Court Opinion

ID: 201693
Source: CourtListenerOpinion
Date Created: 2011-02-07 05:32:17+00
Date Added: 2024-06-11T09:42:56.964046
License: Public Domain

Not for Publication in West's Federal Reporter
                Citation Limited Pursuant to 1st Cir. Loc. R. 32.3

          United States Court of Appeals
                         For the First Circuit
No. 04-2359

            AERO-METRIC INCORPORATED; TRIATHLON LTD.,
          f/k/a TRIATHLON MAPPING; PHOTO SCIENCE, INC.,

                                 Plaintiffs,

                                       v.

     CENTRO DE RECAUDACIONES DE INGRESOS MUNICIPALES (CRIM),

               Defendant, Cross-Claimant, Appellant,

                       UNIVERSAL INSURANCE CO.,

               Defendant, Cross-Claimant, Appellee,

 ENTEC CORPORATION, INC.; CONSULTA ECONOMICA Y PLANIFICACION,
  INC.; HECTOR RIVAS & ASOCIADOS (HRA); TOMMY HABIBE; CHICORP
 FINANCIAL SERVICES; ANALYTICAL SURVEYS INCORPORATED; EASTCAM
GEOMATICS LIMITED; MANUFACTURERS AND TRADERS TRUST COMPANY, not
 individually but solely in its capacity as Trustee; JAMES W.
    SEWALL COMPANY; AMERICAN BONDING COMPANY; LIBERTY MUTUAL
                       INSURANCE COMPANY,

                                 Defendants.

          APPEAL FROM THE UNITED STATES DISTRICT COURT

                   FOR THE DISTRICT OF PUERTO RICO

         [Hon. Héctor M. Laffitte, U.S. District Judge]

                                    Before

              Lynch, Lipez, and Howard, Circuit Judges.
     Fernando Van Derdys, with whom Law Offices of Fernando Van
Derdys was on brief, for cross-claim appellant.
     Eduardo Castillo-Blanco, with whom Law Offices of Ivan M.
Fernandez was on brief, for cross-claim appellee.

                         July 8, 2005
           Per    Curiam.      Appellant   Centro   de   Recaudaciones    de

Ingresos Municipales (CRIM) appeals from a summary judgment denying

its claim under a surety contract, issued by appellee Universal

Insurance Company, on which it was a named obligee. The procedural

history of the case is complicated, but we will confine ourselves

to the essentials, which are relatively straightforward.

           On August 18, 1995, Universal agreed to act as a surety

to ENTEC Corporation, the general contractor hired by CRIM to

design, furnish, and install a Land Information Management System.

Accordingly, Universal simultaneously issued a Performance Bond,

which guaranteed to CRIM the general performance of the contract

(up to the penalty specified in the bond), and a Labor and Material

Payment   Bond,   which     guaranteed   the   payment   of   subcontractors

(again, up to the penalty specified in the bond).              Each bond was

given the number 000-41867, named ENTEC as the principal and CRIM

as the obligee, and was issued with a bond penalty sum in the

amount of $501,750.00 -- apparently, a small fraction of the value

of the project.     Effective October 16, 1996, ENTEC and Universal

executed an endorsement "[t]o be attached to and form part of bond

no. 000-41867 issued on behalf of [ENTEC] as Principal and in favor

of [CRIM] as Obligee in the amount of ONE MILLION THREE THOUSANDS

FIVE HUNDRED AND 00/100 Dollars ($1,003,500.00)."             The endorsement

added Chicorp Financial Services "AS ADDITIONAL OBLIGEE UNDER

CAPTIONED BOND."

                                    -2-
             In May 2000, a number of subcontractors brought the

underlying lawsuit alleging, inter alia, breach of contract.           CRIM

and Universal were named defendants.          On May 31, 2002, Universal

filed a motion for consent and/or declaratory judgment asking the

district court to decree its liability on bond no. 000-41867 to be

the penalty sum of $501,750.00 and to dismiss all claims against it

with prejudice, subject to it paying the judgment amount to the

court.   On September 17, 2002, the court entered the requested

judgment and, on October 1, 2002, Universal deposited $501,750.00

with the court.

             Shortly thereafter, however, CRIM cross-claimed against

Universal under the Performance Bond in the amount of $501,750.00.

Universal moved to dismiss the cross-claim, CRIM opposed, and

several additional filings ensued.          The parties' dispute centered

around whether the $501.750.00 penalty set forth on the Performance

Bond and on the Labor and Material Payment Bond was Universal's

total liability as surety, or whether Universal was separately

obligated in the amount of $501,750 under each bond, in which case

the amount deposited with the court would not reflect Universal's

total liability.

