United States District Court, D. Utah
INTERNATIONAL FIDELITY INSURANCE COMPANY, a New Jersey corporation, Plaintiff,
LA PORTE CONSTRUCTION, INC., et al., Defendants.
DECISION AND ORDER GRANTING THE AMBERLEY DEFENDANTS'
MOTION FOR SUMMARY JUDGMENT; GRANTING THE JOINING
DEFENDANTS' MOTION FOR SUMMARY JUDGMENT; GRANTING
BARCELONA'S MOTION FOR SUMMARY JUDGMENT; AND DENYING
FIDELITY'S WRITTEN RULE 56(D) MOTION
N. Parrish United States District Court Judge.
International Fidelity Insurance Company
(“Fidelity”) filed a Complaint for Indemnity,
Specific Performance, and Quia Timet Relief. Fidelity's
claims arise from an Agreement of Indemnity (the
“Indemnity Agreement”) under which Fidelity
issued performance and payments bonds to Defendant La Porte
Construction, Inc. (“La Porte”) in connection
with La Porte's construction of a high-density mixed-use
residential and commercial project known as The Plaza at
State Street in Salt Lake City, Utah (the “Plaza
Amberley Properties I, LLC, Amberley Properties II, LLC,
Bracken Properties, L.L.C., Dundee Properties, L.L.C.,
Edinburgh Properties, L.L.C., Farquhar Properties, L.L.C.,
Glenfinnan Properties, L.L.C., and Inverness Properties,
L.L.C. (the “Amberley Defendants”) filed a Motion
to Dismiss the Complaint under Federal Rule of Civil
Procedure 12(b)(6) (alternatively to be treated as a motion
for summary judgment) (the “Motion”). (Dkt. 15).
The Amberley Defendants contend that Fidelity cannot state a
claim under the Indemnity Agreement because the individual
who signed it, Benjamin Logue, was not authorized to sign it
on their behalf. Defendants Andalucia Properties, L.L.C.,
Jameson Commercial Properties, L.L.C., Jameson Properties,
L.L.C., Kilmarnock Properties, L.L.C., McGregor Properties,
L.L.C., Oban Properties, L.L.C., Portree Properties, L.L.C.,
and Raasay Properties, L.L.C. (the “Joining
Defendants” and together with the Amberley Defendants,
the “Movants”) filed a Notice of Joining in
Co-Defendants' Motion to Dismiss (the
“Joinder”). (Dkt. 27). The Joining Defendants
similarly argue that Mr. Logue, who likewise signed the
Indemnity Agreement purportedly on behalf of the Joining
Defendants, did not have authority to sign on their behalf.
court held a hearing on the Movants' motions on October
17, 2016. At the hearing, Fidelity made a speaking motion
pursuant to Fed.R.Civ.P. 56(d) for discovery. Specifically,
Fidelity requested that it be granted opportunity to depose
Mr. Logue regarding certain representations contained in the
Indemnity Agreement and Resolutions, and his authorization to
sign the Indemnity Agreement. The court granted
Fidelity's oral Rule 56(d) motion, but limited discovery
to Mr. Logue's testimony regarding his authority to sign
the Indemnity Agreement and the Resolutions on behalf of the
Movants. Because Mr. Logue was present with his attorney at
the hearing, the court determined that it would be most
convenient and cost-effective to allow Fidelity to examine
Mr. Logue at the hearing. Acting pursuant to the discretion
granted to it under Fed.R.Civ.P. 56(d)(3), the court, over
Fidelity's objection, ordered the examination of Mr.
