FI L ED U.S. COURT OF APPEAL S EL EVENTHCI RCUI T MARCH 8, 2012 J OHN L EY CL ERK [DO NOT PUBLISH] IN THE UN ITED STATES COURT OF APPEALS FOR THE ELE VENTH CIRCUIT

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W ESTCHESTER FIRE INSURANC E COMP ANY, a New Yorkco rp or at io n, Pl ai nt iff -Co un te rD e f enda n t-A p p e ll e e , ve rs us CITY OF BROOKSVILLE, Defen da nt -Co un te rC l a im a n t - A pp e l l a n t .

__ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ _ App eal fro m

th e Uni te d S ta te s Di st ric t Co urt fo r th e Mi dd le Dis tri ctof F lo rid a

__ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ _ (Ma rch 8, 2 01 2)
Befo re EDMONDSON an d PRYOR, Ci rcu it Ju dg es , an d BOWD RE, Dis tri ct Ju dg e. *
Honora ble Kar on O. Bow dre, United States District J udg e for the Norther n District of Alabama , * sitti ngby designation.PER CURI AM:

Thi s s ta te -la w cas e is ab ou t p erfo rm an ce b on ds an d a n aba nd on edsi ng le
fam il y ho us in g d ev el op m en t i n t he Cit y of B ro ok sv il le , Flo rid a (the “ Ci ty”). The Ci ty is at te m

pt in g t o re co ve r $5 .3 m il li on fro m th e Westc he st er Fi re In su ran ce Co m pa ny (“ Surety ”), wh ic h i ss ue d t wo p erfo rm an ce b on ds to in de m ni fy th e Ci ty fro m da m ag e if

th e d ev el op er fa il edto co m pl et e ag reed -upo n i nf

ras tru ctur e fo r th e de ve lo pm en t. The de ve lo pe r fi le d fo r ba nkrupt cy an d fa il edto be gi n c on st ru ct io n of th e ag reed -upo n i nf

ras tru ctur e; th is di sp ut e fo ll owe d. Surety so ug hta de cl arat ory

jud gm en t t ha t t he Cit y

is no t en ti tl edto th e p ro ceed s o f th e pe rfo rm an ce b on ds ; t he Cit y co un te rcl ai m edto co ll ectth e fac e v al ue of t he bo nd s. On ap pe al fro m

th e d is tri ctco urt’s g ran t o f su m m ary jud gm en t fo r Su rety , th e Ci ty argu es th atSurety is requi redto pa y

th e Ci ty the ful l v al ue of t he bo nd s
ev enif n o c on stru ct io n o n t he de ve lo pm en t b eg an . W e co nc lu de th atth e b on ds im po se no ob li ga ti on on Surety to pa y th e Ci ty to co m

pl et e th e ag reed -upo n in fras tru ctur e im

pr ov em en ts be cau se no co ns tru ct io n o f th e p ert in en t

2im

pr ov em en ts co m

m en ced . W e aff

irm th e d is tri ctco urt’s g ran ti ng su m m ary jud gm en t fo r Su rety . 1

I. BACKGROUND

Lev it t an d S on s o f Hern an do Co un ty (“ Lev it t” ), a d ev el op er, p ur ch as ed pr op erty in Bro ok sv il le an d p la nn edto de ve lo p afiv e-p ha se , si ng le -fam il y
res id en ti al subd iv is io n kno wn as th e “ Cas cad es .” Levi ttan d t he Cit y en te redin to a Uti li ty Servi ces Agre em en t, i n wh ic h t he Cit y ag reedto pro vi de , am on g o th er th in gs , po tabl e wat er an d s ewer s erv ic es to th e Cas cad es . As pa rt o f th e Uti li ty Serv ic es Agre em en t, Lev it t an d t he Cit y ag reedto a Dev el op m en t Sc he du le , whi ch in cl ud es fiv e p ha se s fo r de ve lo pm en t o f th e Cas cad es . Con st ru ct io n o f Ph as e One of th e Dev el op m en t Sc he du le is ne arl y co m pl et ed . This cas e is ab ou t Ph as e Two. The th ree r em ai ni ng ph as es of t he Cas cad es de ve lo pm en t h av e n otbe enpl at te d,
an d n o p la ns ex is t fo r de ve lo pm en t o f th es e p ha se s.

