Court Opinion

ID: 903534
Source: CourtListenerOpinion
Date Created: 2013-06-19 18:35:49.860882+00
Date Added: 2024-06-11T09:08:58.194875
License: Public Domain

UNPUBLISHED

                   UNITED STATES COURT OF APPEALS
                       FOR THE FOURTH CIRCUIT

                               No. 12-1952

AMERICAN CONTRACTORS INDEMNITY COMPANY,

                 Plaintiff - Appellant,

           v.

CAROLINA REALTY AND DEVELOPMENT COMPANY INCORPORATED; JOHN
PAUL BAEHR; KIMBERLY BAEHR; WILLIAM LAMAR BAEHR; DUFFY
BAEHR; JOHN BAEHR; JANIS BAEHR,

                 Defendants – Appellees,

           and

MILLICENT   BOZEMAN;     WILLIAM    S.    BOZEMAN;   CHAD   CLARK;
MARY CLARK,

                 Defendants.

Appeal from the United States District Court for the District of
South Carolina, at Spartanburg.      Timothy M. Cain, District
Judge. (7:09-cv-02145-TMC)

Argued:   May 15, 2013                       Decided:   June 19, 2013

Before TRAXLER, Chief Judge, and GREGORY and DUNCAN, Circuit
Judges.

Affirmed by unpublished per curiam opinion.

Jeff B. Slagle, THOMPSON & SLAGLE, PC, Johns Creek, Georgia, for
Appellant.   John S. Simmons, SIMMONS LAW FIRM, LLC, Columbia,
South Carolina, for Appellees.
Unpublished opinions are not binding precedent in this circuit.

                                  2
PER CURIAM:

       Appellant         American      Contractors            Indemnity      Corporation

(“American Contractors”) filed the instant action in the United

States District Court for the District of South Carolina seeking

to enforce an indemnity agreement entered into with Appellee

Carolina         Realty      and      Development            Incorporated        (“Carolina

Realty”). 1        The     district    court      entered      judgment     in    favor   of

Carolina Realty, finding that the claim for indemnification was

barred by a settlement agreement entered into by the parties.

American        Contractors    appealed          the    district    court’s      decision.

For the reasons that follow, we affirm.

                                             I.

       American     Contractors        is    a    commercial       surety   that     issues

construction payment and performance bonds.                        In accordance with

standard industry practice, American Contractors issues bonds to

general contractors or subcontractors, financially guaranteeing

the    (sub)contractor        will     perform         its    contractual    obligations

with       an   obligee.    Should     the       bonded      (sub)contractor       fail   to

       1
       The other named Appellees, John Paul Baehr, Kimberly
Baehr, William Lamar Baehr, Meredith Baehr, John Baehr, and
Janis Baehr signed the indemnity agreement in their individual
capacities as agents for Carolina Realty. Only John Paul Baehr,
Kimberly Baehr, and Duffy Baehr were represented on appeal. For
the purposes of this opinion, the parties will be referred to
collectively as Carolina Realty.

                                                   3
perform its contractual obligations, such as paying laborers or

suppliers,       the        obligee     can        seek       redress          from     American

Contractors as the surety.

      Dick Corporation was named general contractor for the NAS

Pensacola, Aviation Rescue Swimmers School and Physical Fitness

Center project (the “Florida Project”).                              Dick Corporation in

turn hired Carolina Realty as a subcontractor for the Florida

Project     to    perform       roofing       work.          The    subcontract         required

Carolina Realty to obtain payment and performance bonds and as

such, Carolina Realty applied to American Contractors for the

necessary bonds.            In line with standard practice, before issuing

the   bonds,     American       Contractors         required         Carolina         Realty   to

execute a General Agreement of Indemnity (“Indemnity Agreement”)

to insure against potential losses.                       In the Indemnity Agreement,

Carolina      Realty        agreed     to     “indemnify            and       hold     [American

Contractors]      harmless       from    and       against         any    and    all    demands,

liabilities,       losses,       costs,           damages,         attorneys’          fees    and

expenses”      that    arise     from       any    bond       claims.         Carolina    Realty

executed    the    Indemnity          Agreement         on    July       6,    2006,    and    the

payment and performance bonds were issued on or about August 22,

2006.