Logue at the hearing. At the conclusion of Mr. Logue's
examination, the court inquired whether the parties desired
to submit supplemental briefing for the court's
consideration. Fidelity requested that it be allowed to
submit a supplemental memorandum. The court ordered Fidelity
to submit its supplemental memorandum within seven days and
ordered the Movants to submit their response, if any, within
five days thereafter.
after the hearing, Defendant Barcelona Properties, LLC
(“Barcelona”), whose counsel had been present at
the October 17 hearing, filed a Notice of Joining in
Co-Defendants' Motion to Dismiss or, in the Alternative,
Motion for Summary Judgment (the “Barcelona
Motion”) (Dkt. 35). Because of the similarity of issues
presented and the prior briefing on many of the issues, as
well as the hearing held on the previous motions, the court
finds that oral argument on the Barcelona Motion would not
further assist the court in its decision and will rule on
Barcelona's motion on the basis of the written memoranda.
See DUCivR 7-1(f).
evidence outside the pleadings was presented by the parties
and will not be excluded by the court, the Movant's
motions and the Barcelona Motion must be treated as motions
for summary judgment under Fed.R.Civ.P. 56. See Fed.
R. Civ. P. 12(d). Indeed, none of the parties objected to
treating the motions as motions for summary judgment when the
court indicated at the outset of the October 17 hearing that
it was inclined to treat them as such. After considering all
of the parties' written submissions, the oral arguments,
and the evidence before it, the court issues this Memorandum
Decision and Order Granting the Amberley Defendants'
Motion for Summary Judgment; Granting the Joining
Defendants' Motion for Summary Judgment; Granting
Barcelona's Motion for Summary Judgment; and Denying
Fidelity's written Rule 56(d) Motion.
The Indemnity Agreement
case arises out of the development and construction of a
high-density mixed-use residential and commercial project in
downtown Salt Lake City known as the Plaza at State Street.
Defendant La Porte was hired as the general contractor for
the Plaza Development. At all times relevant to this case, La
Porte conducted its business through its principal, Mr.
Benjamin Logue. In connection with an application to Fidelity
for contractor performance and payment bonds, Mr. J. David
Wittwer, a representative of Fidelity, presented Mr. Logue
with the Indemnity Agreement and asked him to execute and
deliver it to Fidelity. The Indemnity Agreement listed all
named defendants in this action-including the Movants and
Barcelona-as “Indemnitors, ” and named
International Fidelity Insurance Company and/or Allegheny
Casualty Company as “Surety.”
Indemnity Agreement required all those listed as Indemnitors
to indemnify Fidelity “against all losses, costs,
expenses, and exposure” related to its bonds and the
construction of the Plaza Development by La Porte. The
Indemnity Agreement also contained the following provision
under the heading “Representations”:
The undersigned represent to [Fidelity] that they have
carefully read the entire [Indemnity] Agreement and that
there are no other agreements or understandings which in any
way lessen or modify the obligations set forth herein. The
undersigned further warrant and represent to [Fidelity] that
all necessary action has been taken by them to authorize the
execution and delivery of this [Indemnity] Agreement.
Indemnity Agreement was executed on March 30, 2012 on behalf
of each of the Movants and Barcelona by Mr. Logue, who signed
as the Managing Member of each of the Movants and Barcelona.
Accompanying each signature is an Acknowledgment by a notary
public that Mr. Logue Dated: behalf of each of the Movants
with the Indemnity Agreement, Mr. Wittwer also presented Mr.
Logue with Resolutions Authorizing Execution of Indemnity
Agreement (the “Resolutions” or individually
“Resolution”) that corresponded to each of the
Movants and Barcelona. The Resolutions, which were prepared
by Fidelity, each contained the following provisions:
At a Special meeting of the Members of the [e.g., Amberley
Properties II, LLC] . . . duly called and held on the 30 day
of March, 2012 a quorum being present, the following Preamble
and Resolution were adopted: WHEREAS this LLC has a financial
material and beneficial interest in transactions in which
LaPorte Contruction, Inc. [is involved] . . . RESOLVED, that
the Managing Member(s) authorized to execute documents on
behalf of the LLC, be and they are hereby authorized and
empowered to execute any indemnity agreement or agreements
required by [Fidelity] . . . RESOLVED FURTHER, that the
Member be and they are hereby authorized and empowered to
execute such indemnity agreement or agreements and to any and
all amendments to said indemnity agreement or agreements and
to any other or further agreements.
