Court Opinion

ID: 169816
Source: CourtListenerOpinion
Date Created: 2010-08-14 17:47:18+00
Date Added: 2024-06-11T17:25:04.202903
License: Public Domain

FILED
                                                 United States Court of Appeals
                                                         Tenth Circuit
                    UNITED STATES CO URT O F APPEALS
                                                                September 26, 2007
                          FO R TH E TENTH CIRCUIT
                                                                Elisabeth A. Shumaker
                                                                    Clerk of Court

    HARTFORD FIRE INSURANCE
    C OM PA N Y ,

               Plaintiff-Counter-
               Defendant-Appellee,

    v.                                                  No. 07-3010
                                                (D.C. No. 05-CV-2001-DJW )
    P & H CATTLE COM PANY, IN C.;            451 F. Supp. 2d 1262 (D. Kan. 2006)
    EM PORIA LIVESTO CK SALES,
    INC.; OLM A V. PEAK; VELM A M .
    PEA K ; A M B Y SC OTT PEA K ;
    VIRG INIA L. M ORR IS;
    CH RY SANNE M . HA SELHOR ST,
    Trustees of the Olma V. Peak and
    Velma M . Peak Irrevocable Trust;
    OLM A V. PEAK AND VELM A M .
    PEAK IRREV OC AB LE TRUST,

               Defendants-Counter-
               Claimants-Appellants,

         and

    TIM REECE, doing business as
    Reece Cattle Company,

               Defendant-Cross-
               Defendant.

                           OR D ER AND JUDGM ENT *

*
     After examining the briefs and appellate record, this panel has determined
unanimously to grant the parties’ request for a decision on the briefs without oral
argument. See Fed. R. App. P. 34(f); 10th Cir. R. 34.1(G). The case is therefore
                                                                       (continued...)
Before PO RFILIO, A ND ER SO N, and BALDOCK , Circuit Judges.

      Appellants P & H Cattle Company, Inc.; Emporia Livestock Sales, Inc.;

Olma V. Peak; Velma M . Peak; the Olma V. Peak and Velma M . Peak Irrevocable

Trust; and Amby Scott Peak, Virginia L. M orris, and Chrysanne M . Haselhorst,

Trustees, (collectively the Peaks), appeal the district court’s grant of summary

judgment in favor of Hartford Fire Insurance Company on its contractual

indemnity claim. W e have jurisdiction under 28 U.S.C. § 1291 1 and we affirm.

      Pursuant to the Packers and Stockyards Act, 1921, 7 U.S.C. § 204, Hartford

issued a bond listing itself as surety and P & H Cattle as the principal (P & H

Bond). P & H Cattle, Emporia Livestock Sales, Olma Peak, and Velma Peak

(collectively Indemnitors) subsequently executed a General Indemnity Agreement

(GIA) with Hartford. Hartford defended and ultimately settled a claim under the

P & H Bond by Aaron W ilkie (W ilkie Claim) for $75,000. Hartford then filed

this action seeking indemnification under the GIA for the settlement amount and

*
 (...continued)
ordered submitted without oral argument. This order and judgment is not binding
precedent, except under the doctrines of law of the case, res judicata, and
collateral estoppel. It may be cited, however, for its persuasive value consistent
with Fed. R. App. P. 32.1 and 10th Cir. R. 32.1.
1
     In a separate order the district court certified its aw ard of summary
judgment in favor of Hartford on its contractual indemnity claim as a final
judgment under Fed. R. Civ. P. 54(b).

                                        -2-
its attorney’s fees and costs expended in defending and settling the W ilkie Claim,

as w ell as its attorney’s fees and costs in bringing this action. The district court

granted H artford summary judgment on its contractual indemnity claim against

the Indemnitors and awarded Hartford its requested relief.

      In this appeal, the Peaks raise three claims of error: (1) the district court

lacked jurisdiction over this action under 28 U.S.C. § 1332(a) because the amount

in controversy did not exceed $75,000; (2) Hartford’s losses in defending and

settling the W ilkie Claim are not recoverable under the terms of the GIA; and

(3) Hartford cannot recover attorney’s fees or costs under the GIA. The facts, as

they relate to these claims on appeal, are not disputed and are set forth in detail in

the district court’s decision. See Hartford Fire Ins. Co. v. P & H Cattle Co.,

451 F. Supp. 2d 1262, 1265-71 (D. Kan. 2006). W e will not repeat them here,

except as they relate to the arguments raised by the Peaks.

