Current Builders v. First Sealord Sur.

984 So. 2d 526, 2008 WL 2261502, 2008 Fla. App. LEXIS 8127
CourtDistrict Court of Appeal of Florida
DecidedJune 4, 2008
Docket4D06-4076, 4D07-132
StatusPublished
Cited by2 cases

This text of 984 So. 2d 526 (Current Builders v. First Sealord Sur.) is published on Counsel Stack Legal Research, covering District Court of Appeal of Florida primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Current Builders v. First Sealord Sur., 984 So. 2d 526, 2008 WL 2261502, 2008 Fla. App. LEXIS 8127 (Fla. Ct. App. 2008).

Opinion

984 So.2d 526 (2008)

CURRENT BUILDERS OF FLORIDA, INC., Appellant,
v.
FIRST SEALORD SURETY, INC., Appellee.

Nos. 4D06-4076, 4D07-132.

District Court of Appeal of Florida, Fourth District.

April 2, 2008.
Opinion on Rehearing June 4, 2008.

*528 Vincent F. Vaccarella and Jordan M. Keusch of Vincent F. Vaccarella, P.A., Aventura, for appellant.

John J. Shahady and Thomas R. Shahady of Adorno & Yoss LLP, Fort Lauderdale, for appellee.

WARNER, J.

A contractor appeals a final judgment in its favor against its subcontractor for breach of contract, but finding no liability on behalf of the subcontractor's surety. The contractor appeals and the surety cross-appeals the court's award of attorney's fees. We have consolidated these cases for purposes of this opinion. The contractor contends that the judgment for the surety was against the manifest weight of the evidence, and the court erred in failing to grant an additur because the amount of damages the jury awarded against the subcontractor was grossly insufficient. We affirm the judgment in favor of the surety, as the contractor failed to comply with the provisions of the bond required to initiate the surety's obligations. We reverse the damage judgment against the subcontractor as the verdict was legally inadequate. As to the attorney's fees judgment, we reverse because the court did not award the surety the full amount of its attorney's fees.

Current Builders of Florida, Inc. ("CB") acted as the general contractor for the construction of The Residences at Miramar. It entered a subcontract agreement with Morgado Plumbing Corporation to install the plumbing fixtures in the project. The subcontract required Morgado to obtain a surety and furnish CB with a performance bond. Pursuant to this provision, CB, Morgado, and First Sealord Surety, Inc. executed a subcontract payment bond agreement, prepared by CB, in the amount of the contract.

Early on, CB was unhappy with Morgado's performance. It wrote several letters to Morgado and First Sealord complaining of Morgado's performance. Each letter declared Morgado in default and demanded that First Sealord be responsible for any delays or damages. However, it did not terminate Morgado until a year into the project, upon learning from a state-run website that Morgado's workers' compensation insurance had lapsed. CB hired another plumbing company to correct and complete Morgado's work and notified both Morgado, who responded that it did have insurance, and First Sealord, who did not respond.

CB filed a complaint against First Sealord for breach of the performance bond. Subsequently, Morgado filed a complaint against CB alleging breach of the subcontract by failing to make payroll payments. *529 CB then counterclaimed against Morgado for breach of the subcontract. In defense of the counterclaim, Morgado argued that its duties under the subcontract were discharged due to CB's failure to comply with the subcontract's termination provision which required that the general contractor, prior to termination, send the subcontractor written notice of intent to terminate and allow the subcontractor three days to cure the default.

The court consolidated these three claims and ordered the parties to arbitrate. Because the arbitrator found in favor of Morgado and First Sealord, and against CB, CB elected to proceed to trial. The issues at trial were: (1) whether Morgado breached the subcontract and, if so, the amount of damages, or whether Morgado's duties under the subcontract were discharged due to CB's wrongful termination; (2) whether First Sealord received proper notice under the performance bond; and (3) whether CB breached the subcontract and, if so, the amount of damages.

At trial, CB presented evidence regarding Morgado's breach of the subcontract. Problems arose soon after Morgado began installing the plumbing. CB would document these problems with letters addressing each issue and declaring Morgado in default. First Sealord received copies of these letters. On the other hand, Morgado presented evidence that its problems were a result of various actions taken by CB which delayed Morgado's performance, and CB wrongfully terminated Morgado for failing to have current workers' compensation insurance while Morgado's insurance coverage was in place.

A July letter from CB to Morgado, and copied to First Sealord, constituted the notice of default of Morgado. In it, CB informed Morgado that it considered Morgado to be in default of the subcontract for failing to have sufficient workforce to meet its project schedules and for failing to have proof of insurance. Several days later CB sent a second letter to Morgado, with a copy to First Sealord, notifying it that CB had removed Morgado from the permits and hired another plumbing company to finish the job. CB did not agree to pay First Sealord the contract balance, which First Sealord contended was required under the bond.

First Sealord's vice president, Brian Fortay, testified to its obligations under the bond and the notice requirements to initiate its duties. He explained that the surety requires a definite "trigger" declared by the contractor before it will commence performance of its bond obligation, because it does not want to be liable for interfering with the contractor-subcontractor relationship. Fortay testified that to trigger the surety's obligations under the bond, the letters from CB to Morgado and copied to First Sealord "would have had to have a declaration of default, a termination, and probably an agreement that they're going to release the remaining project funds to the surety." The company's position was that so long as the subcontractor was working despite the "notices of default," all matters required for the surety's obligation to arise had not occurred. Thus, none of the so-called "notice of default" letters constituted proper notice to trigger First Sealord's performance under the bond. As Fortay testified:

Again, we act when our bond is triggered. I mean, that's what happens. You got to follow the language of the bond; otherwise, surety companies would have to react to everything that goes on all over the country in every single construction project. You'd have no surety companies. That's why the bond language is there. It's there to show the surety when and how they have to act. And it's also there to make *530 sure that the bond obligee does what they're supposed to do to trigger the bond.

When First Sealord received the letter which CB maintained was the termination letter, Fortay testified that it did not terminate Morgado in accordance with the terms of the contract. Because CB had not followed the terms of the contract in terminating Morgado, First Sealord's bond obligations were not triggered. In any event, CB never tendered the contract balance to First Sealord.

A new plumbing company finished the project, and CB paid it over $800,000 to complete and correct the plumbing work under the subcontract. The overrun on the plumbing contract amounted to at least $682,230.

After the presentation of the evidence and various motions for directed verdict, the jury returned the following verdict: (1) Morgado breached the subcontract with CB and, as a result, CB sustained $30,000 in damages, thereby rejecting Morgado's wrongful termination defense; (2) First Sealord did not receive proper notice under the performance bond, thus discharging the surety's liability on the bond; and (3) CB breached the subcontract with Morgado but was not liable for any damages. The court entered a final judgment in accordance with the jury's verdict.

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Cite This Page — Counsel Stack

Bluebook (online)
984 So. 2d 526, 2008 WL 2261502, 2008 Fla. App. LEXIS 8127, Counsel Stack Legal Research, https://law.counselstack.com/opinion/current-builders-v-first-sealord-sur-fladistctapp-2008.