We deny the City ’s motion to certify questions of state law to the Supre me Court of F lorida. 1 3The Cit y ap pr ov edLevi tt ’s fin al pl anforth e co ns tru ct io n o f Ph as e Two (t he

“pl at ”), an d t he pl atwas re co rd edin Marc h 2 00 6. Th e p la t re qu ire s Lev it t (o r it s
su cces so rs ) to co ns tru ctcert ai n i m pr ov em en ts on Ph as e Two, wh ic h wo ul d b e
ne ces sa ry forth e Ci ty to s up pl y

ut il it y servi ces pro m is edto futur e res id en ts of Ph as e Two. The se im

pr ov em en ts in cl ud e st orm li ne s, p ot ab le wate r li ne s, recl ai m edwate r li ne s, s an it ary se wer l in es , eart hwo rk , androa dwa y s. The Cit y , bef

or e ap pr ov in g afin al pl at , m us t “ be sat is fie d t ha t al l im pr ov em en ts . . . ha ve be enco ns tru ct ed .” C IT Y O F B R O O K S V ILLE C O D E O F O R D IN A N C E S § 1 29 -3 (c) (2 00 6) . But , “ [i]n l ie u o f co m pl et io n o f th e im pr ov em en ts , a bo nd
. . . sh al l b e fu rn is he d” equa l t o t he co stof c on st ru ct in g t he im pr ov em en ts . Id. Fo r Ph as e Two, i n l ie u o f co m pl et in g the im

pr ov em en ts be fo re ob ta in in g t he Cit y ’s app ro va l o f a fi na l p la t (a ndin acco rd an ce wi th th e Bro ok sv il le Ordi na nc e), Lev it t fu rn is he d abo ndto sec ur e co m pl et io n o f th e im pr ov em en ts . 2 Befo re b eg in ni ng co ns tru ct io n o f th e Ph as e Two i m pr ov em en ts , andbe fo re th e es ti m at edco m

pl et io n d at e st at edon th e b on ds , Levi ttpe ti ti on edfor
L evitt commissioned Coastal Eng ineering to deter mine the construction cost of the Phase Two 2 improvements and the value of the bonds L evitt would need to post. Ba sed on Coastal Eng ineering’ s estimate, L evitt asked Surety to issue two perf ormanc e bonds on behalf of L evitt and in favor of the City as security for L evitt’s obligation to complete the improvements. For Phase Two the total value of the two bonds delivere d by L evitt (as principal) and Surety to the City (as oblige e) is $5,366,454.75. 4ba nkrupt cy

an d aba nd on edth e Cas cad es . W he n Lev it t fi le d fo r ba nkrupt cy , Levi tt ha d re m ov edso m e tr ees an d c le aredso m e o f th e la ndforPh as e Two. Lev it t h ad be gu n n o c on st ru ct io n o f th e p ert in en t i m pr ov em en ts , m ark et edan d s ol d n o l ot s i n Ph as e Two, an d b ui ltno ho m e in Ph as e Two. 3 Sh ortl y aft er Lev it t ab an do ne d the Cas cad es , th e Ci ty dem an de d p aym en t fro m Surety on th e su rety

bo nd s. Su rety

de ni edpa ym en t. The Cit y th ensu ed Su rety in st at e co urt t o fo recl os e th e b on ds ; t he pa rti es lat er v ol un ta ril y di sm is se d th e st at e-co urt ac ti on an d a gr eedto a on e-year for be aran ce t o a ll ow fo r th e po ss ib il it y

th ata ne w dev el op er wo ul d p ur ch as e th e Cas cad es an d b eg in
co ns tru ct io n. Onth e d ay th e Ci ty pla nn edto term in at e th e fo rb earanc e ag reem en t, Su rety fil edth is su itin di st ric t co urt fo r a d ecl arat ory jud gm en t o f it s o bl ig at io ns to th e Ci ty. The C it y

co un te rcl ai m edto for ecl os e o n t he bo nd s. 4 The Ph as e Two p ro pe rty rem ai ns un de ve lo pe d l an d i n ave ge ta te d s ta te . A pr in ci pa l o f CaS HP2 st at edth at , if the Cit y do es no t re co ve r on th e b on ds , “ th ere The parties stipulated that “ther e are no disputes of fac t a nd that the claims should be decide d 3 by the Court a s a matter of law.” (empha sis in orig inal). We ha ve seen in the r ecor d a mention of a box culver

t be tween Phase One and Phase Two. Fr om the rec ord we cannot say that this c ulvert is a Phase Two improvement of any kind; moreove r, we cannot conclude that the culver t repr esents commence ment of a substantial (as opposed to de minimi s) construction of the pertinent Phase Two improvements. Be fore this case was fi l ed , Ke y Ba nk purcha sed the proper