                                 Standards of Review

      The Peaks initially claim that the district court did not have subject-matter

jurisdiction under § 1332. “The ultimate question of whether diversity

jurisdiction exists is a mixed question of law and fact to be reviewed de novo,

with any factual findings of the district court reviewed for clear error.” Elliott

Indus. Ltd. P’ship v. BP Am. Prod. Co., 407 F.3d 1091, 1105 (10th Cir. 2005).

The Peaks’ remaining two claims of error address the district court’s grant of

summary judgment in favor of Hartford. “We review the district court’s grant of

                                           -3-
summary judgment de novo, applying the same legal standard used by the district

court. W e also review the district court’s interpretation of [a contract] de novo.”

Old Republic Ins. Co. v. Durango Air Serv., Inc., 283 F.3d 1222, 1225 (10th Cir.

2002) (citation omitted). And we review de novo the district court’s

interpretation of Kansas law. See Reynolds v. Sch. Dist. No. 1, 69 F.3d 1523,

1536 (10th Cir. 1995).

                                Diversity Jurisdiction

      In its complaint, Hartford alleged federal court jurisdiction existed under

§ 1332. W here there is diversity of citizenship of the parties, § 1332(a) gives

district courts original jurisdiction over “all civil actions w here the matter in

controversy exceeds the sum or value of $75,000, exclusive of interest and costs.”

Hartford’s complaint sought a total sum in excess of $117,000, including the

$75,000 settlement amount on the W ilkie Claim, plus attorney’s fees, costs, and

interest. Nonetheless, the Peaks argue that, under Kansas law, attorney’s fees and

costs are not recoverable under the GIA, and without the additional sums for

attorney’s fees, costs and interest, the amount in controversy was only $75,000.

Therefore, they assert that the district court should have dismissed Hartford’s

claim for lack of subject-matter jurisdiction.

      This argument ignores altogether the district court’s basis for concluding

there was jurisdiction under § 1332. The court summarized the “legal certainty

rule” for determining whether the amount-in-controversy requirement is satisfied:

                                           -4-
“Under the legal certainty rule, pleading damages in excess of the amount in

controversy requirement in the complaint is sufficient to satisfy the jurisdictional

requirement unless it appears to a legal certainty that the plaintiff in good faith

cannot claim that amount.” Hartford Fire Ins., 451 F. Supp. 2d at 1272 (citing

St. Paul M ercury Indem. Co. v. Red Cab Co., 303 U.S. 283, 288-89 (1938)).

Rather than addressing application of the legal certainty rule, the Peaks instead

argue the merits of their contention that Kansas law precludes recovery of

attorney’s fees and costs under the GIA. Their argument aptly illustrates the lack

of legal certainty regarding that very question. W e conclude that the district court

correctly determined that Hartford’s prayer for judgment in an amount exceeding

$75,000 was sufficient to meet the jurisdictional requirement under § 1332(a).

                              Interpretation of the GIA

      The Peaks contend that the terms of the GIA do not provide for

indemnification of the loss sustained by Hartford in defending and settling the

W ilkie Claim because none of the Indemnitors were involved in the underlying

transaction that gave rise to that claim. Some background is necessary to

understand this argument. As described by the district court, the specifics of the

W ilkey transaction were as follow s:

            On February 14, 2001, Aaron W ilkey d/b/a A & W Cattle
      Company (“W ilkey”) sold 225 head of fat cattle for $186,780.39,
      which were shipped from the Hy-plains Feedyard to Iowa Beef
      Processors in Emporia, Kansas for slaughter. The cattle were
      ultimately purchased by Holmes Livestock, who issued a check in the

                                          -5-
      amount of $186,780 payable to Tim Reece. Upon receiving the
      check from Holmes Livestock, Tim Reece’s wife endorsed the check
      and sent it to W ilkey’s bank. The check was dishonored for payment
      due to insufficient funds.

Hartford Fire Ins., 451 F. Supp. 2d at 1267. After failing to receive payment for

his cattle, W ilkey made a claim under the P & H Bond, which listed “Tim Reece

DBA Reece Cattle Company” as an “other registrant[]” and “CLEAREE.” See

Aplee. Supp. App. at 89, 95. 2 Hartford denied the claim and W ilkey then filed an

action against P & H Cattle, as principal, and Hartford, as surety, to recover on

the P & H Bond.

