Court Opinion

ID: 4149007
Source: CourtListenerOpinion
Date Created: 2017-02-28 20:01:49.706518+00
Date Added: 2024-06-11T07:46:29.191842
License: Public Domain

Case: 16-14861   Date Filed: 02/28/2017   Page: 1 of 12

                                                       [DO NOT PUBLISH]

          IN THE UNITED STATES COURT OF APPEALS

                   FOR THE ELEVENTH CIRCUIT
                     ________________________

                           No. 16-14861
                     ________________________

                D.C. Docket No. 1:15-cv-24183-MGC

INTERNATIONAL FIDELITY INSURANCE
COMPANY,
a foreign corporation,
ALLEGHENY CASUALTY COMPANY,
a foreign corporation,

                                    Plaintiffs-Counter Defendants-Appellees,

                              versus

AMERICARIBE-MORIARTY JV,
a joint venture,

                                       Defendant-Counter Claimant-Appellant.

                     ________________________

              Appeal from the United States District Court
                  for the Southern District of Florida
                    ________________________
                          (February 28, 2017)
               Case: 16-14861       Date Filed: 02/28/2017       Page: 2 of 12

Before HULL, MARTIN and EBEL, * Circuit Judges.

MARTIN, Circuit Judge:

       Americaribe-Moriarty JV (“Americaribe”) appeals the District Court’s order

granting summary judgment for International Fidelity Insurance Company and

Alleghany Casualty Company (together, “Fidelity”) and denying its own motion

for summary judgment. Fidelity was the surety on a performance bond issued for a

subcontract between Americaribe, a general contractor, and Certified Pool

Mechanics 1, Inc. (“CPM”). After Americaribe terminated CPM for defaulting on

the subcontract, it notified Fidelity, as required by the bond, but also hired a new

subcontractor. The parties dispute whether Americaribe’s hiring of a new

subcontractor breached the notice requirements in the termination provisions of the

bond. The District Court found Americaribe failed to properly comply with the

bond’s notice requirements, and held that Fidelity was therefore not liable for the

bond. After careful review, we affirm. The bond incorporated the subcontract, and

Americaribe did not comply with the notice requirements in the termination

provisions of those documents.

                                              I.
       Americaribe entered into a written subcontract with CPM for the pool work

at the Brickell CityCentre Super Structure project in Miami, Florida. The

       *
        Honorable David M. Ebel, United States Circuit Judge for the Tenth Circuit, sitting by
designation.

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subcontract included a termination provision that required Americaribe to provide

three-days notice before it could act to complete the job on its own:

      12.2(a) Termination for Cause. If Subcontractor at any time . . . fails
      to cure the default after the three (3) day notice in Article 11.2(a),
      Contractor shall be at liberty to terminate this Subcontract Agreement
      upon an additional three (3) day written notice mailed or delivered to
      Subcontractor and take possession of all materials on site and employ
      others to complete the Work. . . . If the expense incurred by
      Contractor in finishing the Work plus damages suffered by the
      Contractor exceed the unpaid balance to be paid under this
      Subcontract Agreement then the Subcontractor shall pay the
      difference to the Contractor.

      Fidelity, as the surety, issued a performance bond on behalf of CPM with

Americaribe as obligee. Section 1 of the bond expressly incorporated the

subcontract. The bond also included termination provisions. Section 3 set out

three steps by which Americaribe could trigger Fidelity’s obligations under the

bond, including a notice requirement in § 3.2:

      § 3 If there is no Owner Default under the Construction Contract, the
      Surety’s obligation under this Bond shall arise after
      .1 the Owner first provides notice to the Contractor and the Surety that
      the Owner is considering declaring a Contractor Default. Such notice
      shall indicate whether the Owner is requesting a conference among
      the Owner, Contractor and Surety to discuss the Contractor’s
      performance. . . .
      .2 the Owner declares a Contractor Default, terminates the
      Construction Contract and notifies the Surety; and

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      .3 the Owner has agreed to pay the Balance of the Contract Price in
      accordance with the terms of the Construction Contract to the Surety
      or to a contractor selected to perform the Construction Contract.