ty at a fore closure sale and later 4 assigned the Cascade s to OREO Corp. Whil e this case was pending in the district court, owner ship of Phase Two of the Cascade s chang ed hands twice. In May 2009 OREO sold the Casca d es to Kolter Gr oup, L L C (“Kolter ”). K olter later transfe rre d title to P hase Tw o to CaSHP2, L L C. 5is no ch an ce tha t t he im pr ov em en ts wil l ev enbe st art edin th e fo res eeab le futur e”
an d, i f th e Ci ty doe s re co ve r onth e b on ds , th ere i s “ m ay be , [a] 50- 50 ” ch an ce tha t de ve lo pm en t wi ll be gi n o n arol li ng ba si s “ be twee n 2 01 3 a nd20 17 .” The C it y ha s
ne it he r at te m

pt edto co ns tru ctth e p ert in en t i m pr ov em en ts no r so li ci te d b id s t o
es tabl is h acu rren t ex pe ct edco stof c on st ru ct in g t he im pr ov em en ts no r as ke d CaSHP 2 t o c on st ru ctth e im pr ov em en ts . No Ci ty resi de ntha s re qu es te d t he

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co ns tru ct io n o f th e im

pr ov em en ts , andno ex is ti ng ho m e requi res th e u ti li ty
se rv ic es th atwou ldbe pro vi de d b y th e im pr ov em en ts . The di stric t co urt g ran te d s umm ary jud gm en t i n fa vo r of Surety an d a ga in st th e Ci ty, reas on in g, am on g o th er thi ng s, tha t Su rety ’s ob li ga ti on to pa y th e Ci ty on th e b on ds is subjec t t o a n i m pl ie d c on di ti on th atpa ym en t fo r th e im pr ov em en ts is requi redon ly if co ns tru ct io n c omm en ces .
II. DISCUSS ION

A su rety bo ndis a co nt ractgu aran te ei ng pe rfo rm an ce o f anob li ga ti on owed by ano th er p arty ; we i nt erp retsu rety bo nd s ac co rd in g t o t he st an da rd s t ha t g ov ern
The City expressly relieve d OREO and its succe ssors of the obligation to construct the pertinent 5 improvements; CaSHP2’s acquisition of Phase Two was expressly con d i t i oned on the City ’s agree ment that CaSHP2 would not be obligate d to install the Phase Tw o improvements. 6co ns tru ct io n o f co nt ract s i n g en eral an d a cco rd in g t o t he in te ntof t he pa rti es . See

Am er. Ho m e Ass ur an ce Co . v. Lark in Gen. Ho sp ., Ltd., 5 93 So . 2d19 5, 1 97 (Fl a. 19 92 ). The s ur ety

bo nd s i n t hi s ca se read , inpa rt, t hi s way: [T]he Dev el op er h as ag reedto co m pl et e certa in on -s it e an d/ or off -s it e im pr ov em en ts in acco rd an ce wi th th e Pro ject En gi ne er’s Certi fie d Co stEst im at e fo r Co m

pl et io n o f Im

pr ov em en ts . . . su chth atif t he Dev el op er p ro m

pt ly andfai th fu ll y

co m pl et es th e im

pr ov em en ts as requi redby the Cit y

App ro va ls on or b efo re the Est im at edDate of Co m pl et io n, t he n t hi s o bl ig at io n wi ll be nu ll an d v oi d; ot he rwis e it wil l re m ai n i n fu ll for ce an d e ffec t, s ub ject o nl y to th e fo ll owi ng co nd it io ns :

. . . . 2. If t he Deve lo pe r fai ls to co m pl et e th e requi red Im pr ov em en ts in acco rd an ce wi th th e Ci ty App ro va ls , app li cab le reg ul at io ns an d t hi s ag reem en t, [Su rety ] m us t, upo n wri tt ende m an d by the Cit y , pro m

pt ly pay ov er t o t he Cit y

th e u nr el eas edpo rti on of th e b on d s o tha t the City , or i ts ag en t, ca n c om pl et e th e u nf