      Hartford initially resisted the W ilkey Claim on the basis that P & H Cattle

did not act as a clearing agency under Clause 3 in the W ilkey transaction. But

Hartford ultimately concluded there was a substantial risk that it and P & H Cattle

could be held liable on the P & H Bond, even though P & H Cattle was not aware

2
      “Other registrants” could be added to Clause 3 of the P & H Bond by rider.
Clause 3 provided that the bond was “applicable” and “remain[ed] in full force
and virtue”

      [i]f the said Principal, acting as a clearing agency responsible for the
      financial obligations of other registrants engage[d] in buying
      livestock, . . . or if such other registrants, shall [fail to] (1) pay when
      due to the person or persons entitled thereto the purchase price of all
      livestock purchased by such other registrants for their own account
      or for the accounts of others [or] (2) safely keep and properly
      disburse all funds coming into the hands of such Principal or such
      other registrants for the purpose o[f] paying for livestock purchased
      for the accounts of others.

Aplee. Supp. App. at 89.

                                          -6-
of and did not participate in the transaction with W ilkey. Hartford settled the

W ilkey Claim for $75,000. It then filed this action against the Peaks, seeking

recovery under the GIA of the settlement amount and its costs and attorney’s fees

expended in defending the W ilkey Claim.

      The Indemnitors filed a counterclaim against Hartford, asserting that

Hartford was negligent in settling the W ilkey Claim. Further, in response to

Hartford’s summary judgment motion, the Indemnitors contended they were not

liable under the GIA because the W ilkey Claim was not a valid claim on the

P & H Bond. But the district court concluded that Hartford was not required to

show that the bond claim was valid in order to enforce the GIA . Hartford Fire

Ins., 451 F. Supp. 2d at 1281-82. It held that Hartford need only show that it

acted reasonably in settling the W ilkey Claim, and it concluded that Hartford had

demonstrated its conduct was reasonable. Id. at 1279. The court also granted

summary judgment in Hartford’s favor on the Indemnitors’ negligence

counterclaim. Id. at 1285–86.

      On appeal, the Peaks do not identify any error in the district court’s ruling

that Hartford acted reasonably in settling the W ilkey Claim. Nor have they

appealed the district court’s dismissal of the Indemnitors’ negligence claim

against Hartford. But they argue that Hartford cannot recover under the G IA

because none of the Indemnitors was aware of or participated in the transaction

with W ilkey. They rest their argument on Section II of the agreement, which

                                         -7-
provides, in relevant part: “This Agreement applies to all Bonds executed by the

Surety (1) on which any Indemnitor either acts solely or as a member of a

partnership or a joint venture, or (2) in connection with which any Indemnitor

acts as a silent partner or a silent joint venturer.” Aplee. Supp. App. at 100.

Before ruling on Hartford’s summary judgment motion, the district court asked

the parties for additional briefing on whether this section limits or qualifies the

GIA’s applicability to “all Bonds” executed by Hartford. Focusing solely on the

underlying transaction with W ilkey, the Peaks argued that the GIA does not

provide indemnification for the W ilkey Claim because none of the Indemnitors

acted solely in that transaction, or acted in that transaction as a partner or joint

venturer, silent or otherwise, with Tim Reese. The Peaks quoted the language of

Section II and asserted that its plain meaning is clear. But they provided no basis

for reasonably interpreting it in the manner that they propounded.

      Hartford disagreed with the Peaks’ interpretation, contending that Section

II does not address the Indemnitors’ activity, or lack thereof, in any underlying

transaction. Hartford argued that it could recover under the GIA for sums it

expended in connection with the W ilkey Claim because P & H Cattle acted solely

in procuring the P & H Bond from Hartford. Therefore, Hartford contended that

the P & H Bond falls within the application of the G IA because, under Section II,

the agreement applies not only to Bonds issued at the request of an Indemnitor

acting solely, but also when they request Bonds as a member of a partnership or

                                           -8-
joint venture. Thus, Hartford argued that Section II not only does not limit the

Indemnitors’ liability under the GIA, but actually expands the definition of which

Bonds are covered. Hartford contended that its construction of Section II is

consistent with the four corners of the GIA, addressing various other provisions

of the agreement.

