Court Opinion

ID: 4408072
Source: CourtListenerOpinion
Date Created: 2019-06-19 07:04:25.625794+00
Date Added: 2024-06-11T14:52:47.395120
License: Public Domain

FIRST DIVISION
                              BARNES, P. J.,
                          MERCIER and BROWN, JJ.

                   NOTICE: Motions for reconsideration must be
                   physically received in our clerk’s office within ten
                   days of the date of decision to be deemed timely filed.
                               http://www.gaappeals.us/rules

                                                                     June 11, 2019

In the Court of Appeals of Georgia
 A19A0583. AUTO-OWNERS INSURANCE COMPANY v. CW
     MASONRY, INC. et al.

      BROWN, Judge.

      Auto-Owners Insurance Company brings this interlocutory appeal from the trial

court’s order denying its cross-motion for summary judgment in an action Auto-

Owners filed against CW Masonry, Inc. (“CWM”), and Clint and Lynnette Wauters

(collectively “defendants”) for indemnification under the terms of a performance and

payment bond. For the reasons set forth below, we reverse the denial of summary

judgment.

      “We review a grant or denial of summary judgment de novo and construe the

evidence in the light most favorable to the nonmovant.” Progressive Elec. Svcs. v.

Task Force Constr., 327 Ga. App. 608, 609 (760 SE2d 621) (2014). Viewed in that
  light, the record shows that July 8, 2009, CWM entered into a subcontract agreement

  with RTD Construction, Inc., whereby CWM agreed to provide masonry work for the

  City of Villa Rica’s West Water Reclamation Facility Project. Defendants Clint and

  Lynnette Wauters, husband and wife, were the owners/officers of CWM. Pursuant to

  the terms of the subcontract, CWM was required to post a performance and payment

  bond in the amount of $435,000. Clint and Lynnette Wauters were both aware that

  RTD required the bond. On July 28, 2009, Clint Wauters applied for a bond by faxing

  to Auto-Owners a two-page document. The first page, designated “Page 1 of 2,” is

  titled Application for Contract Bond, and lists CWM as applicant, RTD as obligee,

  and the Wauterses as indemnitors. The second page, designated “Page 2 of 2,” is

  titled Indemnity Agreement.1 The second document lists CWM as the Company

      1
        As a general condition for the issuance of any bonds, Auto-Owners required CWM
and the Wauters to execute an Indemnity Agreement. The Indemnity Agreement signed by
the Wauters provides, in pertinent part, as follows:

      The undersigned does or do hereby represent that the statements made herein
      as an inducement to the Company to execute or procure the bond or bonds
      herein applied for, are true, and should the Company execute or procure said
      bond or bonds, does or do hereby agree, for the undersigned, the heirs,
      personal representatives and assigns of the undersigned, jointly and severally,
      as follows: . . . [(2)] to indemnify the Company against all loss, costs,
      damages, expenses and attorneys fees whatever, and any and all liability

                                            2
Name, and is signed by Lynnette Wauters individually, and Clint Wauters

individually under the heading “Signatures”/“Personal Indemnitors.” Clint Wauters

   therefor, sustained or incurred by the Company by reason of executing of said
   bond or bonds, or any of them, in making any investigation on account
   thereof . . . [(3)] that the Company shall have the right, and is hereby
   authorized but not required: . . . (b) To adjust, settle or compromise any claim,
   demand, suit, or judgment upon said bond or bonds, or any of them, unless
   the undersigned shall request the Company to litigate such claim or demand,
   or to defend such suit, or to appeal from such judgment, and shall deposit
   with the Company , at the time of such request, cash or collateral satisfactory
   to it in kind and amount, to be used in paying any judgment or judgments
   rendered or that may be rendered, with interest, costs and attorneys’ fees . .
   . [(5)] that liability hereunder shall extend to, and include, the full amount of
   any and all sums paid by the Company in settlement or compromise of any
   claims, demands, suits, and judgments upon said bond or bonds, or any of
   them, on good faith, under the belief that it was liable therefor, whether liable
   or not, as well as any and all disbursements on account of costs, expenses and
   attorney’s fees, as aforesaid, which may be made under the belief that such
   were necessary, whether necessary or not; [(6)] that in event of payment,
   settlement or compromise, in good faith, of liability, loss, costs, damages,
   expenses and attorney’s fees, claims, demands, suits, and judgments as
   aforesaid, and itemized statement thereof, sworn to by any officer of the
   Company, or the voucher or vouchers or other evidence of such payment,
   settlement or compromise shall be prima facie evidence of the fact and extent
   of the liability of the undersigned, in any claim or suit hereunder, and in any
   and all matters arising between the undersigned and the Company. . . .

