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IN THE UNITED STATES DISTRICT COURT

FOR THE WESTERN DISTRICT OF TEXAS

SAN ANTONIO DIVISION

DD&B CONSTRUCTION, INC.,

 Plaintiff,

vs.

THE HANOVER INSURANCE 

COMPANY,

 Defendant.

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5-20-CV-00182-FB-RBF

REPORT AND RECOMMENDATION

OF UNITED STATES MAGISTRATE JUDGE

To the Honorable United States District Judge Fred Biery:

This Report and Recommendation concerns the Motion to Dismiss filed by Third-Party 

Defendant PHG Stone Oak, LLC. See Dkt. No. 21. All pretrial matters in this action have been 

referred for resolution pursuant to Rules CV-72 and 1 of Appendix C to the Local Rules for the 

United States District Court for the Western District of Texas. See Dkt. No. 6. Authority to enter 

this recommendation stems from 28 U.S.C. § 636(b)(1)(B). 

Plaintiff DD&B Construction, Inc. sues Defendant (and Third-Party Plaintiff) The 

Hanover Company, seeking to recover under an insurance policy for remediation work DD&B 

performed on a construction project insured by Hanover and owned by PHG. Hanover contends 

that it paid out under the policy pursuant to a settlement between it and DD&B. But according to 

Hanover, it disbursed the proceeds to PHG—instead of DD&B—at PHG’s instruction. As it is 

now being sued by DD&B for amounts it contends were already passed along to PHG with the

understanding that they were intended for DD&B, Hanover asserts third-party claims against 

PHG in connection with the alleged failure to forward the payments to DD&B.

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PHG’s pending motion to dismiss addresses those third-party claims by Hanover against 

PHG. In the motion, PHG argues that Hanover’s claims are barred by three affirmative defenses 

that PHG asserts, all of which are premised on the fact that PHG and DD&B settled their dispute 

with one another stemming from PHG’s alleged failure to pay DD&B for work DD&B

performed on the project. But PHG’s motion doesn’t establish that any of its affirmative defenses 

to Hanover’s claims are valid as a matter of law due to that or any other settlement. Moreover, 

Hanover has also plausibly pled claims for breach of contract, conversion, promissory estoppel, 

and declaratory relief against PHG. Accordingly, the motion doesn’t warrant the requested relief.

As set forth further below, the Motion, Dkt. No. 21, should be DENIED.

Factual and Procedural Background

Third-Party Defendant PHG operates and invests in premium-branded extended-stay 

hotels, including the recently constructed Home 2 Suites by Hilton located in San Antonio,

Texas. See 3rd Party Compl. ¶ 6 (Dkt. No. 17). Construction for the Home 2 Suites project 

spanned October 2016 through October 2019. See id. ¶¶ 7. Plaintiff DD&B Construction served 

as the project’s general contractor, and Defendant (also a Third-Party Plaintiff) Hanover 

provided PHG with Builder’s Risk insurance during construction. See id. ¶ 7-8. The facts recited

next, except as otherwise specified, assume the truth of Hanover’s allegations in its live pleading, 

which raises third-party claims by Hanover against PHG.

On July 4, 2018, the property suffered water damage caused by a sub-contractor’s failure 

to properly secure a fire-suppression pipe. See id. ¶ 9. PHG, in response, filed a claim under the 

Hanover policy. See id. While Hanover investigated the claim, PHG retained DD&B to oversee 

repair and remediation work associated with the water damage. See id. ¶ 10. After completing its 

remediation work, DD&B submitted a final invoice to PHG for $386,463.97. See id. But PHG

allegedly failed to pay for the remediation as well as other work that DD&B performed on the 

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project. See id. ¶ 11. Accordingly, on April 2, 2019, PHG filed a mechanics lien on the property. 

See id. (incorporating DD&B State Compl., lien, lien notice, and demand letter at Dkt. Nos. 17-2 

at 1-4; 17-3 at 57-63, 17-4 at 1-3). On May 1, 2019—before Hanover resolved the still-pending 

insurance claim—DD&B sued PHG in state court for breach of contract and foreclosure of the 

lien. See id. In total, DD&B sought $1,409,642.40 in past-due compensation from PHG, 

including the amount invoiced for the remediation. See id.

Hanover wasn’t a party to the state court litigation between DD&B and PHG. But on 

June 18, 2019, Hanover—in furtherance of its investigation and adjustment of PHG’s 

remediation claims—negotiated a $195,000 final payment with DD&B in full settlement of any 

claims arising out of the July 4, 2018, leak. See id. ¶ 13 (incorporating Hanover-DD&B 

settlement at Dkt. No. 15-6). Despite Hanover’s desire to directly remit the $195,000 to DD&B, 

PHG advised Hanover that the money should be issued to PHG. See id. ¶ 14. Specifically, in an 

email dated June 6, 2019, Lee Shuman, Vice President of Construction and Design for PHG, 

advised Hanover and DD&B that:

This payment [$195,000] will have to come to PHG [not DD&B directly]. We are 

then required to send funds to our lender. Then we have to draw these funds and 

the lender must approve. The [sic] may require further back up to release the 

funds to DDB.