      The district court considered the meaning of the w ord “acts” in Section II,

noting the parties’ differing interpretations and the consequence of each with

regard to whether H artford could recover on its claim. Hartford Fire Ins.,

451 F. Supp. 2d at 1277. The court construed “‘acts’ to mean the indemnitor’s

acts of procuring a bond from the surety” and illustrated why its interpretation

was consistent with other provisions of the GIA . Id. at 1277-78. Then,

concluding that it could reasonably infer that one of the Indemnitors acted to

procure the P & H Bond on behalf of P & H Cattle, it held that the GIA applied to

that bond. Id. at 1278.

                      Strict Construction Against the Drafter

      The Peaks first argue that the district court erred in failing to strictly

construe the GIA against Hartford, as the drafter, because the GIA is both an

indemnity agreement and an adhesion contract. They contend that under this rule

of construction the district court had no option but to select the Peaks’

interpretation of the GIA. W e disagree. The rule requiring construction against

the drafter does not come into play unless and until a court reaches the conclusion

                                          -9-
that an agreement is ambiguous. See Mo. Pac. R.R. v. City of Topeka, 518 P.2d

372, 376 (Kan. 1974) (“Doubts arising from ambiguity or obscurity in the

language used [in the indemnity agreement] are to be resolved against the party

preparing the contract.”); St. Francis Hosp. & Sch. of Nursing, Inc. v. Eckman,

510 P.2d 175, 177 (Kan. 1973) (noting rule of construction applicable to adhesion

contracts applies only after finding vagueness or uncertainty in contract’s

meaning).

      The Peaks do not argue that the GIA is ambiguous; indeed, they contend

that the language of Section II is clear. But they assert that the district court

concluded the G IA is ambiguous. W e find no such holding in the district court’s

decision. A nd w e note that it confined its analysis to the four corners of the GIA ,

as is appropriate in construing an unambiguous agreement. See H artford Fire

Ins., 451 F. Supp. 2d at 1277-78; see also Clark v. Wallace County C o-Op. Equity

Exch., 986 P.2d 391, 393 (Kan. Ct. App. 1999) (holding court must interpret

unambiguous contract within its four corners). M oreover, the court’s

acknowledgment of the parties’ differing interpretations does not constitute a

finding that the GIA is ambiguous. See Allied M ut. Ins. Co. v. M oeder, 48 P.3d 1,

4 (Kan. Ct. App. 2002) (“The fact that the parties do not agree over the meaning

of the terms does not in and of itself prove that the contract is ambiguous.”).

Thus, in the absence of a holding that the GIA is ambiguous, we conclude that the

                                          -10-
district court did not err in failing to construe the agreement strictly against the

drafter.

                        Construction of Unam biguous Term s

       The Peaks argue in the alternative that the district court erred in construing

the unambiguous terms of the GIA. W e review the district court’s interpretation

of the agreement de novo. See Old Republic Ins. Co., 283 F.3d at 1225. The

parties agree that the GIA should be construed under Kansas law. In M issouri

Pacific Railroad, the Kansas Supreme Court made “a few observations as to

indemnity”:

       The word is generally defined as an obligation resting on a party to
       make good any loss another has incurred w hile acting at his request
       or for his benefit; it is a right which inures to a person who has
       fulfilled an obligation owed by him but which as between himself
       and another person should have been discharged by the other. In
       construing a contract of indemnity and determining the rights and
       liabilities of the parties thereunder, the important question to be
       determined is the intention of the parties, and effect should be given
       to that intention if such can be done consistently with legal
       principles.

518 P.2d at 375-76 (citation omitted). Furthermore, “[r]easonable rather than

unreasonable interpretations of contracts are favored.” Kan. State Bank & Trust

Co. v. DeLorean, 640 P.2d 343, 349 (Kan. Ct. App. 1982). And a court must

construe each section in the context of and consistent with the entire agreement,

rather than critically analyzing a single provision. See Zukel v. Great W .

M anagers, LLC, 78 P.3d 480, 484 (Kan. Ct. App. 2003). A court’s “job is to use

                                          -11-
comm on sense and not to strain to create an ambiguity in a written instrument

when one does not exist.” Allied M ut. Ins. Co., 48 P.3d at 4.