Section 5 provided Fidelity with four options for completing CPM’s work after it

was terminated, allowing Fidelity to elect the option that best mitigated its

damages:

      § 5 When the Owner has satisfied the conditions of Section 3, the
      Surety shall promptly and at the Surety’s expense take one of the
      following actions:
      § 5.1 Arrange for the Contractor, with the consent of the Owner, to
      perform and complete the Construction Contract;
      § 5.2 Undertake to perform and complete the Construction Contract
      itself, through its agents or independent contractors;
      § 5.3 Obtain bids or negotiated proposals from qualified contractors
      acceptable to the Owner for a contract for performance and
      completion of the Construction Contract . . . ; or
      § 5.4 Waive its right to perform and complete, arrange for completion,
      or obtain a new contractor and with reasonable promptness under the
      circumstances:
      .1 After investigation, determine the amount for which it may be
      liable to the Owner and, as soon as practicable after the amount is
      determined, make payment to the Owner; or
      .2 Deny liability in whole or in part and notify the Owner, citing the
      reasons for denial.

If Fidelity failed to elect an option “with reasonable promptness,” Americaribe had

to provide Fidelity seven-days notice before it could enforce other remedies:

      § 6 If the Surety does not proceed as provided in Section 5 with
      reasonable promptness, the Surety shall be deemed to be in default on

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      this Bond seven days after receipt of an additional written notice from
      the Owner to the Surety demanding that the Surety perform its
      obligations under this Bond, and the Owner shall be entitled to
      enforce any remedy available to the Owner.

                                         II.
      On August 17, 2015, Americaribe issued a notice of default to CPM and

Fidelity, as called for by § 3 of the bond. In the notice, Americaribe requested a

conference call with Fidelity “to substitute CPM’s scope . . . with an alternative

subcontractor.” On August 20, Fidelity responded to Americaribe requesting more

information and directing Americaribe “not to take any steps with respect to the

completion of the project without the written consent of the Surety.” On

September 2, the parties held a conference call.

      On September 21, Americaribe sent CPM and Fidelity a letter terminating

CPM, notifying Fidelity, and agreeing to pay the balance of the contract price,

consistent with § 3 of the bond and § 12.2 of the subcontract. However, on

September 16, Americaribe got a proposal from Dillon Pools, Inc. for completing

the work that remained on the subcontract. And on September 17, Dillon sent

Americaribe a schedule with a presumed start date of September 21. Then on

September 22, Americaribe sent vendors of CPM a letter, again copying Fidelity,

and informing them of CPM’s termination and that “[Americaribe] intends to

award the subcontract to complete the remaining work . . . to Dillon.” As of

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September 23, Dillon had begun “supplementation work and on site investigations

to determine corrective work required for the project.”

       On October 1, Americaribe sent Fidelity the “additional written notice”

required by § 6 of the bond, which started the seven-day clock toward Fidelity

defaulting on its obligations under the bond. On October 8, Fidelity responded to

Americaribe that its actions in engaging Dillon may have discharged Fidelity’s

obligations under the bond. On October 9, Americaribe responded that Fidelity

was in default of the bond for not acting under § 5 with reasonable promptness.

On November 5, Fidelity issued a formal denial of Americaribe’s claim because

Americaribe materially breached the bond “by commencing efforts to supplement

CPM’s work before providing the Surety with an opportunity to remedy any

alleged default.”

       In the following months, Americaribe formalized its relationship with

Dillon. On November 4, Dillon signed a subcontract with Americaribe. The

contract is dated October 1, 2015, and lists a start date of September 28, 2015. On

November 5, Americaribe paid Dillon $1,100,870.86 for invoices dated September

29 and 30 with a period ending date of September 30.1 This payment included

$450,000 for Bradford Products, LLC, which had supplied pool shells to CPM but

had not been paid before CPM was terminated. About $71,416.26 of the payment

       1
       Americaribe made an additional payment of $364,946.87 to Dillon for the same invoices
on December 14.

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was for various permits.2 The rest of the payment was for items like “Plumbing”

and “Mechanical Equipment/Installation.”

