American Contractors Indemnity Co. v. Carolina Realty & Development Co.

UNPUBLISHED

UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT

No. 12-1952

AMERICAN CONTRACTORS INDEMNITY COMPANY,

Plaintiff - Appellant,

v.

CAROLINA REALTY AND DEVELOPMENT COMPANY INCORPORATED; JOHN
PAUL BAEHR; KIMBERLY BAEHR; WILLIAM LAMAR BAEHR; DUFFY
BAEHR; JOHN BAEHR; JANIS BAEHR,

Defendants – Appellees,

and

MILLICENT BOZEMAN; WILLIAM S. BOZEMAN; CHAD CLARK;
MARY CLARK,

Defendants.

Appeal from the United States District Court for the District of
South Carolina, at Spartanburg. Timothy M. Cain, District
Judge. (7:09-cv-02145-TMC)

Argued: May 15, 2013 Decided: June 19, 2013

Before TRAXLER, Chief Judge, and GREGORY and DUNCAN, Circuit
Judges.

Affirmed by unpublished per curiam opinion.

Jeff B. Slagle, THOMPSON & SLAGLE, PC, Johns Creek, Georgia, for
Appellant. John S. Simmons, SIMMONS LAW FIRM, LLC, Columbia,
South Carolina, for Appellees.
Unpublished opinions are not binding precedent in this circuit.

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PER CURIAM:

Appellant American Contractors Indemnity Corporation

(“American Contractors”) filed the instant action in the United

States District Court for the District of South Carolina seeking

to enforce an indemnity agreement entered into with Appellee

Carolina Realty and Development Incorporated (“Carolina

Realty”). 1 The district court entered judgment in favor of

Carolina Realty, finding that the claim for indemnification was

barred by a settlement agreement entered into by the parties.

American Contractors appealed the district court’s decision.

For the reasons that follow, we affirm.

I.

American Contractors is a commercial surety that issues

construction payment and performance bonds. In accordance with

standard industry practice, American Contractors issues bonds to

general contractors or subcontractors, financially guaranteeing

the (sub)contractor will perform its contractual obligations

with an obligee. Should the bonded (sub)contractor fail to

1
The other named Appellees, John Paul Baehr, Kimberly
Baehr, William Lamar Baehr, Meredith Baehr, John Baehr, and
Janis Baehr signed the indemnity agreement in their individual
capacities as agents for Carolina Realty. Only John Paul Baehr,
Kimberly Baehr, and Duffy Baehr were represented on appeal. For
the purposes of this opinion, the parties will be referred to
collectively as Carolina Realty.

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perform its contractual obligations, such as paying laborers or

suppliers, the obligee can seek redress from American

Contractors as the surety.

Dick Corporation was named general contractor for the NAS

Pensacola, Aviation Rescue Swimmers School and Physical Fitness

Center project (the “Florida Project”). Dick Corporation in

turn hired Carolina Realty as a subcontractor for the Florida

Project to perform roofing work. The subcontract required

Carolina Realty to obtain payment and performance bonds and as

such, Carolina Realty applied to American Contractors for the

necessary bonds. In line with standard practice, before issuing

the bonds, American Contractors required Carolina Realty to

execute a General Agreement of Indemnity (“Indemnity Agreement”)

to insure against potential losses. In the Indemnity Agreement,

Carolina Realty agreed to “indemnify and hold [American

Contractors] harmless from and against any and all demands,

liabilities, losses, costs, damages, attorneys’ fees and

expenses” that arise from any bond claims. Carolina Realty

executed the Indemnity Agreement on July 6, 2006, and the

payment and performance bonds were issued on or about August 22,

2006.

Beginning in 2008, American Contractors began receiving

claims on the payment bond it had issued to Carolina Realty from

labor and material suppliers. In July of that year, one

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supplier and one subcontractor of Carolina Realty filed suit

against Dick Corporation in the United States District Court for

the Northern District of Florida, asserting a payment bond claim

against the bond that Dick Corporation had itself taken out for

the Florida Project. Dick Corporation filed third party

complaints naming American Contractors and Carolina Realty as

third-party defendants. Dick Corporation also asserted a

performance bond claim against American Contractors based on

Carolina Realty’s alleged deficient performance of the

subcontract. Carolina Realty filed a counterclaim against Dick

Corporation. American Contractors did not assert any

counterclaims. Ultimately, several lawsuits were filed by a

number of parties alleging breaches of various contracts entered

into for the Florida Project. These lawsuits were consolidated

for purposes of discovery and trial (the “Florida Litigation”). 2

In 2009, American Contractors sent a demand letter to

Carolina Realty, insisting it post $650,000.00 in collateral

security -- an amount thought sufficient at the time to

indemnify American Contractors for the expenses it had incurred

2
The other consolidated cases were captioned as United
States of America for the use and benefit of Bradco Supply Corp.
v. Dick Corp., et. al. and United States for the use and benefit
of Infinity Builders of the Emerald Coast, LLC v. Continental
Ins. Co. et al., Consolidated Civil Action No. 3:08-cv-56-MCR-MD
(N.D. Fla.).

