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Travelers Casualty and Surety Co. of America v. CraCar Construction Co.

United States District Court, D. Utah, Central Division

August 15, 2018

TRAVELERS CASUALTY AND SURETY COMPANY OF AMERICA, a corporation Plaintiff,
v.
CRACAR CONSTRUCTION COMPANY et al., Defendants.

          MEMORANDUM DECISION

          DAVID SAM, SENIOR JUDGE

         Plaintiff Travelers Casualty and Surety Company of America (“Travelers”), by and through counsel of record, moves the Court for summary judgment on its claims of Breach of Indemnity Agreement and Specific Performance against all Defendants. This motion is filed pursuant to Rule 56 of the Federal Rules of Civil Procedure and Local Rule DUCivR 56-1. Travelers is seeking summary judgment on its First and Third Claims for Relief: Breach of Indemnity and Specific Performance. If granted, Travelers will voluntarily dismiss, without prejudice, the remaining claims, effectively resolving the case.

         Defendants are all indemnitors under a General Agreement of Indemnity ("GAI”) in favor of Travelers, a surety on various bonds furnished on behalf of CraCar Construction Company (“CraCar”). On its claim for Breach of the Indemnity Agreement, Travelers seeks an order granting Travelers a money judgment in the amount of $1, 299, 559.28 for indemnification of Travelers' losses under construction-related bonds that Travelers issued on behalf of CraCar, and an additional amount of $26, 809.00 for unpaid bond premiums. On its claim for Specific Performance, Travelers seeks an order requiring Defendants, pursuant to Section 5 of the GAI, to deposit with Travelers $999, 467.30, to be held as collateral under the terms of the GAI to secure Travelers against further anticipated losses under the bonds.

         BACKGROUND

         In 2010, each of the Defendants entered into the GAI as partial consideration for Travelers' issuance of various contractor performance and payment bonds (“Bonds”) in connection with various construction projects (“Projects”) on which CraCar was or would be the general contractor, and for which CraCar was required to provide Bonds. Under the terms of the Bonds and governing statutes, Travelers is secondarily liable as the surety for CraCar's performance of contract work and its payments to Project suppliers and subcontractors.

         As a condition to issuing the Bonds, Travelers required that Defendants sign and furnish the GAI, whereby they each promised, among other things, (1) to indemnify Travelers for its losses due to claims made against the Bonds, (2) to pay premiums as they became due, and (3) as and if requested by Travelers, to post sufficient collateral to protect Travelers against any anticipated losses. Under the GAI, Defendants further agreed that these obligations were joint and several, and that a statement of loss from a Travelers' employee would constitute prima facie evidence of the existence and amount of Travelers' losses. Travelers issued the Bonds in reliance upon Defendants' promises and obligations under the GAI.

         Subsequently, several claimants have made claims against the Bonds, alleging either (1) that CraCar failed to faithfully perform and complete the Bonded Project work pursuant to the applicable construction contract; or (2) that CraCar failed to pay its subcontractors and suppliers for material, labor, and/or equipment provided on the Bonded Projects. As of February 12, 2018, Travelers has incurred $1, 299, 559.28 in investigating, defending, and resolving many of the Bond claims. Additionally, Travelers is exposed to potential liability and losses of $999, 467.30 based on unresolved and pending Bond claims ($439, 387.96) and anticipated losses to complete projects on which CraCar's defaulted ($560, 079.34).

         Travelers is requesting that Defendants fully indemnify it for all losses and unpaid premiums and post sufficient collateral to protect Travelers against further anticipated Bond losses, as required by the express terms of the GAI. Travelers alleges each of the Defendants has failed to honor these joint and several obligations.

         SUMMARY JUDGMENT STANDARD

         Under Fed.R.Civ.P. 56, summary judgment is proper only when the pleadings, affidavits, depositions or admissions establish there is no genuine issue regarding any material fact and the moving party is entitled to judgment as a matter of law. The burden of establishing the nonexistence of a genuine issue of material fact is on the moving party.[1] E.g., Celotex Corp. v. Catrett, 477 U.S. 317 (1986). In determining whether summary judgment is appropriate, the court views all relevant facts in the light most favorable to the party opposing the motion. Summary judgment is appropriate only where the evidence “is free from doubt so that all reasonable [persons] would come to the same conclusion” Schnuphase v. Storehouse Markets, 918 P.2d 476, 477 (Utah 1996).

         ANALYSIS

         A. Breach of Contract

         Travelers argues it is entitled to summary judgment against each of the defendants on its breach of contract claim. In a diversity case such as is before the Court, a federal court applies the substantive law of the forum state, in this case, Utah. See Cornhusker Cas. Co. v. Skaj, 786 F.3d 842, 850 (10th Cir. 2015). Utah law contemplates that contracts are enforced by their plain terms and that “contracts mean what they say, and parties will be bound by them.” Russ v. Woodside Homes, Inc., 905 P.2d 901, 906 n. 1 (Utah App. 1995). Courts should “consider each contract provision in relation to all of the others, with a view toward giving effect to all and ignoring none.” Café Rio, Inc. v. Larkin-Gifford-Overton, LLC, 2009 UT 27, ¶ 25, 207 P.3d 1235, 1240 (internal quotations and ellipses omitted).

         Under Utah law, "[t]he elements of a prima facie case for breach of contract are (1) a contract, (2) performance by the party seeking recovery, (3) breach of the contract by the other party, and (4) damages." Am. W. Bank Members, L.C. v. State, 2014 UT 49, ¶ 15, 342 P.3d 224, 230-31 (quoting Bair v. Axiom Design, L.L.C., 2001 UT 20, ¶ 14, 20 P.3d 388). In the GAI at issue, as to the first element, all parties signed and had the contract notarized, wherein they agreed to perform certain obligations as partial consideration for Travelers issuing the Bonds. See Exh. 1, Holzer Decl,, ΒΆ 9. In reliance on the GAI, Travelers issued the Bonds requested by CraCar. Second, Travelers claims it has and will continue to face significant secondary liability, losses, and expenses based on ...


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