      Beginning        in    2008,    American          Contractors           began    receiving

claims on the payment bond it had issued to Carolina Realty from

labor   and      material      suppliers.            In      July    of       that    year,    one

                                                    4
supplier and one subcontractor of Carolina Realty filed suit

against Dick Corporation in the United States District Court for

the Northern District of Florida, asserting a payment bond claim

against the bond that Dick Corporation had itself taken out for

the   Florida      Project.      Dick     Corporation        filed      third       party

complaints naming American Contractors and Carolina Realty as

third-party      defendants.      Dick      Corporation         also        asserted      a

performance      bond   claim    against    American        Contractors       based      on

Carolina    Realty’s       alleged        deficient       performance          of      the

subcontract.       Carolina Realty filed a counterclaim against Dick

Corporation.       American       Contractors         did       not     assert         any

counterclaims.      Ultimately,      several       lawsuits     were     filed      by    a

number of parties alleging breaches of various contracts entered

into for the Florida Project.              These lawsuits were consolidated

for purposes of discovery and trial (the “Florida Litigation”). 2

      In   2009,    American     Contractors       sent     a   demand       letter      to

Carolina   Realty,      insisting    it    post     $650,000.00        in    collateral

security    --     an   amount    thought        sufficient     at     the     time      to

indemnify American Contractors for the expenses it had incurred

      2
       The other consolidated cases were captioned as United
States of America for the use and benefit of Bradco Supply Corp.
v. Dick Corp., et. al. and United States for the use and benefit
of Infinity Builders of the Emerald Coast, LLC v. Continental
Ins. Co. et al., Consolidated Civil Action No. 3:08-cv-56-MCR-MD
(N.D. Fla.).

                                             5
to date on the payment and performance bonds issued to Carolina

Realty.    Carolina    Realty          did     not       respond   to     the     request.      On

August 13, 2009, while the Florida Litigation was still pending,

American Contractors filed the instant action against Carolina

Realty, seeking indemnification for expenses it had incurred as

a result of the issued bonds, including repayment of the money

spent paying bond claims and attorneys’ fees for the litigation.

      Meanwhile, settlement talks between the various parties to

the   Florida   Litigation             were    transpiring.          In    the     settlement

talks,     Carolina    Realty          did     not       represent      itself.         Instead,

American    Contractors’          attorney,          Frank     Lanak,      negotiated          the

agreement on behalf of Carolina Realty pursuant to the power-of-

attorney    provision        in    the        Indemnity       Agreement,         as     Carolina

Realty    objected     to    settlement.                 On   February      10,       2011,    the

parties to the Florida Litigation, including Dick Corporation,

Carolina    Realty,        and    American        Contractors,            entered       into    an

agreement settling the suits embroiled in the Florida Litigation

and releasing all claims between the parties arising out of the

Florida    Project    (“Settlement             Agreement”).        In      total,       American

Contractors paid Dick Corporation $262,250.00 in claims against

the bonds taken out by Carolina Realty.

      Once the Florida Litigation settled, discovery ensued in

the   instant    action,          as     American          Contractors          still    sought

indemnification       in    the    amount       of       $677,473.59,       reflecting         the

                                                     6
money it had paid in settlements, additional bond claims, costs,

and    attorneys’        fees     in    connection            with    the    bonds    issued      to

Carolina      Realty.      Following       discovery,           both    parties       moved       for

summary       judgment.            Carolina           Realty           argued        that         the

indemnification           claim    was    barred         by    the    Settlement          Agreement

entered      into    by    the    parties       to       end    the    Florida       Litigation.

American Contractors contended that the Settlement Agreement had

no effect on its claim for indemnification.