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to date on the payment and performance bonds issued to Carolina

Realty. Carolina Realty did not respond to the request. On

August 13, 2009, while the Florida Litigation was still pending,

American Contractors filed the instant action against Carolina

Realty, seeking indemnification for expenses it had incurred as

a result of the issued bonds, including repayment of the money

spent paying bond claims and attorneys’ fees for the litigation.

Meanwhile, settlement talks between the various parties to

the Florida Litigation were transpiring. In the settlement

talks, Carolina Realty did not represent itself. Instead,

American Contractors’ attorney, Frank Lanak, negotiated the

agreement on behalf of Carolina Realty pursuant to the power-of-

attorney provision in the Indemnity Agreement, as Carolina

Realty objected to settlement. On February 10, 2011, the

parties to the Florida Litigation, including Dick Corporation,

Carolina Realty, and American Contractors, entered into an

agreement settling the suits embroiled in the Florida Litigation

and releasing all claims between the parties arising out of the

Florida Project (“Settlement Agreement”). In total, American

Contractors paid Dick Corporation $262,250.00 in claims against

the bonds taken out by Carolina Realty.

Once the Florida Litigation settled, discovery ensued in

the instant action, as American Contractors still sought

indemnification in the amount of $677,473.59, reflecting the

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money it had paid in settlements, additional bond claims, costs,

and attorneys’ fees in connection with the bonds issued to

Carolina Realty. Following discovery, both parties moved for

summary judgment. Carolina Realty argued that the

indemnification claim was barred by the Settlement Agreement

entered into by the parties to end the Florida Litigation.

American Contractors contended that the Settlement Agreement had

no effect on its claim for indemnification.

The cross motions were referred to a magistrate judge, who

concluded that the Settlement Agreement was not intended to

release American Contractors’ indemnification claim against

Carolina Realty. As such, the magistrate judge submitted a

report and recommendation to the district court recommending

that American Contractors’ motion for summary judgment be

granted and Carolina Realty’s motion be denied. The district

court held oral argument on the magistrate judge’s report on May

21, 2012. On July 9, 2012, the court issued an order declining

to adopt the magistrate judge’s conclusions, and instead granted

Carolina Realty’s motion to enforce settlement, or in the

alternative, summary judgment. See American Contractors Indem.

Co. v. Carolina Realty and Development Co., Inc., 2012 WL

2711802 (D.S.C. 2012). American Contractors timely appealed.

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 II.

The district court heard this case pursuant to its

diversity jurisdiction. See 28 U.S.C. § 1332. Therefore, we

have jurisdiction under 28 U.S.C. § 1291. There is no choice of

law provision in the Indemnity Agreement. As such, because the

action was filed in the United States District Court for the

District of South Carolina, South Carolina law, including its

choice-of-law rules, applies to this action. Erie R.R. Co. v.

Tompkins, 304 U.S. 64 (1938); Volvo Const. Equip. N. Am., Inc.

v. CLM Equip. Co., Inc., 386 F.3d 581, 599-600 (4th Cir. 2004).

Under South Carolina law, “a contract is controlled by the laws

of the State in which it is made and to be performed.” Doctors

Hosp. of Augusta, LLC v. CompTrust AGC Workers’ Comp. Trust

Fund, 636 S.E.2d 862, 864 (S.C. 2006). As all relevant acts

regarding the settlement transpired in Florida, we employ

Florida law to resolve the dispute, 3 and review the grant of

summary judgment de novo. Blair v. Defender Servs., Inc., 386

F.3d 623, 625 (4th Cir. 2004).

A.

