t atut e st at es t hati t s provi s i ons do notappl y t o “cons truct i on bonds. ” M i s s . C ode A nn. § 31- 5
- 4 1 (R e v . 2 0 0 8 ). A p e rf o rm a n c e b o n d is a ty p e o f c o n s tru c tio n b o n d
. See Mo r g a n v . U. S. Fid. & G uar. Co. , 191 So. 2d 851, 852 ( M i ss. 19 66) ( r ef err i ng t o per f

or m ance and p a y m e n t b o n d s a s c o n stru c tio n b o n d s); A lexanderv. Fid. & Cas . Co. , 232 M i s s . 629, 633,

### 5

1 0 0 S o . 2 d 3 4 7 , 3 4 8 (M iss . 1 9 5 8 ) (d e sc rib in g a p e rfo rm a n c e b o n d a n d th e n in d ire c tly
e q u a tin g it t o a c o n stru c tio n b o n d ); s e e al s o Roge rP. Sa u e r , Kev i n J . Rus s e l l , & J a me s E. R u d w ic k , P er

f or m ance Bonds , i n 2 C ons t ruct i on L aw H andbook § 3 5 . 0 3 , at 12 7 8 (R o b ert F . C u sh m a n & Ja m e s J . M y e rs e d s ., A s p e n L a w & B u sin e ss 1 9 9 9 ) (“ [t] h e tw o m a in
cons truct i on bonds ar e per f or m ance bonds a nd pa ym entbonds ”)
. Sect i on 31- 5- 41 then, by i t s ow n l anguage , exce pt s per f or m ance bonds
. T hi s r emai ns true even i f the per f or m ance b o n d in c o rp o ra tes th e c o n stru c tio n c o n tra c t b y re fe re n c e . P e rfo rm a n c e b o n d s ro u tin e ly in c o rp o ra te th e p e rt in e n t c o n s tru c tio n c o n tr a c t b y re fe re n c e . B e n ja m in D . L e n tz , D e

fa u lt, N ot i ce of D ef aul t , I m pact U pon Sur et

y’s O bl igat i ons W

her e N ot i ce I s N otG i ven , i n T he Law
o f P erfo rm an ce B o n d s at 2 1 -22 , (L aw ren ce R . M o elm an n & Jo h n T . H arris ed s. , A B A 1 9 9 9 ); D a v id C . D re if

u s s , B ond, C ontr actual

, and Stat ut or

y P r ovis i ons and G ener alA gr eem ent of In d e m n ity , in B o n d D efa u ltM an u al, S ec o n d E d it ion at 5 (D u n ca n L . C lore e d
. , A B A 1 9 9 5 ). T h e m o s t c o m m o n ly u s e d p e rf o rm a n c e b o n d fo rm s in c lu d e s u c h la n g u a g e . See D e bo r a h S. G ri ff in , C om pl et i on by the Bond O bl igee , B ond D ef aul tM anual , Second Edi t i on at212- 13 (C lo re e d ., A B A 1 9 9 5 ); B o n d D e fa u lt M a n u a l, S e c o n d E d itio n a t a p p . 4 2 1 , 4 2 3 (C lo re e d ., A B A 1995)
. I ncorpor at i on by r ef er ence s i m pl y i ndi cat es thatthe bond and c ons truct i on
c o n tr a c ts e tf

o r th “ mu tu a l l y i n t e r d e p e n d e n tr i g h t s a n d o b l i g a t i o n s , ” a n d th a tth e two d o c u m e n ts m u s t b e c o n s tru e d to g e th e r. See State f orU s e of N at ’l Sur. Corp. v. Malvaney
e t a l. , 2 2 1 M is s . 1 9 0 , 2 0 9 -1 0 , 7 2 S o . 2 d 4 2 4 , 4 3 1 (1 9 5 4 ). ¶1 1. B eca us e Sect i on 31-5- 41 exem pt s construct i on bo nd s f r om i t s a pp l i cat i on, t he
c h a n c e llo r e rr e d in g ra n tin g M c K n ig h t’ s m o tio n to d is m is s . I I . W het her t he chancel l or er red i n denyi ng s um m ary j udgm ent f or F i del i t y.

### 6

¶12. T h e p a rties d isp u te w h e th e r th e issue of sum m ary j u d g m en t is ri p e fo r a p p e a l. M cK ni ghtar gues thatthi s C our ts houl d nota ddr es s the i s s ue beca us e the cha ncel l ornever
rul ed on Fi del i ty’ s mot i on f ors um m ary j udgm ent . Fi del i ty, on the otherhand, poi nt s outthat tw i ce dur i ng the hear i ng, the chanc el l ors t at ed thatFi del i ty’ s mot i on f ors um m ary j udgm ent
w a s b e fo re h e r. ¶13. A l though the chanc el l or tw i ce m ent i oned Fi del i ty’ s m oti on for s um m ary j udgm ent atthe hea r i ng, s he neve rrul ed on thati s s ue. A tt he begi nni ng of the hea r i ng, the cha ncel l or
n o ted th at M cK n igh t’ s m o ti o n to d ism iss an d F idelity ’s m o ti o n for su m m ary jud g m en t w ere bef or e her
. S he then s ai d “[ l ] etus begi n w i th .
. . [ M cK ni ght ’ s ] M ot i on t o D i s m i s s and f or Sanct i ons . ” Fr om thatpoi nton, the m ot i on f ors um m ary j udgm entw as notaddr es s ed. T he chanc el l orl abel ed herf i nal or deran “O r deron [ M cK ni ght ’ s ] M oti on to D i s m i s s and f or S an cti o n s. ” In the o rde r, sh e stated that o ral arg u m e n ts h ad b ee n h ea rd o n M cK n igh t’ s
m o tio n to d is m is s . T h e o rd e r n e v e r r e fe re n c e s s u m m a ry ju d g m e n t. ¶ 1 4
. T h is C o u rt d o e s n o t c o n sid e r m a tters th a t h a v e n o t b e e n d e c id e d b y th e trial c o u rt. B r yant Con s t . Co. , I nc. v. Cook Constr. Co. , I nc. , 518 So. 2d 625, 632 ( M i s s . 1987) ( ci t i ng E duc. P lacem ent

Ser vs. v. W

il s on , 487 So. 2d 1316, 1320 ( M i s s . 1986) )
. B eca us e the chanc el l orneverdeci ded t he mer i t s of Fi del i ty’ s m ot i on f

ors um m ary j udgm ent , w e do not
a d d re s s th is is s u e o n a p p e a l. CO NC L US I ON ¶15. B ecause S ect i on 31- 5- 41 exce pt s cons truct i on bonds , e. g. , per f or m ance bonds , the
s t atut e does notbarFi del i ty’ s s ui t . A ccor di ngl y, w e f i nd thatthe cha ncel l orerr ed i n gr ant i ng

### 7

M cK ni ght ’ s m ot i on t o di s m i s s . Fur therm or e, w e dec l i ne t o cons i derFi del i ty’ s m ot i on f or
s u m m a ry ju d g m e n t b e c a u s e th e is s u e is n o t r ip e fo r a p p e a l. ¶ 1 6
. RE VE RS ED AND RE M ANDE D. C A R LSO N , P . J. , D I C K I N SO N , R A N D O LP H , LA M A R , K I TC H EN S, CH AND LER AND PI ERCE, J J . , CO NCU R. GR AVES, P. J . , CO NCU RS I N RESULT O N L Y .