FILED
NOT FOR PUBLICATION
SEP 18 2017
UNITED STATES COURT OF APPEALS MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
FOR THE NINTH CIRCUIT
COUNTY OF MOHAVE, a political No. 15-17167
subdivision of the State of Arizona,
D.C. No. 3:14-cv-08011-DJH
Plaintiff-counter-
defendant-Appellant,
MEMORANDUM*
v.
LEXON SURETY GROUP, LLC and
LEXON INSURANCE COMPANY,
Defendants-counter-claim-
3rd-party-plaintiffs-
Appellees,
v.
LJC DEVELOPMENT, LLC; et al.,
Third-party-defendants-
counter-claimants,
v.
AFFINITY HOMES INCORPORATED;
et al.,
Third-party-defendants.
*
This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
COUNTY OF MOHAVE, a political No. 15-17232
subdivision of the State of Arizona,
D.C. No. 3:14-cv-08011-DJH
Plaintiff-counter-
defendant-Appellee,
v.
LEXON SURETY GROUP, LLC and
LEXON INSURANCE COMPANY,
Defendants-counter-claim-
3rd-party-plaintiffs,
v.
LJC DEVELOPMENT, LLC; et al.,
Third-party-defendants-
counter-claimants-
Appellants,
v.
AFFINITY HOMES INCORPORATED;
et al.,
Third-party-defendants,
and
VALLEY SPRINGS LENDER, LLC,
Third-party-defendant-
2
Appellee.
COUNTY OF MOHAVE, a political No. 16-16887
subdivision of the State of Arizona,
D.C. No. 3:14-cv-08011-DJH
Plaintiff-counter-
defendant,
v.
LEXON SURETY GROUP, LLC;
LEXON INSURANCE COMPANY,
Defendants-counter-claim-
3rd-party-plaintiffs-
Appellants,
v.
LJC DEVELOPMENT, LLC; et al.,
Third-party-defendants-
counter-claimants-
Appellees,
v.
VALLEY SPRINGS LENDER, LLC,
Third-party-defendant.
Appeal from the United States District Court
for the District of Arizona
Diane J. Humetewa, District Judge, Presiding
3
Argued and Submitted August 28, 2017
Pasadena, California
Before: W. FLETCHER and IKUTA, Circuit Judges, and FREUDENTHAL,**
Chief District Judge.
Mohave County appeals the district court’s order granting summary
judgment to Lexon Surety Group LLC and Lexon Insurance Company
(collectively, Lexon) and denying its motion for partial summary judgment on
County’s claims that Lexon breached a performance bond guaranteeing certain
subdivision improvements by Valley Springs Estates, LLC (VSE). Lexon appeals
the district court’s order dismissing its indemnity claims against VSE and James
Leo Crowley as moot. Finally, VSE and Crowley appeal the district court’s orders
dismissing as moot their third party claims against Valley Springs Lender, LLC
(Lender). We have jurisdiction under 28 U.S.C. § 1291.
The district court erred in holding that Lexon’s obligation on the bond was
subject to a lot-sale condition precedent. Nothing in the performance bond, nor the
statute or regulations incorporated into the bond, see Ariz. Rev. Stat. § 11-821(C);
Mohave Cty. Land Div. Regulations § 1.3(B)(4)–(5), makes the sale of lots in the
subdivision a precondition to Lexon’s duty to pay. Nor does Arizona law require a
**
The Honorable Nancy Freudenthal, Chief United States District Judge
for the District of Wyoming, sitting by designation.
4
court to construe the language of a bond in light of its alleged purpose. Cf. Porter
v. Eyer, 80 Ariz. 169, 172 (1956); U.S. Fid. & Guar. Co. v. Christoffel, 115 Ariz.
507, 509 (Ct. App. 1977). Therefore, Lexon breached the terms of its performance
bond when it failed to pay Mohave County the amounts needed to complete the
subdivision improvements specified in the bond upon VSE’s default, and the
district court erred in holding otherwise.
Lexon’s argument that it is discharged from liability because Mohave
County has not itself incurred any costs due to VSE’s default fails. Nothing in the
performance bond makes Mohave County’s incurrence of costs a condition
precedent to Lexon’s performance, and Lexon points to no Arizona case suggesting
such a precondition applies as a matter of state law. Nor has Lexon pointed to any
Arizona case suggesting that Lexon is relieved of its contractual obligations
because County subsequently entered into a bilateral contract with a third party
(i.e., a contract requiring County to bring an action on its performance bond and
requiring Lender to proceed with the proposed development).
We reverse the district court’s grant of summary judgment in favor of
Lexon. Because the district court dismissed the other two appeals as moot in light
of its decision that Lexon was relieved of its obligations on the performance bond,
5
we vacate the district court’s dismissal of these appeals. We remand for further
proceedings consistent with this disposition.
REVERSED IN PART, VACATED IN PART, AND REMANDED1
1
The parties shall bear their own costs on appeal.
6
County of Mohave v. Lexon Surety Group, No. 15-17167, 15-17232, 16-16887
W. FLETCHER, Circuit Judge, dissenting: FILED
SEP 18 2017
MOLLY C. DWYER, CLERK
I respectfully dissent. U.S. COURT OF APPEALS
Although Lexon Surety Group is obligated under its performance bond
agreement with the County, the County has fully mitigated its damages. The
purpose of the performance bond is to cover the remaining costs of completion of
the infrastructure work in the event of a breach by the developer. See Ponderosa
Fire Dist. v. Coconino Cty., 334 P.3d 1256, 1262 (Ariz. Ct. App. 2014). The
developer breached, but the Lender has agreed to perform, at no expense to the
County, the obligations of the developer in completing the infrastructure work.
Because the County is already fully protected from having to pay the costs of
completing the infrastructure work, it has fully mitigated any damages arising out
of the breach. There is no reason to require Lexon to pay to the County the costs
of completion when the County will never pay those costs.
1