The pertinent part of the Settlement Agreement reads:

[the parties] fully and forever settle, release and
discharge, each other, each of their predecessors,
successors, assigns, agents, insurers, sureties,

3
All parties agree that Florida law governs this matter.

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 attorneys, officers, directors and employees from any
and all past and present claims, demands, damages,
debts, or causes of action, in law or in equity,
damages and losses of any and all kind or nature,
whether contingent or fixed, known and unknown claims
for known and unknown damages and which arise or may
arise out of acts, omissions or events which occurred
prior to the date hereof, arising out of or related to
[the Florida Litigation], all other matters between
the Parties relating to the [Florida] Project.

The Settlement Agreement goes on:

Not withstanding anything in this Settlement Agreement
to the contrary, this Settlement Agreement and the
releases contained here are strictly limited to the
Federal Action, Bradco Action, Infinity Action, Dick
Claims, Carolina Work, Carolina Claims, and all other
matters between the parties relating to or arising out
of the [Florida] Project.

Under Florida law, “[w]here the terms of a contract are

clear and unambiguous, the parties’ intent must be gleaned from

the four corners of the document.” Crawford v. Baker, 64 So.3d

1246, 1255 (Fla. 2011). Further, when the language of a

contract “is clear and unambiguous[,] a court cannot entertain

evidence contrary to its plain meaning.” Sheen v. Lyon, 485

So.2d 422, 424 (Fla. 1986).

We find the Settlement Agreement to be clear. Using broad

and unequivocal language, American Contractors decided to “fully

and forever settle . . . any and all past and present claims

. . . between the Parties relating to or arising out of the

[Florida] Project.” American Contractors and Carolina Realty

are named parties to the Settlement Agreement; they clearly fall

9
within its broad scope. The instant action was pending at the

time the parties entered into the Agreement; it was most

certainly a “present claim.” American Contractors’

indemnification claim “arose out of” the Florida Project. When

the term “arising out of” is used as an exclusionary term, as it

was here, Florida courts have looked to the plain dictionary

definition of the term “arise” to conclude it means to

“originate” or “result from.” Westmoreland v. Lumbermens Mut.

Cas. Co., 704 So.2d 176, 181-83 (Fla. Dist. Ct. App. 1997).

American Contractors seeks repayment for the money it paid out

on the bonds it issued Carolina Realty; these costs “resulted

from” Carolina Realty’s allegedly deficient performance on the

Florida Project and were therefore “fully and forever” settled

by the Agreement. American Contractors also requests

reimbursement for attorneys’ fees incurred during the course of

litigation; these fees “originated” in the Florida Litigation

and are thereby foreclosed by the Settlement Agreement. In

short, the plain and unambiguous language of the Settlement

Agreement forecloses American Contractors’ request for

indemnification. 4

4
Even if we were to find the Settlement Agreement to be
ambiguous, under Florida law any ambiguity is construed against
American Contractors as drafter of Agreement. See Hurt v.
Leatherby Ins. Co., 380 So.2d 432, 434 (Fla. 1980).

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 B.

Despite the clear language of the Settlement Agreement,

American Contractors argues the above Agreement does not cover

indemnification claims because: (1) the context of the

Settlement Agreement evinces indemnity claims were not intended

to be released; (2) Carolina Realty was not a true party to the

Settlement Agreement as the Agreement was signed by American

Contractors on Carolina Realty’s behalf; (3) the instant action

is not mentioned in the Settlement Agreement, showing that it

was not included under the purview of the Settlement; and (4)

the asserted indemnification claim does not “arise out of” the

Florida Project. We find these arguments unpersuasive.

i.

American Contractors argues that indemnification provisions

are essential to the successful operation of the construction

bond industry. Therefore, it asserts that putting the

Settlement Agreement in context, it is unreasonable to conclude

that a commercial surety in the construction industry would

waive its ability to bring an indemnification claim after having

to pay out on an issued bond.

We have noted indemnification is critical to the successful

operation of the construction bond industry. See Fidelity &

Deposit Co. of Md. v. Bristol Steel & Iron Works, Inc., 722 F.2d

1160, 1163 (4th Cir. 1983). This general premise does not

11
render any provision of the Settlement Agreement ambiguous, such

that we may consider evidence outside of the four corners of the

contract. See Sheen, 485 So.2d at 424. In accordance with

Florida law, we cannot consider this context evidence. The

general nature of the construction bond industry has no bearing

on our resolution of this appeal.

