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International Fidelity Insurance Co. v. La Porte Construction, Inc.

United States District Court, D. Utah

February 12, 2019

INTERNATIONAL FIDELITY INSURANCE COMPANY, a New Jersey corporation, Plaintiff,
v.
LA PORTE CONSTRUCTION, INC., et al., Defendants.

          MEMORANDUM DECISION AND ORDER GRANTING MOTION FOR PARTIAL SUMMARY JUDGMENT

          Hon. Jill N. Parrish, United States District Court Judge

         Before the Court is Plaintiff International Fidelity Insurance Company's (“IFIC”) Motion for Partial Summary Judgment (the “Motion”) (ECF No. 95). IFIC moves the court for summary judgment against defendants Benjamin Logue (“Mr. Logue”), Lisa Marie Logue (“Mrs. Logue”), La Porte Construction, Inc. (“La Porte Construction”), and La Porte Management, Inc. (“La Porte Management”) (collectively “Defendants”) on its First Claim for Relief for Breach of Contract. Only Mrs. Logue opposed IFIC's Motion. See Affidavit/Declaration in Opposition to Motion (the “Opposition”), ECF No. 97.

         The court heard oral argument on the motion on January 11, 2019. At the hearing, defendants Mr. Logue, La Porte Construction, and La Porte Management represented that they intended to stipulate to an entry of judgment against them. On February 4, 2019, IFIC filed a Verified Statement in Support of Judgment by Confession (“Verified Statement”) (ECF No. 127) signed by Mr. Logue on behalf of Mr. Logue, La Porte Construction, and La Porte Management (“Confessing Defendants”). Pursuant to the Verified Statement, the court hereby GRANTS the Motion for Partial Summary Judgment as to the Confessing Defendants. The court now evaluates the Motion on the merits as to Mrs. Logue.

         BACKGROUND

         This 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 (the “Plaza”). Defendant Tannach Properties, record owners of certain properties, hired La Porte Construction as the general contractor for the Plaza. Mr. Logue is the president and principal of La Porte Construction. Tannach and La Porte entered into three separate construction contracts regarding the Plaza. Each contract required La Porte to acquire construction bonds to guarantee the project.

         La Porte applied to IFIC to furnish both contractor performance and payment bonds for the Plaza. IFIC agreed to execute performance and payment bonds for each project (collectively the “Bonds, ” separately “Performance Bonds” or “Payment Bonds”). As a condition of procuring the Bonds, IFIC presented La Porte with an “Indemnity Agreement.” The Indemnity Agreement lists International Fidelity Insurance Company and/or Allegheny Casualty Company as “Surety, ” La Porte Construction as “Contractor, ” and the remaining 63 named defendants as “Indemnitors.” On March 30, 2012, Mr. Logue and his wife, Mrs. Logue, executed the Indemnity Agreement in their individual capacities. Mr. Logue also executed the Indemnity Agreement on behalf of the other Indemnitors, purportedly as President of La Porte Construction and La Porte Management, and as Managing Member of the other 60 Indemnitors. Accompanying each signature is an acknowledgment by a notary public that Mr. Logue signed on behalf of each of the Indemnitors. But Mr. Logue was not the managing member of the Indemnitors, nor had he been authorized to represent them. On March 3, 2017, the court dismissed 16 indemnitors due to Mr. Logue's lack of authority, apparent or actual, to bind them.[1]

         The Indemnity Agreement required all the Indemnitors to indemnify IFIC “against all losses, costs, expenses, and exposure” related to the 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 [IFIC] 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.

         Along with the Indemnity Agreement, IFIC also required Mr. Logue to sign Resolutions Authorizing Execution of Indemnity Agreement (the “Resolutions”). The Resolutions, which were prepared by IFIC, each contained the following provision:

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.

         The Resolutions concluded with a provision intended to identify by name the “Managing Members” authorized to execute the Indemnity Agreement, but no names or entities were listed.

         Each of the Resolutions bears the sole signature of “Benjamin Logue, Managing Member.” After the execution of the agreements, the project got underway. But the project faced severe hardships. As a result, work on the Plaza was suspended indefinitely. In June 2015, Citibank, one of the obligees under the Bonds, made demand on IFIC under the Performance Bonds. Citibank filed suit in the United States District Court, District of Utah. The suit was dismissed. Citibank refiled in the Third District Court for Salt Lake County, State of Utah. Citibank also filed an action to judicially foreclose Citibank's trust deed on the property (the “Foreclosure Action”). Meanwhile, La Porte Construction's subcontractors and suppliers made claims on the Payment Bonds. These actions were all brought in the Third District Court for Salt Lake County, Utah. IFIC has paid damages on all of the claims except for Citibank's claim under the Performance Bonds and one action pending under the Payment Bonds.