in is he d im pr ov em en ts in acco rd an ce wi th th e te rm s an d c on di ti on s o f th e Ci ty App ro va ls
. Pu rs ua ntto th e Ci ty’ s o rd in an ce, an d b efo re the pl atwas re co rd ed , Levi tt pu rch as edth e b on ds ; Su rety th enis su edth e b on ds . W e co ns tru e th e b on ds in th e li gh t o f th atord in an ce. See Glad es Cn ty. v. Det ro itFid . & Su r. Co ., 57 F.2d44 9, 45 1 (5 thCir . 19 32 ) (“ The bo ndis pl ai nl y gi ve n u nd er the [Fl or id a] sta tu te an d t o be co ns tru edin th e li gh t o f it .”). The C it y , per it s o rd in an ce, co nd it io ns pl at ap pr ov al on eithe r th e p res en ce o f al read y -co m pl et edim pr ov em en ts or abo nd fu rn is he d b y

th e d ev el op er equa l t o t he co stto co ns tru ctth e im pr ov em en ts . 7As re qu ire d b y th e Ci ty ord in an ce, Lev it t fu rn is he d t he pe rfo rm an ce b on ds be fo re the Cit y ’s reco rd in g o f th e p la t. Fo r th e Ci ty, a p ur po se of t he bo nd s was to
en su re tha t n o fu tu re re si de ntof P ha se Two o wns a ho m e wit ho utacce ss to Cit y ut il it ie s. Fo r Lev it t, the pu rp os e o f th e b on ds was t o b e al lo wedto m ov e fo rward wit h t he de ve lo pm en t o f Ph as e Two. The se pu rp os es no lo ng er ap pl y to th is cas e. No l ot s h av e b een m ark et edor s ol d; so no futur e res id en t o f Ph as e Two re qu ire s th e u ti li ti es servi ces th e im pr ov em en ts wou ldpro vi de . No co ns tru ct io n o f im pr ov em en ts ha s b een st art ed ; s o n o c on st ru ct io n o f im pr ov em en ts canbe
co m pl et ed , th atis , fin is he d. The Cit y can no t “ co m

pl et e th e u nf

in is he d i m

pr ov em en ts ” -- as th e b on ds
sa y -- b ecau se no un fin is he d i m pr ov em en ts are p res en t i n t hi s ca se : n o im pr ov em en ts were s ta rte d. Th e wor di ng of t he bo nd s an d t he requi rem en ts of t he Ci ty ord in an ce co m

pe l the co nc lu si on forus th atth e b on ds were n otis su edto pu ni sh Levi ttor t o e nr ic h t he Cit y , bu t t o a ll ow t he City to co m pl et e im pr ov em en ts
on ce a d ev el op er s ta rts th em . For t he se ki nd s o f bo nd s, thi s p oi ntis to be hi gh li gh te d: th e Ci ty is n otto be lef t wi th th e ex pe ns e an d m es s o f ha lf- fin is he d im pr ov em en ts on ce wo rkon th e im pr ov em en ts ha s s ta rte d. Surety gu aran te edth at th e im pr ov em en ts wou ldbe fin is he d i f st art edbu t d idno t g ua ran te e th atth e im pr ov em en ts wou ldbe bo th st art edan d fi ni sh ed
. 8W e ag ree wi th th e d is tri ctco urt t ha t the se bo nd s ar e subjec t t o a n i m pl ie d
co nd it io n t ha t p aym en t fo r co m pl et io n o f th e im

pr ov em en ts is requi redon ly if Lev it t s ta rte d c on st ru ct io n o f th e p ert in en t i m pr ov em en ts . Cf. Riv er Val e Pl an ni ng Bd . v. E & R Offi ce In te rio rs , Inc ., 57 5 A.2 d 5 5, 5 9- 60 (N.J. Supe r. Ct
. App . Div . 19 90 ) (i ns ta ll at io n o f im pr ov em en ts ag reedto as aco nd it io n o f si te pl an ap pr ov al was s ub

ject t o a n i m

pl ie d c on di ti on th atth e im pr ov em en ts were re qu ire d
on ly if th e d ev el op er p ro ceed edwith t he pro ject t ha t was ap pr ov ed ). Thi s i m pl ie d c on di ti on was n otful fil le d: no co ns tru ct io n o f th e p ert in en t Ph as e Two i m

pr ov em en ts be ga n. Su rety ’s ob li ga ti on to pay th e Ci ty the am ou nt of th e b on ds ha s n otbe entri gg ered
.
III. CONCLUSION

Su rety ha s n o o bl ig at io n t o p ay

th e Ci ty the face va lu e o f th e b on ds to
co m pl et e co ns tru ct io n o f im

pr ov em en ts th atne ve r be ga n. Th e Ci ty is en ti tl edto
no reco ve ry

on th es e b on ds ; t he gra ntof s umm ary jud gm en t i n t hi s ca se is affi rm ed
. AFFIR MED.

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