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Developers Surety & Indemnity Co. v. Lewis Walker Roofing

United States District Court, M.D. Florida, Jacksonville Division

May 31, 2017

DEVELOPERS SURETY & INDEMNITY CO., Plaintiff,
v.
LEWIS WALKER ROOFING, a Florida Corporation, LEWIS G. WALKER, and HEATHER C. WALKER, Defendants.

          FINDINGS OF FACT AND CONCLUSIONS OF LAW

          MARCIA MORALES HOWARD United States District Judge.

         This action is before the Court for the entry of findings of fact and conclusions of law as to Plaintiff Developers Surety & Indemnity Company's (Developers) claim for indemnification against Defendants Lewis G. Walker and Heather C. Walker (collectively, the Walkers). On December 6, 2016, the Court held a bench trial to resolve the outstanding issues between these parties. See Clerk's Minutes (Doc. 43). Having reviewed the pleadings, examined the evidence, observed the witnesses, and considered the arguments of the parties, as well as the remainder of the record, in this order the Court makes its findings of fact and conclusions of law as required by Rule 52 of the Federal Rules of Civil Procedure (Rule(s)).

         I. Procedural Background

         The operative pleading in this action is Developers' Amended Complaint filed on June 5, 2015. See Developers Surety & Indemnity Company's First Amended Complaint (Doc. 5; Complaint). In the Complaint, Developers asserts that it issued payment and performance bonds to Lewis Walker Roofing, a Florida corporation (“LWR”), for a project to be completed by LWR for the Georgia Department of Corrections (“Georgia DOC”). Id. at 5. In connection with the issuance of the bonds, LWR and the Walkers executed an indemnity agreement (the “Indemnity Agreement”) in favor of Developers in which they agreed to indemnify and hold harmless Developers from any losses including attorney's fees and costs sustained by reason of the bonds. See Order (Doc. 38; Summary Judgment Order) (adopting the Report and Recommendation (Doc. 33; Report) at 5-6). When LWR did not complete the construction project, Developers was called upon to pay suppliers, subcontractors and other claims under the bonds. See Summary Judgment Order (adopting the Report at 6-7). Relying on the Indemnity Agreement, Developers seeks to recoup these payments as well as its consulting fees and attorney's fees and costs from the Walkers. See Complaint at 5. Specifically, Developers asserts three causes of action against the Walkers and LWR: Count I - Specific Performance of Indemnity Agreement; Count II - Breach of the Indemnity Agreement; and Count III - Common Law Indemnity. See generally Complaint.

         The Walkers filed an answer to the Complaint, in which they neither admit nor deny any specific allegation. See Response to Developers Surety & Indemnity Company's Complaint (Doc. 10; Answer). Instead, the Walkers explain their belief that they were neither at fault for the problems with the Georgia DOC construction project, nor are they indebted to Developers. See generally Answer. Although the Walkers attempted to answer the Complaint on behalf of, and to represent, LWR in this action, the Court determined that the corporation must be represented by counsel. See Order (Doc. 23). When LWR failed to make an appearance through counsel, the Court directed the Clerk to enter a default as to LWR, see Order (Doc. 24), which the Clerk did on November 2, 2015, see Clerk's Default (Doc. 25). On February 3, 2016, Developers filed Plaintiff's Motion for Default Judgment and Memorandum of Law in Support (Doc. 29; Motion for Default Judgment) seeking a default judgment against LWR. Because the liability of the Walkers and LWR under the Indemnity Agreement was joint and several, in an order dated September 26, 2016, the Court deferred consideration of the Motion for Default Judgment pending its resolution of the claims against the Walkers. See Summary Judgment Order. The Court therefore does not address the Motion for Default Judgment here, and instead addresses only Developers' claim as to the Walkers. The Court will address the Motion for Default Judgment by separate order.

         On September 14, 2015, Developers filed a motion for summary judgment seeking summary judgment as to its breach of the Indemnity Agreement claim set forth in Count II of the Complaint. See Plaintiff's Motion for Summary Judgment and Incorporated Statement of Material Facts and Memorandum of Law in Support (Doc. 20; Motion). The undersigned referred the Motion to the assigned Magistrate Judge for preparation of a report and recommendation. See Order (Doc. 31). After the Walkers failed to respond to the Motion, on July 25, 2016, the Magistrate Judge entered the Report recommending that the Motion be granted in part, in particular with respect to the Walkers' liability under the Indemnity Agreement, but denied in part with regard to some of the losses for which Developers sought indemnification. See generally Report.