      In this case, the district court looked first at the language of the initial

paragraph of the GIA . See H artford Fire Ins., 451 F. Supp. 2d at 1277. It

provides:

      One or more of the undersigned, herein called Indemnitors, has
      requested or may request Hartford Fire Insurance Company or any of
      its insurance company affiliates, herein individually and collectively
      called Surety, to furnish, procure or continue contracts of suretyship,
      guaranty or indemnity, or other obligatory instruments, herein called
      Bonds, on behalf of any one or more of the Indemnitors.

Aplee. Supp. App. at 100. This language broadly defines the term “Bonds,”

which is used throughout the GIA, to include numerous different types of

instruments. Further, such Bonds may be requested by any Indemnitor “on behalf

of any one or more of the Indemnitors.” The district court also considered the

second paragraph of the GIA . See H artford Fire Ins., 451 F. Supp. 2d at 1277-78.

That paragraph provides:

      By the execution of this A greement, the Indemnitors expressly
      warrant their material or beneficial interest in such Bonds, and in
      consideration of the furnishing, procuring or continuing of such
      Bonds, and other good and valuable consideration, the Indemnitors
      hereby jointly and severally agree to the following[.]

Aplee. Supp. App at 100. This provision indicates that Hartford’s “furnishing,

procuring or continuing of such Bonds” is the consideration for the agreements

made by the Indemnitors in the G IA. One such agreement is in Section III:

                                          -12-
      The Indemnitors will indemnify and hold the Surety harmless from
      all loss, liability, damages and expenses including, but not limited to,
      court costs, interest and attorney’s fees, w hich the Surety incurs or
      sustains (1) because of having furnished any Bond. . . .”

Id. (emphasis added). This provision broadly defines the scope of the

Indemnitors’ liability to extend to all losses Hartford incurs “because of having

furnished any Bond.”

      As the district court observed, see Harford Fire Ins., 451 F. Supp. 2d at

1278, other references in the GIA support the conclusion that it is intended to

cover all Bonds executed by Hartford, at the request of and on behalf of one or

more of the Indemnitors. For example, Section XV states, “This is a continuous

Agreement which remains in full force and effect as to every Bond issued by the

Surety.” A plee. Supp. App. at 101. Section XIV requires the Indemnitors to

immediately provide Hartford with written notice of any demand or action

“relating to any Bond.” Id. at 100. That section provides further that Hartford

“may adjust, settle or compromise any claim, demand, suit or judgment upon any

Bonds.” Id. at 101.

      W e note as w ell that the GIA includes plainly-stated references to

underlying transactions, including provisions regarding actions by the

Indemnitors and others w ith respect to those transactions. Section I refers to

“Bonds required in connection with the performance of a contract.” Id. at 100.

Section VI refers to “the status and condition of work under any contracts being

                                        -13-
performed by any Indemnitor and the financial status of such contracts.” Id.

Section VII likewise refers to “[a]n Indemnitor’s abandonment, forfeiture or

breach of, or failure, refusal or inability to perform, a contract guaranteed by any

Bond.” Id. And Section X provides that the Indemnitors waive notice of

“[d]efaults under contracts or any acts w hich might result either in claims, or in

liabilities of the Surety under any Bonds.” Id.

      Finally, we observe that the other provision in Section II of the G IA

expands, rather than limits, the Indemnitors’ liability. It provides that, “[i]f

[Hartford] procures the execution of Bonds by other sureties, or executes Bonds

with cosureties, the provisions of this Agreement shall inure to the benefit of such

other sureties or cosureties as their interests may appear.” Id.

      Against this background, we consider what it means to “act” “on” or “in

connection with” a “Bond,” as those words are used in Section II. According to

the Peaks, acting on or in connection with a Bond refers to the Indemnitors’

actions in an underlying transaction that results in a claim under the Bond.

Therefore, under their construction, the GIA would only sometimes apply to the

P & H Bond, depending on whether an Indemnitor participates in the underlying

transaction that gives rise to a claim under that bond. P & H Cattle made

essentially the same argument in defending the W ilkey Claim, by asserting that

the P & H Bond did not cover the W ilkey Claim because P & H Cattle did not

participate in the W ilkey transaction. But, after determining there was a good

                                          -14-
chance that defense would not succeed, Hartford settled the W ilkey Claim. The

district court ruled in this action that Hartford acted reasonably in doing so.