       The cross motions were referred to a magistrate judge, who

concluded         that   the     Settlement      Agreement            was    not   intended        to

release      American       Contractors’          indemnification               claim      against

Carolina      Realty.       As    such,    the       magistrate         judge      submitted       a

report      and    recommendation         to    the      district       court      recommending

that     American        Contractors’          motion         for     summary      judgment        be

granted and Carolina Realty’s motion be denied.                                    The district

court held oral argument on the magistrate judge’s report on May

21, 2012.         On July 9, 2012, the court issued an order declining

to adopt the magistrate judge’s conclusions, and instead granted

Carolina      Realty’s         motion     to    enforce          settlement,         or    in     the

alternative, summary judgment.                   See American Contractors Indem.

Co.    v.    Carolina      Realty        and    Development           Co.,    Inc.,        2012 WL
2711802 (D.S.C. 2012).             American Contractors timely appealed.

                                                     7
                                       II.

     The      district   court      heard    this     case   pursuant       to    its

diversity jurisdiction.          See 28 U.S.C. § 1332.           Therefore, we

have jurisdiction under 28 U.S.C. § 1291.                 There is no choice of

law provision in the Indemnity Agreement.                 As such, because the

action was filed in the United States District Court for the

District of South Carolina, South Carolina law, including its

choice-of-law rules, applies to this action.                  Erie R.R. Co. v.

Tompkins, 304 U.S. 64 (1938); Volvo Const. Equip. N. Am., Inc.

v. CLM Equip. Co., Inc., 386 F.3d 581, 599-600 (4th Cir. 2004).

Under South Carolina law, “a contract is controlled by the laws

of the State in which it is made and to be performed.”                      Doctors

Hosp.    of   Augusta,   LLC   v.   CompTrust       AGC   Workers’    Comp.      Trust

Fund, 636 S.E.2d 862, 864 (S.C. 2006).                    As all relevant acts

regarding     the   settlement      transpired       in    Florida,    we     employ

Florida law to resolve the dispute, 3 and review the grant of

summary judgment de novo.           Blair v. Defender Servs., Inc., 386
F.3d 623, 625 (4th Cir. 2004).

                                       A.

     The pertinent part of the Settlement Agreement reads:

     [the parties] fully and forever settle, release and
     discharge, each other, each of their predecessors,
     successors,  assigns,  agents,  insurers,  sureties,

     3
         All parties agree that Florida law governs this matter.

                                             8
     attorneys, officers, directors and employees from any
     and all past and present claims, demands, damages,
     debts, or causes of action, in law or in equity,
     damages and losses of any and all kind or nature,
     whether contingent or fixed, known and unknown claims
     for known and unknown damages and which arise or may
     arise out of acts, omissions or events which occurred
     prior to the date hereof, arising out of or related to
     [the Florida Litigation], all other matters between
     the Parties relating to the [Florida] Project.

The Settlement Agreement goes on:

     Not withstanding anything in this Settlement Agreement
     to the contrary, this Settlement Agreement and the
     releases contained here are strictly limited to the
     Federal Action, Bradco Action, Infinity Action, Dick
     Claims, Carolina Work, Carolina Claims, and all other
     matters between the parties relating to or arising out
     of the [Florida] Project.

     Under Florida law, “[w]here the terms of a contract are

clear and unambiguous, the parties’ intent must be gleaned from

the four corners of the document.”       Crawford v. Baker, 64 So. 3d
1246,   1255   (Fla.   2011).   Further,   when   the   language   of   a

contract “is clear and unambiguous[,] a court cannot entertain

evidence contrary to its plain meaning.”          Sheen v. Lyon, 485
So. 2d 422, 424 (Fla. 1986).

     We find the Settlement Agreement to be clear.         Using broad

and unequivocal language, American Contractors decided to “fully

and forever settle . . . any and all past and present claims

. . . between the Parties relating to or arising out of the

[Florida] Project.”       American Contractors and Carolina Realty

are named parties to the Settlement Agreement; they clearly fall

                                     9
within its broad scope.                The instant action was pending at the

time       the    parties     entered    into     the     Agreement;     it    was    most

certainly           a       “present      claim.”          American       Contractors’

indemnification claim “arose out of” the Florida Project.                             When

the term “arising out of” is used as an exclusionary term, as it

was here, Florida courts have looked to the plain dictionary

definition         of   the    term     “arise”      to     conclude    it    means     to

“originate” or “result from.”                  Westmoreland v. Lumbermens Mut.