                                          3
also signed on behalf of CWM under the heading “Signatures.” CWM and the

Wauterses do not dispute that Clint executed the application and signed the second-

page Indemnity Agreement on behalf of CWM and himself, individually, or that

Lynnette signed the second page, individually. Lynnette Wauters testified that she

was aware that CWM applied for a bond from Auto-Owners and that her husband told

her to sign both pages, but that she did not read what she was signing. According to

Clint Wauters, “after [he] submitted [the] application, . . . Auto-Owners issue[d] a

bond on [his] behalf.” The bond is not dated, but listed CWM as the principal and

Auto-Owners as the surety. The bond was signed by a surety representative, but the

signature line for the principal was blank.

      CWM began performing work at the project site in the fall of 2009, but walked

off the project on May 27, 2010, after a dispute with RTD. As of May 28, 2010, RTD

terminated the subcontract and notified Auto-Owners of its intention to file a claim

against the bond for reimbursement of costs and expenses. After RTD filed its claim,

other subcontractors, suppliers, and CWM vendors also filed bond claims. Auto-

Owners, with the assistance of attorneys and specialists, spent approximately one and

a half years investigating the claims under the bond. Auto-Owners communicated

frequently with the Wauterses/CWM, in writing and by telephone, requesting their

                                          4
input on the claims and sending supporting documents for their review, and even met

with Clint Wauters and an RTD representative to discuss the status of the payment-

bond claims received by Auto-Owners. An Auto-Owners representative spoke

repeatedly with Clint Wauters about the bond claims and the indemnitors’ indemnity

obligations. In several written communications, Auto-Owners requested that the

Wauterses post collateral in the amount of $60,000, if they wanted Auto-Owners to

provide a defense to the bond claims, but neither the Wauterses nor CWM ever did

so. The Wauterses and CWM disputed some claims, and maintained that RTD had

lied and that its claim was not proper, but CWM never provided sufficient

documentation or evidence to support its defenses. Auto-Owners eventually

concluded that CWM defaulted on the project by walking off the job before

completing its scope of work; failing to pay its subcontractors, laborers, and vendors;

and failing to complete the work it did perform in a fit and workmanlike manner and

free from defects and/or failing to complete the work it performed in conformance

with the terms and conditions of its subcontract with RTD. Auto-Owners paid five

payment bond claims asserted by CWM vendors in the total amount of $36,469.07,

as well as RTD’s bond claim in the amount of $117,770.25. In addition, Auto-Owners

incurred legal and investigative costs in the amount of $125,308.49.

                                          5
      On January 19, 2017, Auto-Owners filed suit against defendants for

indemnification. Subsequently, the Wauterses filed a motion for summary judgment

“in favor of Defendants,” on the ground that the indemnity agreement is not valid and

enforceable, and violates the Statute of Frauds because it is a personal guaranty which

must identify the parties, the debt, the principal debtor, and the promisor and

promisee. Auto-Owners filed a cross-motion for summary judgment, disputing

defendants’ claim that the indemnity agreement is a personal guaranty, and

contending that the indemnity agreement is unambiguous and its terms enforceable.

Following oral argument, in which defendants’ counsel waived participation, the trial

court orally granted Auto-Owners’ cross-motion for summary judgment. The trial

court subsequently entered an order denying Auto-Owners’ cross-motion for

summary judgment, without explanation, concluding simply that “issues of material

fact remain to be tried as to the validity of the indemnity agreement, and the issues

of liability and the amount, if any, of damages.” Auto-Owners appeals this ruling.

      1. Auto-Owners contends that the trial court erred in denying its cross-motion

for summary judgment because the indemnity agreement is a valid contract,

enforceable against the Wauterses. In response, defendants contend that the indemnity

agreement is actually a personal guaranty and unenforceable under the Statute of

                                          6
Frauds because it does not sufficiently identify the name of the principal debtor or the

promisee. Defendants further contend that even if we construe the agreement as an

indemnity agreement, it still fails because it does not identify the party to be

indemnified and is not incorporated into a document that does identify the parties.

      The threshold question in this appeal is the nature of the second page signed

by the Wauterses and labeled “Indemnity Agreement.” Is the document a guaranty or

an indemnity contract? “[A] contract of suretyship or guaranty is one whereby a

person obligates himself to pay the debt of another. . . .” OCGA § 10-7-1. See also

41 AmJur2d 4, Indemnity (2019) (“[a] ‘guaranty agreement’ is one in which the

promisor protects his or her promisee from liability for a debt resulting from the

failure of a third party to honor an obligation to that promisee — thus creating a

secondary liability”). A contract of indemnity is a promise to accept liability for

another’s loss. See 41 AmJur2d 1, Indemnity (2019) (“[u]nder a contract for

indemnification, one party (the indemnitor) promises to hold another party (the

indemnitee) harmless for loss or damage of some kind, and the indemnitor promises

to indemnify the indemnitee against liability of the indemnitee to a third person or

against loss resulting from the liability”). This Court has explained the difference

between the two as follows:

                                           7
      Like the contract of suretyship, the contract of indemnity has as its
      purpose security of the promisee against loss. The great difference
      between the two lies in the character of the promisee. In
      suretyship[/guaranty] the promise runs to an obligee or creditor, present
      or prospective. In indemnity the promise runs to an obligor or debtor
      present or prospective. In suretyship[/guaranty] the promisee has or is
      about to extend credit to a third person, the principal, and the promise
      is made to protect the promisee creditor in case the principal fails to
      perform. In indemnity, the promisee owes or is about to assume an
      obligation to a third person, the creditor, and the promisor agrees to save
      him harmless from a loss as a result of his assuming that obligation.

(Citation and punctuation omitted.) Rankin v. Smith, 113 Ga. App. 204, 207 (1) (147

SE2d 649) (1966). See also Progressive Elec., 327 Ga. App. at 613 (1) (b) (“[a]n

indemnity contract differs from a guaranty in that the former is an original rather than

a collateral undertaking and generally undertakes to make good the promisee’s loss

resulting from his liability to another rather than from another’s liability to him”)

(citation and punctuation omitted); 38 AmJur2d 11, Guaranty (2019) (“[t]he essential

distinction between an indemnity contract and a guaranty is that in an indemnity

contract, the promisor undertakes to protect the promisee against loss or liability to

a third person, while in a guaranty, the undertaking is to protect the promisee against

                                           8
loss through the failure of a third person to fulfill his or her obligations to the

promisee”).

      A performance bond in the construction industry is a “‘prime example’ of an

indemnification agreement because it creates a direct, primary liability between the

promisor and the promisee that is original and independent of any other obligation.”

(Citation and emphasis omitted.) Travelers Cas. and Sur. Co. of America v. Ream,

No. 07-171-DLB, 2009 WL 2969897, at *4 (1) (E.D. Ky., September 9, 2009). Under

a performance bond, a surety posts a bond on behalf of a principal to guarantee

performance, and the principal agrees to indemnify its surety for any loss arising out

of non-performance. The disputed document signed by the Wauterses in this case is

a contract of indemnity and not a guaranty. See, e.g., Copeland v. Beville, 93 Ga.

App. 442, 443 (92 SE2d 54) (1956). As such, it falls outside the Statute of Frauds and

need not be in writing to be enforceable. See Progressive Elec., 327 Ga. App. at 613

(1) (b) (“[c]ontracts of indemnity generally fall outside the Statute of Frauds”)

(citation omitted). See also Flemister v. United Bonding Ins. Co., 122 Ga. App. 422,

423 (1) (177 SE2d 182) (1970) (“[a] promise by one person to indemnify another for

becoming security to a third, is not within the statute of frauds, and need not be in

writing”) (citation and punctuation omitted). Compare OCGA § 13-5-30 (2) (promise

                                          9
to answer for the debt of another must be in writing and signed by the party to be

charged therewith); Capital Color Printing v. Ahern, 291 Ga. App. 101, 104 (1) (661

SE2d 578) (2008) (the requirement that a guaranty must be in writing “has been

interpreted to mandate further that a guaranty identify the debt, the principal debtor,

the promisor, and the promisee”) (citation and punctuation omitted).

      Indemnity agreements are interpreted under the rules governing contracts. See

Anderson v. U.S. Fidelity & Guar. Co., 267 Ga. App. 624, 627 (1) (600 SE2d 712)

(2004). The main consideration in contract interpretation is the intent of the parties.

Megel v. Donaldson, 288 Ga. App. 510, 513 (1) (654 SE2d 656) (2007). The intent

of the parties is to be ascertained from the document itself when the terms are clear

and unambiguous. See Greenberg Farrow Architecture v. JMLS 1422, LLC, 339 Ga.

App. 325, 329 (1) (791 SE2d 635) (2016). See also Anderson, 267 Ga. App. at 627

(1). “Where ambiguities exist, the court may look outside the written terms of the

contract and consider all the surrounding circumstances to determine the parties’

intent.” (Citation and punctuation omitted.) Greenberg Farrow, 339 Ga. App. at 329

(1). Moreover, “contract disputes are particularly well suited for adjudication by

summary judgment because construction of contracts is ordinarily a matter of law for

the court.” (Citation omitted.) Megel, 288 Ga. App. at 513 (1).

                                          10
      The uncontroverted evidence in this case shows that the Wauterses agreed to

indemnify Auto-Owners for any loss related to the performance and payment bond.