Hartford Fire Ins., 451 F. Supp. 2d at 1279. As w e have indicated, the Peaks did

not appeal that ruling. Nonetheless, they seek to extend their argument regarding

lack of participation in the underlying transaction to the construction of the scope

of their liability to indemnify H artford under the GIA.

      The Peaks’ proposed interpretation improperly looks at Section II in

isolation, rather than in harmony with the rest of the agreement. See Zukel,

78 P.2d at 484. As we have noted, they failed to analyze in the district court why

their interpretation is reasonable and consistent with the other terms of the GIA .

Nor do they make any effort to do so on appeal. They also provide no

explanation why Hartford would accept liability as surety under a Bond requested

by and for the benefit of one or more Indemnitors, yet limit its ability to obtain

indemnification from the Indemnitors under the GIA for claims on that Bond that

it reasonably settles.

      W e conclude that the GIA applies to all Bonds executed by Hartford at the

request of one or more of the Indemnitors, whether an Indemnitor acts alone, or as

a member, silent or otherwise, of a partnership or joint venture, in making a

request to Hartford to furnish, procure, or continue a Bond. The Indemnitors

agreed under the GIA to make good the losses Hartford incurred because of

having furnished a Bond at their request. Therefore, this interpretation of Section

                                         -15-
II is also consistent with the general meaning of indemnity as “an obligation

resting on a party to make good any loss another has incurred while acting at his

request or for his benefit.” M o. Pac. RR., 518 P.2d at 375. W e conclude that it is

the only reasonable interpretation.

              Recovery of Attorney’s Fees and Costs Under the GIA

      The Peaks’ third and final claim of error is that the district court wrongly

concluded that Hartford could recover attorney’s fees and costs under the GIA .

Section III of the agreement provides for that recovery:

      The Indemnitors will indemnify and hold the Surety harmless from all loss,
      liability, damages and expenses including, but not limited to, court costs,
      interest and attorney’s fees, which the Surety incurs or sustains
      (1) because of having furnished any Bond, or (2) because of the failure of
      an Indemnitor to discharge any obligations under the Agreement, or (3) in
      enforcing any of the provisions of this A greement.

Aplee. Supp. App. at 100 (emphasis added). The district court held that Hartford

was entitled to recover its attorney’s fees and costs incurred in defending and

settling the W ilkey Claim and in enforcing the GIA in this action. Hartford Fire

Ins., 451 F. Supp. 2d at 1286. But the Peaks contend that the provision for

recovery of attorney’s fees and costs in the GIA is null and void under a prior

version of Kan. Stat. Ann. § 58-2312. At the time the GIA was executed in 1993,

§ 58-2312 provided in relevant part (emphasis added):

      Hereafter it shall be unlawful for any person or persons, company,
      corporation or bank, to contract for the payment of attorney’s fees in
      any note, bill of exchange, bond or mortgage; and any such
      contract or stipulation for the payment of attorney’s fees shall be null

                                         -16-
      and void; and that hereafter no court in this state shall render any
      judgment, order or decree by which any attorney’s fees shall be
      allowed or charged to the maker of any promissory note, bill of
      exchange, bond, mortgage, or other evidence of indebtedness by
      way of fees, expenses, costs or otherw ise. . . .” 3

      The question is w hether the previous version of this statute applied to

indemnity agreements. The district court concluded it did not, relying on the

reasoning in In re Dvorak, 176 B.R. 929 (Bankr. D . Kan. 1994). See H artford

Fire Ins., 451 F. Supp. 2d at 1283-84. In Dvorak the court distinguished

indemnity agreements from the agreements listed in § 58-2312. See 176 B.R. at

934. Similar to this case, the indemnitee in Dvorak was the surety on a bond for

which the indemnitor was the principal. The court held that the bond and the

indemnity agreement were distinct and the indemnity agreement could not be

“characterized as a bond.” Id. It also reasoned that an indemnity agreement is

not a “note” because it is not “an unconditional promise to pay a fixed amount of

money.” Id. And it concluded that an indemnity agreement is not “an evidence

of indebtedness” because, “[a]t the time the indemnity agreement is entered into,

there is no debt.” Id.