Id. Pursuant to these representations, Hanover made the check payable to PHG “under the guise 

that the funds would be delivered to DD&B.” Id. ¶ 15.

On August 12, 2019, PHG and DD&B privately settled the state court litigation. See id. ¶ 

12. Pursuant to PHG and DD&B’s settlement, PHG paid $836,225.27 and DD&B released “any 

and all claims . . . relating to the [construction] Contract, lien, [state court] Lawsuit and the 

[Home2Suites construction] Project.” See id. (incorporating PHG and DD&B Project Close Out 

Agreement at Dkt. No. 15-6 ¶ 9 ).

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PHG never forwarded to DD&B the $195,000 it received from Hanover. See id. ¶ 16. 

Instead, PHG withheld the $195,000, contending that the funds were part of the overall PHGDD&B state court settlement. See id. ¶¶ 16-17. To date, PHG refuses to remit the $195,000 to 

DD&B. See id. ¶ 18.

On January 15, 2020, DD&B sued Hanover in state court to recover the $386,463.97 

associated with the remediation work it performed on the project. See DD&B Compl. (Dkt. No. 

1-3). DD&B raises claims against Hanover for breach of contract and, in the alternative, 

quantum meruit. See id. Hanover removed the action to federal court, asserting diversity 

jurisdiction. See Dkt. No. 1. On July 14, 2020, Hanover filed a third-party complaint against 

PHG. See Dkt. No. 17.

Essentially, Hanover claims that PHG’s refusal to remit the $195,000 to DD&B has 

resulted in DD&B instituting the instant action against Hanover. See id. Hanover raises thirdparty claims against PHG for breach of contract and conversion. Alternatively, in the event 

Hanover can’t prove a legal contract with PHG, Hanover brings a third-party claim for 

promissory estoppel. See id. Finally, Hanover seeks a judgment declaring that “PHG is obligated 

and required to deliver the remediation payment of $195,000 to DD&B pursuant to its 

contractual obligation memorialized on June 6, 2019.” Id. 

PHG now moves to dismiss Hanover’s third-party complaint. See Dkt. No. 21.

Analysis

PHG has failed to establish that DD&B and PHG’s private settlement precludes, as a 

matter of law, any recovery by Hanover against PHG. Moreover, Hanover has pled sufficient 

facts to state plausible claims against PHG for breach of contract, conversion, promissory 

estoppel, and declaratory judgment. 

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A. The State Court Settlement Doesn’t Necessarily Bar Hanover’s Claims. 

Hanover’s third-party claims, according to PHG, must be dismissed based on PHG’s affirmative 

defenses of (1) release and waiver; (2) accord and satisfaction; and (3) res judicata. These 

defenses, to be clear, are asserted in defense of third-party claims brought by Hanover against 

PHG, not against claims brought by DD&B against PHG. In essence, PHG argues that because 

DD&B’s claims against PHG for the work were settled, DD&B can’t sue Hanover and Hanover,

in turn, can’t try to shift the blame to PHG via Hanover’s third-party claims. But it’s undisputed 

that Hanover wasn’t a party to the state court lawsuit or the DD&B-PHG settlement, and,

importantly, Hanover never released any claims it may have against PHG.

PHG hasn’t conclusively demonstrated at this juncture that the doctrines of release and 

waiver, accord and satisfaction, and res judicata must bar Hanover from recovering against 

PHG.

1 Whether and to what extent Hanover could ultimately be liable to DD&B for all or part of 

the remediation work appears—at least at this juncture—to be an issue between Hanover and 

DD&B. PHG has failed to convince the Court at this early stage that its potential liability to 

Hanover is foreclosed as a matter of law due to the PHG-DD&B’s settlement. To do so, PHG 

must conclusively connect all the dots between its settlement with DD&B and Hanover’s thirdparty claims against PHG. Its motion hasn’t done that. At this stage it’s not clear that PHG even 

1

See, e.g., Tyler v. Cedar Hill Indep. Sch. Dist., 426 F. App’x 306, 308 (5th Cir. 2011) 

(affirmative claim of release requires that the defendant—in the instant case, Third-Party 

Defendant PHG—establish that the plaintiff—here, Third-Party Plaintiff Hanover— signed a 

release that addresses the claims at issue); Baylor Health Care Sys. v. Emp’rs Reins. Corp., 492 

F.3d 318, 321 (5th Cir. 2007) (explaining that an accord and satisfaction exists when the 

parties—here PHG and Hanover—enter into a new contract, express or implied, which 

discharges the obligations under the original contract in a manner otherwise than as originally 

agreed); Test Masters Educ. Servs., Inc. v. Singh, 428 F.3d 559, 571 (5th Cir. 2005) (res judicata 

precludes a party from litigating claims that either have been litigated or should have been 

litigated in an earlier suit only where the parties in the underlying action are identical or in 

privity). 

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has standing to challenge Hanover’s liability to DD&B.2 Accordingly, more work would be

needed from PHG before dismissal pursuant to PHG’s current arguments could be warranted. 