Clint Wauters testified that RTD required CWM to obtain a payment and performance

bond and that he sought such a bond from Auto-Owners. Lynnette Wauters also

testified that she was aware that CWM had applied for a bond from Auto-Owners.

The application and indemnity agreement is designated as a two-page document, and

the first page identifies the company from whom CWM sought bonding — Auto-

Owners — as well as the indemnitors — Clint and Lynnette Wauters. Both Wauterses

admit to signing both pages, and Clint Wauters confirmed that he submitted both

pages simultaneously to Auto-Owners in order for CWM to secure the performance

and payment bond as required by RTD. Clint Wauters further testified that Auto-

Owners issued the bond after he submitted both pages. That Lynnette Wauters did not

read the two-page application and indemnity agreement when she signed it is

inconsequential. See Jaycee Atlanta Dev. v. Providence Bank, 330 Ga. App. 322, 328

(3) (765 SE2d 536) (2014) (“the law is clear that parties to a contract must exercise

ordinary diligence in making an independent verification of contractual terms and

representations and ensure that they understand the contract’s contents before signing

it[;] the rule is that one who signs a contract is presumed to know its contents”)

                                         11
(citations and punctuation omitted). Because there is ample evidence that the

Wauterses intended to enter into an indemnity agreement with Auto-Owners in which

they agreed to become indemnitors for a performance and payment bond issued in

connection with the subcontract agreement entered into by CWM for work on behalf

of RTD, the trial court erred in finding that issues of material fact remain to be tried

as to the validity of the indemnity agreement.

      2. Auto-Owners contends that the trial court erred in finding that material

issues of fact remain as to damages. The defendants contend that issues of material

fact remain because Clint Wauters testified in his deposition that he contested the

amounts paid by Auto-Owners and “specifically asked [Auto-Owners] not to pay the

claim as RTD was not entitled to the amount sought.”

      Under an indemnity agreement, “the promisee may recover of the promisor the

whole of the moneys which he was compelled to pay by virtue of the bond into which

he entered. The assumption of the responsibility is a sufficient consideration for the

promise.” (Citations and punctuation omitted.) Flemister, 122 Ga. App. at 423 (1).

Here, the Wauterses agreed that Auto-Owners had the discretion to adjust, settle, or

compromise any claims upon the bond “unless [indemnitors] shall request [Auto-

Owners] to litigate such claim or demand, or to defend such suit . . . and shall deposit

                                          12
with [Auto-Owners], at the time of such request, cash or collateral satisfactory to it

in kind and amount. . . .” The Wauterses also expressly agreed that an itemized

statement sworn to by any officer of Auto-Owners shall be prima facie evidence of

the fact and extent of their liability to Auto-Owners. The Wauterses assented to and

are bound by these terms. Auto-Owners submitted the affidavits of its attorney and

a senior attorney/records custodian to prove the demands/claims it received under the

bond, as well as the expenses incurred in satisfying those claims, and the Wauterses

expressly agreed that an itemized statement sworn to by any officer of Auto-Owners

shall be prima facie evidence of the fact and extent of the Wauterses’ liability to

Auto-Owners.

      There is also ample evidence that Auto-Owners repeatedly asked the Wauterses

to post collateral, and that Clint Wauters admitted that he never posted collateral,

even though the indemnitors were required to do so in order to contest any claims.

Although defendants contend that RTD was not entitled to the amounts claimed, they

have failed to submit any evidence to support this contention or to controvert Auto-

Owners’ payments. Moreover, by failing to post collateral, the Wauterses failed to

comply with the terms of the indemnity agreement. Accordingly, there is no material

issue of fact as to damages, and the trial court erred in denying Auto-Owners’ cross-

                                         13
motion for summary judgment on its claim for damages under the indemnity

agreement. See, e.g., Anderson, 267 Ga. App. at 627-629 (1) (summary judgment as

to liability and damages under indemnity agreement proper based upon affidavits of

vice president and claims attorney/record custodian detailing claim payments and

invoices); Nguyen v. Lumbermens Mut. Cas. Co., 261 Ga. App. 553, 555-556 (1) (583

SE2d 220) (2003) (in action under indemnity agreement, trial court properly directed

verdict in favor of bond insurer where evidence showed that indemnitor failed to post

collateral); Ins. Co. of the West v. Alpha Dev. Corp., No. C09-5426RJB, 2009 WL

5064041, at *3 (11) (C) (W.D. Wash., December 15, 2009) (granting summary

judgment to bond insurer on its claim for damages for breach of indemnity agreement

where indemnitors failed to controvert evidence of incurred expenses/claim

payments).

      Judgment reversed. Barnes, P. J., and Mercier, J., concur.

                                         14