Resolutions each concluded with a provision intended to
identify by name the “Managing Members”
authorized to execute the Indemnity Agreement on behalf of
each of the Movants and Barcelona, but no names or entities
were listed. Each of the Resolutions bears the sole signature
of “Benjamin Logue, Managing Member.”
the Resolutions state that they were adopted in a
“Special meeting of the Members” of each of the
Movants and Barcelona, no such meetings actually took place.
the Movants is a single purpose Utah limited liability
company. Each of the Movants was individually formed for a
specific purpose, i.e., to invest in, develop, and maintain
its own specific real estate “Project.” By way of
example, Amberley Properties II, LLC's Operating
Agreement defined its “Project” as “the
property . . . in Ogden, Utah and the 32-unit multifamily
rental housing development and other improvements to be
rehabilitated, owned and operated thereon by the Company, and
to be known as Fairview Apartments.” None of the
Movants' “Projects” are in any way related to
the Plaza Development. Further, none of the Movants have any
financial, material or beneficial interest in the Plaza
Development. The only connection between the Movants and the
Plaza Development is that the Plaza Development's
contractor, La Porte, had also acted as the contractor in
constructing or renovating the various “Projects”
owned by the Movants.
the exception of Andalucia Properties, L.L.C.
(“Andalucia”), Mr. Logue was not the Managing
Member of any of the Movants. The Movants' Operating
Agreements, except for that of Andalucia, are identical for
purposes of this matter. Each provides that the membership of
each Movant consists of two members: an Investor Member (who
in every case was an institutional investor and not Mr.
Logue) and a Managing Member. Although Mr. Logue signed the
Indemnity Agreement as the “Managing Member” of
each of the Movants, he was not the Managing Member of any of
them. Rather, each of the Movants' Operating Agreements
(except for Andalucia's) identifies the Managing Member
as a Managing LLC.
differs from the other Movants because Andalucia was set up
to be manager managed and had no Investor Member and no
Managing Member. Rather, the Andalucia Operating Agreement
identifies Benjamin Logue and Lisa Logue as its Members-Mr.
Logue owning a 51% membership interest and Lisa Logue owning
a 49% membership interest-and Benjamin Logue as its
Manager. Like the other Movants, Andalucia was
created to accomplish a single delineated purpose. Andalucia
was “formed for the purposes of owning, developing, and
managing real property in Price City, Utah and other
activities directly related to that property.” Like the
other Movants, Andalucia has no financial, material or
beneficial interest in the Plaza Development and its only
connection to the Plaza Development is its hiring of La Porte
for the development of its real property in Price City, Utah.
the Movants ever authorized Mr. Logue to sign the Indemnity
Agreement or the Resolutions on their behalf. Rather, Mr.
Logue testified that Fidelity's representative presented
him with the Indemnity Agreement and Resolutions and asked
him to sign them. Although Mr. Logue purported to execute the
Indemnity Agreement and Resolutions on behalf of the Movants,
he was not authorized to do so and had believed that he was
pledging only his own individual ownership interest-an
interest in the Managing LLCs which each owned only a .01% or
.1% interest in the Movants.
the Movants, Barcelona was set up as a sole-member LLC, the
sole member being Benjamin Logue. Barcelona was organized as
a manager-managed LLC with Benjamin Logue identified as the
company's Manager. At the time the Indemnity Agreement
was signed, Mr. Logue served as both the sole member and
Manager of Barcelona. Barcelona's Operating Agreement
provided that Barcelona was formed for the purpose of
“engag[ing] in the business of owning, operating,
managing[, ] developing and selling real property, and to
conduct such other business as is designated by [its]
Manager.” The Barcelona Operating Agreement also
provided that “management of [Barcelona] is vested
exclusively in the Manager. No Member, acting solely in its
capacity as a Member, may be an agent of [Barcelona], nor may
any Member, in that capacity, bind or execute any instrument
on behalf of [Barcelona] without the prior written consent of
the Manager.” Like the Movants, Barcelona has no
financial, material or beneficial interest in the Plaza
Demand Made on the Bonds
difficulties in completing the Plaza Development, the
construction lender for the project served La Porte with a
Notice of Default and Termination, and made demand on the
bonds issued by Fidelity. Fidelity brought this action to
enforce its rights under the Indemnity Agreement.