Similarly, American Contractors argues that we should put

ourselves in the shoes of the parties and consider the contract

in light of their individual perspectives. See 11 Fla. Jur. 2d

Contracts § 149. We can only do this, however, when the

contract is ambiguous or the meaning of the contract is

doubtful. See Ungaro v. West Palm Beach Biltmore Apartments, 61

So.2d 642 (Fla. 1952). As we just stated, American Contractors

has not identified a single ambiguity in the Settlement

Agreement. Therefore, regardless of how important

indemnification is to sureties in the bond business, surety

relationships were considered under the Settlement Agreement and

all claims covered therein were still released.

ii.

American Contractors next argues that because Carolina

Realty was represented by an American Contractors’ attorney in

the settlement talks, Carolina Realty is not a true party to the

Settlement Agreement.

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 To accept this argument would mean the Settlement Agreement

in toto has no effect as to claims asserted by or against

Carolina Realty. This cannot be. The Settlement Agreement

specifically lists Carolina Realty as a party to the Agreement.

The Indemnity Agreement gave American Contractors the option of

exercising power-of-attorney to represent Carolina Realty in

settlement talks. American Contractors chose to exercise its

power-of-attorney to settle the Florida Litigation on Carolina

Realty’s behalf over Carolina Realty’s objection. American

Contractors knowingly bound both itself and Carolina Realty by

the deal reached.

iii.

American Contractors also argues that this action does not

fall under the purview of the Settlement Agreement as it is not

specifically mentioned in the Agreement. American Contractors

reasons that this litigation was pending at the time the

Settlement Agreement was entered into, and had it wished to

include it in the Agreement, it would have done so expressly.

Again, this argument has no grounding in the words of the

Agreement. The Settlement Agreement expressly released all

involved parties from “any and all past and present claims”

relating to/arising from the Florida Litigation and the Florida

Project (emphasis added). To repeat, this indemnification

action was a “present claim” at the time of the Settlement

13
Agreement. That it was not individually mentioned in the

Agreement is of no moment. Moreover, while there is a carve-out

provision in the Settlement Agreement exempting personal injury

and property damage claims, there is no similar provision for

indemnification claims. And the exclusion of indemnification

claims from the Settlement Agreement’s carve-out provision is

evidence that the parties did not intend to “contract with

respect to that matter.” See Gulf Cities Gas Corp. v. Tangelo

Park Svc. Co., 253 So.2d 744, 748 (Fla. Dist. Ct. App. 1971).

It is important to remember that American Contractors

helped draft the Settlement Agreement. This is not a case of

parties having lopsided legal acumen -- the Settlement Agreement

was drafted and agreed to by American Contractors’ attorneys,

who are (presumably) well-apprised of the construction bond

business and basic contract principles. If American Contractors

wanted to exempt indemnification claims from the Settlement

Agreement it had the ability and knowledge to do so, as

evidenced by the fact that it expressly exempted other claims

from the Agreement. American Contractors’ attempt to carve out

this indemnification action from the Settlement Agreement is

contrary to the clear terms of the contract, and therefore

contrary to Florida law.

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 iv.

American Contractors’ final argument is that the

indemnification claim did not “arise out of” or “relate to” the

Florida Litigation or the Florida Project. American Contractors

asserts that the claim arose from the Indemnity Agreement

itself, and therefore, does not fall under the plain language of

the Settlement Agreement.

The Settlement Agreement specifically includes the

subcontract entered into by Dick Corporation and Carolina

Realty, which required the payment and performance bonds at

issue. These bonds are specifically mentioned in the recitals

to the Settlement Agreement, and there is no dispute that bond

claims were settled by the Agreement. As the district court

reasoned, American Contractors would have no claim for

indemnification had it not been for Carolina Realty’s alleged

lack of performance in relation to the Florida Project.

Additionally, the attorneys’ fees sought by American Contractors

are for reimbursement for having to partake in the Florida

Litigation -- this is exactly what the Settlement Agreement

forecloses. The Indemnity Agreement was only activated when the

Florida Project was alleged not to have been performed

adequately by Carolina Realty. American Contractors’ claim for

indemnification arose from the Florida Project and the Florida

Litigation; it is therefore barred by the Settlement Agreement.

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 III.

American Contractors drafted and executed a Settlement

Agreement with extremely broad language. It must now live by

the terms of the contract. For the reasons detailed herein,

clear principles of Florida contract law require us to affirm

the district court’s judgment granting summary judgment in

Carolina Realty’s favor. 5

AFFIRMED

5
Agents of the named corporate entities were also parties
to the Settlement Agreement. The Settlement Agreement therefore
covers the individual indemnitors who are parties to this
appeal. Our holding today applies to all named Appellees with
equal force.

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