             Universal pointed to the Supreme Court of Puerto Rico's

decision in Caguas Plumbing, Inc. v. Continental Constr. Corp.,

2001   JTS   169   (2001),    where   the   Court   in   dicta   evinced   an

understanding      that   a    surety's      liability    under    similar,

                                      -3-
simultaneously issued Performance and Labor and Material Bonds was

the single amount listed on each bond.                        CRIM countered that the

surety    contract    at    issue      here    materially           differed    from       that

considered in Caguas Plumbing by pointing to the endorsement, which

stated    that     Universal's      liability           was    twice     the   $501,750.00

specified in each bond, or $1,003,500.00.                      Along these same lines,

CRIM also mentioned, without elaborating why it should matter, the

fact that the project cost far more than Universal's potential

liability    under     either     reading          of   the     contract.        Universal

responded with a sworn statement from Iris M. Rivera-Menéndez,

Universal's Surety Department Manager, which averred that the sole

purpose of the endorsement was to name Chicorp Financial Services

as   an   additional    obligee        under       bond       no.   000-41867,       that    no

additional premium was charged for the issuance of the endorsement,

and that the endorsement did not alter the amount of Universal's

monetary liability in any way.

             Treating      the   motion       to    dismiss         as   one   for   summary

judgment     and    finding      the     Caguas         Plumbing         decision     to    be

dispositive, the district court entered judgment in favor of

Universal.    The court's brief opinion explaining the judgment made

no mention of the endorsement or the fact that the contract covered

only a fraction of the project's cost.

             On appeal, CRIM makes intertwined arguments, which may be

addressed together, that the district court improperly resolved on

                                          -4-
summary judgment a material factual issue -- the intent of the

parties to the surety contract with respect to the total liability

issue. In developing its position, CRIM relies on the endorsement,

which, it says, constitutes trialworthy evidence that the parties

intended Universal's total liability to be $1,003,500.00.               (CRIM

also again adverts to the fact that the project's cost far exceeded

Universal's liability, but fails to explain why this is relevant).

          Universal responds by pointing out that Rivera's sworn

statement,    the   upshot   of   which   is   that    the   total   liability

specified in the endorsement was a mistake, is uncontradicted. And

with the endorsement out of the picture, Universal says, we should

proceed on the same assumption as did the Caguas Plumbing court --

that the surety contract contemplated that Universal would be

liable only for the single penalty listed in each of the two bonds

(which together form a single agreement).             Without disputing that

surety contracts involving the simultaneous issuance of Performance

and Labor and Material Payment Bonds usually give rise only to the

single penalty specified in each bond, CRIM replies that we should

not treat the Rivera sworn statement as dispositive on the issue of

the parties' intentions because Universal still controls, and has

not made available, the relevant documents regarding the parties'

intentions and the premiums paid.

             We start with CRIM's last point -- that Universal is in

control of the documentation that might permit it to dispute

                                    -5-
Rivera's sworn statement.            Perhaps this is so, but CRIM did not

object to (and does not now complain of) the district court's

decision to treat Universal's motion to dismiss as one for summary

judgment.    Nor did CRIM seek to invoke Fed. R. Civ. P. 56(f) to

conduct the relevant discovery.               Thus, CRIM lacks a basis to

complain about the state of the record, and we are constrained to

accept    what    Rivera     says:       that   the   gratuitously   provided

endorsement merely added Chicorp as an additional obligee under the

surety contract and worked no change in Universal's underlying

liability.       See Fed. R. Civ. P. 56(e); Celotex Corp. v. Catrett,

477 U.S. 317, 322-23 (1986).

            This leads us swiftly to conclude that the district court

did not err in concluding that Universal met its summary judgment

burden.     While we think that the court read too much into the

Caguas Plumbing decision -- the issue presented here was not joined

in that case -- CRIM has provided us with no basis for questioning

the   Caguas      Plumbing     court's     premise    that   a   surety   who

simultaneously issues Performance and Labor and Material Payment

Bonds as part of a single surety contract is only liable for the

single penalty amount specified in each bond. See Caguas Plumbing,

P.R. Offic. Trans. at 4.        In any event, the premise strikes us as

quite sensible.      On a $1,000,000 project, it is easy to see how a

contractor (and thus a surety, see 10 Appleman, Insurance Law &

Practice, § 5856 (1981) (making clear that the obligations of a

                                        -6-
surety on a public contractor's bond is commensurate with that of

the contractor)) could be liable for up to $1,000,000 to various

subcontractors, or up to $1,000,000 to the obligee.         But it is more

difficult to see how, absent unforeseen circumstances such as cost

overruns (which are circumstances against which a surety agreement

does not insure), the contractor could end up being liable in the

amount of $1,000,000 to both.         After all, the value of any work

done by the subcontractors towards completion of the project (and

within the project's specifications) would reduce the contractor's

ultimate liability to the project's owner by that same amount.

Thus, $500,000    worth   of   work    by   the   subcontractors   would   be

$500,000 worth of work not owed to the project's owner.

          In closing, we acknowledge that, unlike the situation in

Caguas Plumbing, the penalty specified in the Performance and Labor

and Material Payment Bonds constituted only a fraction of the

project's cost.   But CRIM has failed to explain, and we do not see,

why that fact should matter.

          Affirmed.

                                      -7-