the Movants and Barcelona characterize their motions as
motions to dismiss for failure to state a claim pursuant to
Rule 12(b)(6), the Movants and Barcelona have attached
affidavits and the Operating Agreements for the court's
consideration. Fidelity also attached affidavits to its
memoranda in opposition to these motions. In ruling on a Rule
12(b)(6) motion, the court is limited to considering the
contents of the complaint. Berneike v. CitiMortgage,
Inc., 708 F.3d 1141, 1146 (10th Cir.
2013). Under Fed.R.Civ.P. 12(d), if
“matters outside the pleadings are presented to and not
excluded by the court, the motion must be treated as one for
summary judgment.” Therefore, the court can convert the
motions to dismiss into motions for summary judgment, or the
court can treat the motions under Rule 12(b)(6), considering
only the complaint and related documents. See Ordonez v.
Canyons Sch. Dist., No. 2:13-CV-245-DAK-EJF, 2016 WL
5415663, at *2 (D. Utah Sept. 28, 2016) (“The court may
simply disregard the exhibits filed and rule on the motion to
dismiss based solely on the pleadings.”); PayoutOne
v. Coral Mortg. Bankers, 602 F.Supp.2d 1219, 1227 (D.
Colo. 2009) (“There is no requirement, however, that a
court automatically convert a motion to dismiss to a motion
for summary judgment simply because one or both parties file
documents in connection with a motion to dismiss.”).
evidence outside the pleadings has been presented by the
parties and will not be excluded by the court, the motions
will be treated as motions for summary judgment under
Fed.R.Civ.P. 56. See Fed. R. Civ. P. 12(d). None of
the parties object to converting the motions to motions for
summary judgment under Fed.R.Civ.P. 12(d). When a 12(b)(6)
motion is treated as one for summary judgment under Rule 56,
“[a]ll parties must be given a reasonable opportunity
to present all the material that is pertinent to the
motion.” Fed.R.Civ.P. 12(d). In their motion, the
Amberley Defendants stated that they do not object to the
motion being converted into a motion for summary judgment.
Likewise, the Joining Defendants do not object and urge the
court to either dismiss the claims against them or to
alternatively grant summary judgment in their favor.
Barcelona also stated in its motion that it does not object
to considering the motions under Rule 56. In responding to
the motions, Fidelity treated the motions to dismiss as
motions for summary judgment and conformed its responses to
the requirements of DUCivR 56-1. The court also indicated at
the outset of the hearing that it was inclined to treat the
motions as motions for summary judgment, granted
Fidelity's oral motion for discovery under Fed.R.Civ.P.
56(d), and then allowed the parties to file supplemental
memoranda following the hearing. Therefore, all parties have
been given a reasonable opportunity to present all the
material pertinent to the motions.
Federal Rule of Civil Procedure 56, “[t]he court shall
grant summary judgment if the movant shows that there is no
genuine dispute as to any material fact and the movant is
entitled to judgment as a matter of law.” “[A]
party seeking summary judgment always bears the initial
responsibility of informing the district court of the basis
for its motion, and identifying those portions of the
pleadings, depositions, answers to interrogatories, and
admissions on file, together with the affidavits, if any,
which it believes demonstrate the absence of a genuine issue
of material fact.” Celotex Corp. v. Catrett,
477 U.S. 317, 323 (1986) (internal quotation marks omitted).
The court views ...