       Fidelity filed this action for declaratory judgment against Americaribe,

alleging it failed to satisfy the conditions precedent to make a claim against

Fidelity’s bond and instead breached that bond. Americaribe counterclaimed,

alleging it was Fidelity who breached the bond. Americaribe and Fidelity each

moved for summary judgment. The District Court granted Fidelity’s motion and

denied Americaribe’s motion. Americaribe then filed this appeal.

                                              III.
       “We review a district court’s grant of summary judgment de novo, viewing

the evidence in the light most favorable to the nonmoving party.” Lage v. Ocwen

Loan Servicing LLC, 839 F.3d 1003, 1008–09 (11th Cir. 2016) (per curiam).

Summary judgment is proper when “there is no genuine dispute as to any material

fact and the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P.

56(a); accord Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S. Ct. 2548, 2552

(1986). “[T]he mere existence of some alleged factual dispute between the parties

will not defeat an otherwise properly supported motion for summary judgment; the

requirement is that there be no genuine issue of material fact.” Anderson v.

Liberty Lobby, Inc., 477 U.S. 242, 247–48, 106 S. Ct. 2505, 2510 (1986). A fact is

       2
         Americaribe’s invoice lists $79,351.40 in charges for various permits. All charges
appear to be reduced by ten percent resulting in a true payment of $71,416.26.

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“material” if it “might affect the outcome of the suit,” and “genuine” “if the

evidence is such that a reasonable jury could return a verdict for the nonmoving

party.” Id. at 248, 106 S. Ct. at 2510.

      The parties dispute whether Americaribe properly complied with the bond’s

notice provisions when it terminated CPM. As stated, the bond issued by Fidelity

on behalf of CPM expressly incorporated the subcontract between CPM and

Americaribe in § 1. Thus, we are presented with the threshold question of whether

we look to the bond alone or the bond and the subcontract together to determine

the notice requirements.

      The parties agree that Florida law governs our determination of the

responsibilities of Americaribe and Fidelity under their contract. Under Florida

law, “[a] bond is a contract, and, therefore, a bond is subject to the general law of

contracts.” Am. Home Assurance Co. v. Larkin Gen. Hosp., Ltd., 593 So. 2d 195,

197 (Fla. 1992). “It is a generally accepted rule of contract law that, where a

writing expressly refers to and sufficiently describes another document, that other

document, or so much of it as is referred to, is to be interpreted as part of the

writing.” OBS Co. v. Pace Const. Corp., 558 So. 2d 404, 406 (Fla. 1990). In

applying this rule, this Court has held “[w]here a provision for liquidated delay

damages is clearly delineated in the underlying contract and incorporated by

reference into the bond,” the surety is liable for the delay damages even though the

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terms of the bond do not expressly require it. Nat’l Fire Ins. Co. of Hartford v.

Fortune Const. Co., 320 F.3d 1260, 1275–76 (11th Cir. 2003) (“Florida courts have

continued to utilize the well-established doctrine of incorporation by reference to

impose liability on a performance bond surety.”); see also DCC Constructors, Inc.

v. Randall Mech., Inc., 791 So. 2d 575, 576–77 (Fla. 5th DCA 2001) (per curiam)

(looking to the incorporated subcontract for the definition of “default”).

      In Dooley & Mack Constructors, Inc. v. Developers Sur. & Indem. Co., 972

So. 2d 893 (Fla. 3d DCA 2007), a Florida appellate court applied this principle of

incorporation to the notice requirements in termination provisions of bonds and

subcontracts. Id. at 895. As noted by the district court and the parties, an

unpublished opinion from this Court said the Dooley decision demonstrated that,

under Florida law, when a bond incorporates a subcontract we must look to both to

determine the notice requirements with which a contractor must comply. CC-

Aventura, Inc. v. Weitz Co., 492 F. App’x 54, 55 (11th Cir. 2012) (per curiam)

(unpublished). Although we recognize that CC-Aventura is not binding precedent,

it does provide guidance.