B. Hanover Pleads Sufficient Facts to Satisfy Rule 8(a). Hanover has also alleged 

sufficient facts to plausibly establish each element of its third-party claims. PHG’s arguments to 

the contrary are unpersuasive.

First, Hanover has pled a plausible claim for breach of contract. Hanover claims that 

(1) the June 6, 2019, e-mail from Shuman created a valid, enforceable agreement between 

Hanover and PHG; (2) Hanover performed under the agreement by tendering the $195,000 to 

PHG; (3) PHG breached the agreement by failing to remit the payment to DD&B; and 

(4) DD&B has now sued Hanover as a result of PHG’s alleged breach. See Villarreal v. Wells 

Fargo Bank, N.A., 814 F.3d 763, 767 (5th Cir. 2016) (discussing the elements for breach of 

contract under Texas law).

Hanover has also pled a plausible claim for conversion. Hanover claims that (1) it owned 

the $195,000 at issue in its third-party complaint; (2) it tendered the $195,000 to PHG based 

solely on PHG’s representation that PHG would remit the funds to DD&B i.e., PHG wasn’t 

otherwise entitled to possession of the funds; and (3) PHG refuses to remit the funds to DD&B 

or return them to Hanover and, instead, is withholding the funds for its own use. See United 

States v. Boardwalk Motor Sports, Ltd., 692 F.3d 378, 381 (5th Cir. 2012) (discussing the 

elements needed to state a claim for conversion of money under Texas law); Mitchell Energy 

Corp. v. Samson Res. Co., 80 F.3d 976, 984 (5th Cir. 1996) (“Where money is involved, it is 

2

See, e.g., Penda Corp. v. United States, 44 F.3d 967 (Fed. Cir. 1994) (concluding that a 

contractor that had agreed to indemnify the government against liability for the claim in 

question, didn’t have standing to appeal the money judgment against the government—

notwithstanding its potential liability as an indemnitor).

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subject to conversion only when it can be described or identified as a specific chattel, but not 

where an indebtedness may be discharged by the payment of money generally”). 

Hanover’s alternative claim for promissory estoppel is similarly sufficient at this 

juncture. Hanover pleads that (1) PHG promised to remit the $195,000 to DD&B; (2) Hanover 

“reasonably” and “foreseeabl[y]” relied on the promise; and (3) Hanover substantially relied on

the promise to its detriment i.e, it is now out $195,000 without the benefit of DD&B’s bargainedfor release. See MetroplexCore, L.L.C. v. Parsons Transp., Inc., 743 F.3d 964, 977 (5th Cir. 

2014) (discussing the elements needed to prevail on a claim for promissory estoppel under Texas 

law). 

Finally, a justiciable case or controversy exists between Hanover and PHG such that 

Hanover has stated a plausible claim for declaratory relief.3

Conclusion and Recommendation

For the reasons discussed above, it is recommended that PHG’s Motion to Dismiss, Dkt. 

No. 21, be DENIED. 

Instructions for Service and Notice of Right to Object/Appeal

The United States District Clerk shall serve a copy of this report and recommendation on 

all parties by either (1) electronic transmittal to all parties represented by attorneys registered as 

a “filing user” with the clerk of court, or (2) by mailing a copy by certified mail, return receipt 

requested, to those not registered. Written objections to this report and recommendation must be 

filed within fourteen (14) days after being served with a copy of same, unless this time period is 

3 Although Hanover’s claim for declaratory judgment appears to be duplicative of its substantive 

claims, PHG hasn’t moved for dismissal on this basis. Accordingly, the Court won’t recommend

the claim be dismissed at this juncture. Cf. Carson v. Fed. Nat’l Mortg. Ass’n, No. SA-11-CA925-H, 2012 WL 13029757, at *2 (W.D. Tex. Jan. 26, 2012) (“When the request for a 

declaratory judgment adds nothing to an existing suit, and is merely duplicative of the 

substantive claims already at issue, the request for a declaratory judgment need not be 

entertained.”). 

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modified by the district court. 28 U.S.C. § 636(b)(1); Fed. R. Civ. P. 72(b). The objecting party 

shall file the objections with the clerk of the court, and serve the objections on all other parties. A 

party filing objections must specifically identify those findings, conclusions, or 

recommendations to which objections are being made and the basis for such objections; the 

district court need not consider frivolous, conclusory, or general objections. A party’s failure to 

file written objections to the proposed findings, conclusions, and recommendations contained in 

this report shall bar the party from a de novo determination by the district court. Thomas v. Arn, 

474 U.S. 140, 149-52 (1985); Acuña v. Brown & Root, Inc., 200 F.3d 335, 340 (5th Cir. 2000). 

Additionally, failure to timely file written objections to the proposed findings, conclusions, and 

recommendations contained in this report and recommendation shall bar the aggrieved party, 

except upon grounds of plain error, from attacking on appeal the unobjected-to proposed factual 

findings and legal conclusions accepted by the district court. Douglass v. United Servs. Auto. 

Ass’n, 79 F.3d 1415, 1428-29 (5th Cir. 1996) (en banc).

IT IS SO ORDERED. 

SIGNED this 9th day of February, 2021.

RICHARD B. FARRER

UNITED STATES MAGISTRATE JUDGE

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