         IFIC brought this suit against La Porte Construction and the Indemnitors on January 12, 2016. In 2017, the court dismissed the seventeen above-named indemnitors and in October of 2017 entered final judgment in their favor. IFIC now moves for partial summary judgment against Mr. Logue, Mrs. Logue, La Porte Construction, and La Porte Management (“Defendants”) seeking damages for breach of contract and specific performance. The Confessing Defendants did not oppose the Motion and signed the Confession of Judgment on February 4, 2019. Thus, of the four Defendants, only Mrs. Logue opposes the motion.

         ANALYSIS

         A. Legal Standard

         “The 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.” Fed.R.Civ.P. 56(a). “[T]he plain language of [Fed. R. Civ. P. 56] mandates the entry of summary judgment . . . upon motion, against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial.” Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). The moving party “bears the initial responsibility of informing the district court of the basis for its motion, ” and the nonmoving party must “go beyond the pleadings and by [their] own affidavits . . . depositions, answers to interrogatories, and admissions on file, designate specific facts showing that there is a genuine issue for trial.” Id. at 323-24 (internal citation and quotation marks removed).

         When considering a motion for summary judgment, the court must examine all of the evidence in the light most favorable to the nonmoving party. Jones v. Unisys Corp., 54 F.3d 624, 628 (10th Cir. 1995). This requires that all reasonable inferences be drawn in favor of the nonmoving party. Sports Unltd., Inc. v. Lankford Enters., Inc., 275 F.3d 996, 999 (10th Cir. 2002). A dispute of fact is genuine only if “a reasonable [trier of fact] could find in favor of the nonmoving party on the issue.” Macon v. United Parcel Serv., Inc., 743 F.3d 708, 712 (10th Cir. 2014). “‘Where the record taken as a whole could not lead a rational trier of fact to find for the nonmoving party,' summary judgment in favor of the moving party is proper.” Concrete Works of Colo., Inc. v. City & Cty. of Denver, 36 F.3d 1513, 1518 (10th Cir. 1994) (quoting Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986)).

         IFIC has moved for summary judgment on its breach of contract claim against Defendants seeking damages in the amount of $1, 320, 176.66[2] for breach of contract and a decree of specific performance requiring the Defendants to post money or collateral in the amount of $16, 300, 00.00 due to the parties' alleged breach of the Indemnity Agreement. Confessing Defendants admit that the amount of damages and the amount sought as collateral are correct. Mrs. Logue does not contest the essential facts on which IFIC relies, or the amount of damages sought, but rather contests her liability under the contract due to her lack of understanding, lack of legal representation, and her signing under duress. The court will first address whether the contract was breached and then turn to Mrs. Logue's defenses.

         B. Breach of Contract

         IFIC alleges that the Defendants should be held liable for breaching the Indemnity Agreement. Under Utah law, [3] “[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, 342 P.3d 224, 230-31 (Utah 2014) (internal citation omitted).

         1. Contract

         In this case, the Indemnity Agreement is a contract, enforceable under Utah law, against those persons who are a party to the agreement. “A contract is a promise or a set of promises for the breach of which the law gives a remedy, or the performance of which the law in some way recognizes as a duty.” Restatement (Second) of Contracts § 1 (1981). A contract is formed when there is a “manifestation of mutual asset” between “at least two parties” creating a bargained for “exchange” and “consideration.” Id. §§ 9, 17. “A condition precedent to the enforcement of any contract is that there be a meeting of the minds of the parties, which must be spelled out, either expressly or impliedly, with sufficient definiteness to be enforced.” Valcarce v. Bitters, 362 P.2d 427, 428 (Utah 1961). In this case, there was a meeting of the minds and a bargained for exchange. IFIC entered into the Indemnity Agreement with the Defendants in exchange for IFIC becoming surety in the underlying surety transactions.[4] Indemnity Agreements are often used to guarantee the rights of the surety against the obligor. “[I]n cases of suretyship and guaranty, there is, if not an express contract, as in the instant case, an implied contract that the principal should indemnify the surety if the latter is compelled to pay the creditor.” Beaver Cty. v. Home Indem. Co., 88 Utah 1, 52 P.2d 435, 450 (1935). The Indemnity Agreement is enforceable against the parties that properly executed the agreement. The Confessing Defendants admit that the Indemnity Agreement is valid and enforceable. Verified Statement at ¶ 2.

         2. Performance

         IFIC performed its obligation under the Agreement. IFIC is obligated by the Indemnity Agreement to execute or procure bonds for the construction project.[5] IFIC procured three Performance and Payment Bonds dated April 5, 2012. The Bonds are:[6]

Payment Bond No.

Date

Bond Amount

SAIFSU0539632

April 5, 2012

$16, 916.641.00

SAIFSU0539633

April 5, 2012

$1, 508, 636.00

SAIFSU0539634

April 5, 2012

$426, 983.00

Performance Bond No.

Date

Bond Amount

SAIFSU0539632

April 5, 2012

$16, 916, 641.00

SAIFSU0539633

April 5, 2012

$1, 508.636.00

SAIFSU0539634

April 5, 2012

$426, 983.00

         3. ...


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