      Here, both the bond and subcontract required Americaribe to provide notice

to Fidelity when terminating CPM. Americaribe did provide notice on September

21. However, the subcontract required the contractor give three-days notice before

undertaking to complete the work. And the bond gave Fidelity time to choose

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among four options for undertaking the work itself, after Americaribe sent the

termination notice. This undefined period of time was then followed by another

requirement for Americaribe to provide seven-days notice before Fidelity would be

in default. Neither the bond nor the contract allowed Americaribe to immediately

hire Dillon to complete the work.

      The relevant language from the subcontract is in § 12.2(a), which required a

“three (3) day written notice mailed or delivered to Subcontractor” after which

Americaribe could “take possession of all materials on site and employ others to

complete the Work.” The relevant language in the bond is in § 5, which gave

Fidelity a choice among four options to remedy CPM’s default after Americaribe

sent the termination notice, and § 6, which said:

      If the Surety does not proceed as provided in Section 5 with
      reasonable promptness, the Surety shall be deemed to be in default on
      this Bond seven days after receipt of an additional written notice from
      the Owner to the Surety demanding that the Surety perform its
      obligations under this Bond . . . .

      Before Americaribe sent the termination notice on September 21, Dillon had

already sent Americaribe a proposal for completing the work remaining on the

subcontract, as well as a schedule with a presumed start date of September 21.

Then, on September 22, Americaribe sent vendors of CPM a letter, copying

Fidelity, informing them of CPM’s termination and that “[Americaribe] intends to

award the subcontract to complete the remaining work . . . to Dillon.” As of

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September 23, Dillon had commenced some work required for the project. Thus,

the question is whether these actions breached the notice provisions of the bond

and subcontract.

       Americaribe argues its notice was sufficient, and that it did nothing to

impede Fidelity from fulfilling its obligations under the bond. However, there is

ample evidence that Americaribe paid Dillon to do work during the period

immediately after Americaribe sent the termination notice to CPM. The bond

allowed a time period for Fidelity to elect one of its options for completing CPM’s

work. On November 5, Americaribe paid Dillon $1,100,870.86 for invoices dated

September 29 and 30 with a period ending date of September 30. Americaribe

made another payment of $364,946.87 to Dillon for the same invoices on

December 14. Americaribe argues these payments were actually for suppliers who

supplied CPM, but who had not been paid by CPM before it was terminated. But

the invoices show that only $450,000 of the payments were for Bradford Products,

LLC, one of CPM’s suppliers.3 Americaribe also claims the rest of the invoices

were mainly for products and permit fees, so they do not demonstrate significant

work done by Dillon. Approximately $71,416.26 was paid for various permits.

Even if we credit Americaribe’s argument that the supplier and permit payments

do not demonstrate that Dillon was performing work in September, that amount is

       3
         Americaribe argues it also paid another supplier, Hornerxpress, but that payment
appears to have been made separately, on October 15.

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less than half of the payments it made. The rest were for invoice items like

“Plumbing” and “Mechanical Equipment/Installation.”

       Americaribe did not comply with the subcontract’s three-day notice

requirement. It had already hired Dillon, which began remedying the defaulted

work during that three-day period. Neither did Americaribe comply with the

bond’s requirements, which expressly afforded Fidelity time to elect among

options for completing the defaulted work. 4 Americaribe’s immediate hiring of

Dillon to complete the project and the costs Dillon incurred completing CPM’s

work thwarted Fidelity’s ability to choose among the options it had for remedying

CPM’s default under § 5 of the bond. Therefore, Fidelity is not liable on the bond.

Americaribe’s “failure to comply with the [] bond’s notice provisions stripped the

surety of its bargained for right and relieved the surety of its liability for the instant

claim.” See Ins. Co. of N. Am. v. Metro. Dade Cty., 705 So. 2d 33, 35 (Fla. 3d

DCA 1997).

       AFFIRMED.

       4
          It is not relevant that Americaribe and Dillon did not formally sign the contract until
after the bond’s election period. It would defeat the purpose of the notice and election periods if
contractors could just work around them by waiting to sign a contract.

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