Cas. Co., 704 So. 2d 176, 181-83 (Fla. Dist. Ct. App. 1997).

American Contractors seeks repayment for the money it paid out

on the bonds it issued Carolina Realty; these costs “resulted

from” Carolina Realty’s allegedly deficient performance on the

Florida Project and were therefore “fully and forever” settled

by     the        Agreement.       American       Contractors          also     requests

reimbursement for attorneys’ fees incurred during the course of

litigation; these fees “originated” in the Florida Litigation

and    are       thereby    foreclosed    by    the       Settlement    Agreement.     In

short,      the    plain     and   unambiguous       language    of    the    Settlement

Agreement          forecloses       American         Contractors’       request        for

indemnification. 4

       4
       Even if we were to find the Settlement Agreement to be
ambiguous, under Florida law any ambiguity is construed against
American Contractors as drafter of Agreement.       See Hurt v.
Leatherby Ins. Co., 380 So. 2d 432, 434 (Fla. 1980).

                                                10
                                           B.

        Despite    the   clear     language      of    the    Settlement      Agreement,

American Contractors argues the above Agreement does not cover

indemnification          claims     because:         (1)     the    context     of     the

Settlement Agreement evinces indemnity claims were not intended

to be released; (2) Carolina Realty was not a true party to the

Settlement Agreement as the Agreement was signed by American

Contractors on Carolina Realty’s behalf; (3) the instant action

is not mentioned in the Settlement Agreement, showing that it

was not included under the purview of the Settlement; and (4)

the asserted indemnification claim does not “arise out of” the

Florida Project.         We find these arguments unpersuasive.

                                           i.

        American Contractors argues that indemnification provisions

are essential to the successful operation of the construction

bond     industry.         Therefore,      it         asserts      that   putting     the

Settlement Agreement in context, it is unreasonable to conclude

that    a   commercial     surety     in   the       construction     industry       would

waive its ability to bring an indemnification claim after having

to pay out on an issued bond.

       We have noted indemnification is critical to the successful

operation of the construction bond industry.                          See Fidelity &

Deposit Co. of Md. v. Bristol Steel & Iron Works, Inc., 722 F.2d
1160,    1163     (4th   Cir.     1983).      This      general     premise    does   not

                                                11
render any provision of the Settlement Agreement ambiguous, such

that we may consider evidence outside of the four corners of the

contract.         See    Sheen, 485 So. 2d        at   424.    In    accordance       with

Florida     law,    we    cannot         consider          this   context          evidence.   The

general nature of the construction bond industry has no bearing

on our resolution of this appeal.

      Similarly, American Contractors argues that we should put

ourselves in the shoes of the parties and consider the contract

in light of their individual perspectives.                              See 11 Fla. Jur. 2d

Contracts     § 149.          We       can    only     do       this,    however,       when   the

contract     is    ambiguous            or    the     meaning       of       the    contract    is

doubtful.     See Ungaro v. West Palm Beach Biltmore Apartments, 61
So. 2d 642 (Fla. 1952).                 As we just stated, American Contractors

has   not    identified            a    single        ambiguity         in    the      Settlement

Agreement.         Therefore,                regardless            of         how       important

indemnification          is   to       sureties      in     the    bond      business,     surety

relationships were considered under the Settlement Agreement and

all claims covered therein were still released.

                                                ii.

      American      Contractors              next    argues       that       because    Carolina

Realty was represented by an American Contractors’ attorney in

the settlement talks, Carolina Realty is not a true party to the

Settlement Agreement.

                                                      12
      To accept this argument would mean the Settlement Agreement

in   toto   has     no   effect     as   to     claims     asserted        by    or    against

Carolina     Realty.       This     cannot      be.    The     Settlement         Agreement

specifically lists Carolina Realty as a party to the Agreement.

The Indemnity Agreement gave American Contractors the option of

exercising      power-of-attorney         to     represent        Carolina       Realty     in

settlement      talks.     American      Contractors         chose    to     exercise      its

power-of-attorney to settle the Florida Litigation on Carolina

Realty’s     behalf       over    Carolina         Realty’s    objection.             American

Contractors knowingly bound both itself and Carolina Realty by

the deal reached.