         Although Developers objected to portions of the Report, the Walkers filed no objections. See Plaintiff's Objections to Magistrate's Report and Recommendation (Doc. 34; Objections); generally Docket. Despite the Walkers failure to respond to the Report, before making a final determination as to whether the Report was due to be adopted or rejected, the Court scheduled a hearing and invited the Walkers to participate telephonically. See Order (Doc. 36). The Walkers and counsel for Developers appeared at the hearing by phone, and the Court heard from all. See Clerk's Minutes (Doc. 37). At the conclusion of the hearing, the Court determined that the Report was due to be adopted in part. See id. Specifically, the Court determined that summary judgment was due to be granted in favor of Developers to the extent that 1) all facts relating to the question of liability were established in favor of Developers, and 2) the facts relating to certain losses were established in favor of Developers; but denied to the extent that genuine issues of material fact remained as to Developers entitlement to indemnification as to the sums incurred for the services of its consultant Qualex Consulting Service (“Qualex”) as well as its attorney's fees and costs paid to Thompson & Slagle, LLC (the “Firm”). For the remainder of this action, the Court held that the following facts were to be treated as undisputed and established:

(1) the Walkers breached the indemnity agreement;
(2) Developers incurred resulting losses;
(3) there are facts for which there is coverage;
(4) the amounts paid by Developers to bond claimants ($498, 747.97) and to LWR ($82, 041.33) are reasonable; and
(5) Developers received $652, 024.15 through the state court litigation in Georgia.[1]

See Summary Judgment Order at 2. As such, in the Summary Judgment Order, the Court determined that the only issues remaining for the Court's resolution were whether Developers was entitled to indemnification for 1) the sums claimed as having been paid to Qualex ($89, 476.96) and 2) the sums expended for attorney's fees and costs ($291, 246.80).

         After giving the parties an opportunity to amicably resolve the matter, the Court scheduled a bench trial to address the remaining disputed issues. See Summary Judgment Order. The Court proceeded with that bench trial on December 6, 2016.[2] See Clerk's Minutes (Doc. 43); see Bench Trial Transcript (Doc. 47; Tr.). The Walkers, counsel for Developers, and its corporate representative, Cherie Rondinelli, appeared in person at the trial. Developers called three witnesses: Edward Mackowiak, founder and president of Qualex, Cherie Rondinelli, and Joseph Wolenski, counsel for Developers in both the instant and the underlying state court litigation against the Georgia DOC.

         The Walkers presented no specific evidence at trial, but did present argument. In response to one such argument, a question arose as to whether Developers had attempted to recoup the attorney's fees and costs it sought to recover from the Walkers in this action from the Georgia DOC in the state court litigation. See Tr. at 110-11. Mr. Wolenski testified that the contract between LWR and the Georgia DOC entitled the prevailing party to an award of attorney's fees, and that as LWR's subrogee, Developers sought those fees, but the Georgia state court denied its request for reasons which Wolenski could not recall. See id. at 103-05. Because the reason for the denial could impact the Court's determination regarding whether those attorney's fees and costs were reasonably incurred by Developers, and thus encompassed by the Indemnity Agreement, see id. at 122, [3]the Court kept the evidence open and directed Developers to submit to the Court the final court orders from each stage of the Georgia state court litigation, see id. at 119. On December 8, 2016, Developers supplemented the record by filing its Notice to Take Judicial Notice (Doc. 46; Notice) of Construction Contract #DOC-07-006, id., Ex. 1 (Construction Contract), Order Granting Plaintiff's Motion for Summary Judgment and Denying Defendant's Motion for Summary Judgment, id., Ex. 2 (Georgia Trial Court Order), A13A0969. State of Georgia Department of Corrections v. Developers Surety and Indemnity, id., Ex. 3 (Georgia Court of Appeals Order), and S14G0260. State of Georgia Department of Corrections v. Developers Surety and Indemnity Company, id., Ex. 4 (Supreme Court of Georgia Order). With all evidence received, the matter is ripe for the Court's resolution.

         II. Applicable Law

         Under Florida Law, to recover under an indemnification agreement, the plaintiff must prove: “(1) a breach of an indemnity contract; (2) the amount of the loss sustained; (3) the existence of facts for which there was coverage; and (4) the reasonableness of the amount paid.” Fid. & Guar. Ins. Co. v. Ford Motor Co., 707 F.Supp.2d 1300, 1313 (M.D. Fla. 2010) (citing Port Everglades Auth. V. R.S.C. Indus., Inc., 351 So.2d 1148, 1150 (Fla. 4th DCA 1976)); Allegheny Cas. Co. v. United Constr. Co. of Cent. Fla., Inc., No. 6:12-cv-01363-Orl-36KRS, 2014 WL 440083, at *9 (M.D. Fla. Feb. 3, 2014); Brinker v. Chi. TitleIns. Co., No. 8:10-cv-1199-T-27AEP, 2012 WL 1081211, at *9 (M.D. Fla. Feb. 9, 2012). With respect to the fourth element, an indemnitee makes a prima facie showing that its costs and expenses are reasonable by demonstrating that it incurred and paid the sums. See Travelers Cas. & Sur. Co. of Am. v. Grace & Naeem Uddin, Inc., No. 08-61868-CIV, 2009 WL 3878297, at *2 (S.D. Fla. Nov. 18, 2009); In re Cisneros, No. 12-10468, 2012 WL 4627833, at *2 n.4, 9 (Bankr. N.D. Cal. Oct. 1, 2012); see also Travelers Cas. & Sur. Co. of Am. v. Winmark Homes, Inc., 518 F. App'x 899, 903-04 (11th Cir. 2013) (awarding an indemnitee attorney's fees and expenses under an indemnity agreement because the indemnitee made a prima facie showing of its loss, which the defendant failed to rebut). “The burden then shifts to the Defendants to demonstrate ...


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