      W e have found no Kansas authority directly on point and therefore we must

predict how Kansas courts would decide the question whether the former version

3
       The statute was amended in 1994, deleting this language and adding new
language permitting provisions in credit agreements for the recovery of certain
costs of collection, but the amended version has not been applied retroactively.
See Ryco Packaging Corp. v. Chapelle Int’l, Ltd., 926 P.2d 669, 678-80 (K an. Ct.
App. 1996).

                                        -17-
of § 58-2312 applied to indemnity agreements. See U nited States v. DeGasso,

369 F.3d 1139, 1145 (10th Cir. 2004) (“If the state supreme court has not

interpreted a provision of the state’s statutory code, the federal court must predict

how the court would interpret the code in light of state appellate court opinions,

decisions from other jurisdictions, statutes, and treatises.” (quotation and brackets

omitted)). The Peaks point to In re Woerner, 19 B.R. 708, 712 (Bankr. D. Kan.

1982), which held that § 58-2312 applied to indemnity agreements. The Woerner

court concluded, without rationale, that “a promise by the principal to indemnify

the surety at the time the surety pays monies to the principal’s creditor” was

“clearly” a promissory note or evidence of indebtedness. Id. W e find the

reasoning in Dvorak more persuasive on that point.

      They also argue that § 58-2312 precludes H artford’s recovery of attorney’s

fees and costs because the loss Hartford seeks to recover for is based upon a

bond. Hartford counters that the attorney fee provision it sought to enforce is in

the GIA, rather than the P & H Bond. W e agree with Hartford that § 58-2312

nullified provisions for the payment of attorney’s fees and costs “in” bonds, but

did not broadly prohibit the recovery of attorney’s fees and costs otherwise

related to bond claims. Cf. Wingrove v. People’s Nat’l Bank, 275 P. 150, 150-51

(Kan. 1929) (upholding jury verdict awarding attorney’s fees under settlement

agreement related to mortgage foreclosure, despite prohibition in § 58-2312).

                                         -18-
      Finally, the Peaks argue that the prior version of § 58-2312 applied to the

GIA because it is a surety or guaranty agreement, rather than an indemnity

agreement. W e agree that § 58-2312 applied to surety and guaranty agreements.

See Iola State Bank v. Biggs, 662 P.2d 563, 575 (Kan. 1983) (concluding

obligations of sureties and guarantors are substantively the same and holding that

guaranty agreement involving unconditional promise to pay sum certain upon

default of principal fell within terms of § 58-2312). But we disagree that the G IA

is a surety or guaranty agreement. The Kansas Supreme court described a surety

or guaranty relationship as “a contractual relation resulting from an agreement

whereby one person, the surety [or guarantor], engages to be answerable for the

debt, default, or miscarriage of another, the principal.” Id. at 574 (quotation

omitted). M oreover, a surety’s or guarantor’s “obligation to the creditor or

promisee of the principal is said to be direct, primary, and absolute; in other

words, he is directly and equally bound with his principal.” Id. at 575 (quotation

omitted). Although the Peaks point out that neither Olma Peak nor Velma Peak

signed bond agreements with Hartford, they do not explain why that fact makes

the GIA a guaranty or surety agreement. It shows only that there is no principal

and surety relationship between them and Hartford in a separate bond agreement.

And they identify no sense in which Olma Peak or Velma Peak stand in the role

of surety or guarantor of a principal’s obligations under the GIA.

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      As noted by the Kansas Supreme Court in Iola State Bank, indemnity

agreements are distinguishable from surety and guaranty agreements because

“[a]n indemnitor agrees to make whole the indemnitee who in turn had to pay the

obligee.” Id.; see also M o. Pac. R.R., 518 P.2d at 375 (“[Indemnity] is generally

defined as an obligation resting on a party to make good any loss another has

incurred while acting at his request or for his benefit.”) The GIA is clearly an

indemnification agreement. Furthermore, although the Kansas Supreme Court did

not directly hold in Iola State Bank that the previous version § 58-2312 was

inapplicable to indemnity agreements, the fact that it expressly distinguished them

from surety and guaranty agreements in that precise context leads us to conclude

that it would so hold. Therefore, we reject the Peaks’ claim that the district court

erred in aw arding H artford its attorney’s fees and costs under the GIA.

                                     Conclusion

      The judgment of the district court is AFFIRMED.

                                                     Entered for the Court

                                                     Stephen H. Anderson
                                                     Circuit Judge

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