                                          iii.

      American Contractors also argues that this action does not

fall under the purview of the Settlement Agreement as it is not

specifically mentioned in the Agreement.                       American Contractors

reasons     that    this    litigation         was     pending       at    the    time     the

Settlement      Agreement     was    entered       into,     and     had    it    wished    to

include it in the Agreement, it would have done so expressly.

      Again, this argument has no grounding in the words of the

Agreement.      The      Settlement      Agreement         expressly        released       all

involved    parties       from    “any   and     all    past   and        present      claims”

relating to/arising from the Florida Litigation and the Florida

Project     (emphasis      added).         To      repeat,     this        indemnification

action    was   a   “present      claim”      at     the   time    of      the   Settlement

                                                13
Agreement.         That       it     was     not    individually           mentioned       in    the

Agreement is of no moment.                    Moreover, while there is a carve-out

provision in the Settlement Agreement exempting personal injury

and property damage claims, there is no similar provision for

indemnification claims.                    And the exclusion of indemnification

claims from the Settlement Agreement’s carve-out provision is

evidence     that        the       parties    did    not       intend      to   “contract       with

respect to that matter.”                     See Gulf Cities Gas Corp. v. Tangelo

Park Svc. Co., 253 So. 2d 744, 748 (Fla. Dist. Ct. App. 1971).

       It    is     important         to     remember         that     American       Contractors

helped draft the Settlement Agreement.                               This is not a case of

parties having lopsided legal acumen -- the Settlement Agreement

was drafted and agreed to by American Contractors’ attorneys,

who    are   (presumably)             well-apprised            of    the   construction         bond

business and basic contract principles.                              If American Contractors

wanted      to    exempt       indemnification               claims    from     the    Settlement

Agreement         it    had    the     ability          and    knowledge        to    do   so,    as

evidenced by the fact that it expressly exempted other claims

from the Agreement.                 American Contractors’ attempt to carve out

this   indemnification               action    from      the        Settlement       Agreement    is

contrary     to        the    clear    terms       of    the        contract,    and    therefore

contrary to Florida law.

                                                        14
                                                 iv.

       American        Contractors’              final        argument       is         that     the

indemnification claim did not “arise out of” or “relate to” the

Florida Litigation or the Florida Project.                            American Contractors

asserts       that    the     claim      arose      from      the     Indemnity         Agreement

itself, and therefore, does not fall under the plain language of

the Settlement Agreement.

       The      Settlement          Agreement          specifically           includes           the

subcontract          entered      into      by    Dick     Corporation            and     Carolina

Realty,       which    required       the    payment       and      performance          bonds    at

issue.        These bonds are specifically mentioned in the recitals

to the Settlement Agreement, and there is no dispute that bond

claims were settled by the Agreement.                               As the district court

reasoned,       American          Contractors          would        have     no     claim        for

indemnification had it not been for Carolina Realty’s alleged

lack     of    performance          in    relation         to    the       Florida       Project.

Additionally, the attorneys’ fees sought by American Contractors

are    for    reimbursement         for     having       to     partake     in     the    Florida

Litigation       --    this    is     exactly      what       the    Settlement          Agreement

forecloses.          The Indemnity Agreement was only activated when the

Florida       Project       was     alleged        not     to       have    been        performed

adequately by Carolina Realty.                     American Contractors’ claim for

indemnification arose from the Florida Project and the Florida

Litigation; it is therefore barred by the Settlement Agreement.

                                                    15
                                 III.

      American   Contractors   drafted     and   executed    a    Settlement

Agreement with extremely broad language.           It must now live by

the terms of the contract.        For the reasons detailed herein,

clear principles of Florida contract law require us to affirm

the   district   court’s   judgment   granting     summary       judgment   in

Carolina Realty’s favor. 5

                                                                     AFFIRMED

      5
       Agents of the named corporate entities were also parties
to the Settlement Agreement. The Settlement Agreement therefore
covers the individual indemnitors who are parties to this
appeal.   Our holding today applies to all named Appellees with
equal force.

                                      16