Ohio Casualty Insurance v. Fratarcangelo

7 F. Supp. 3d 206, 2014 U.S. Dist. LEXIS 38617
CourtDistrict Court, D. Connecticut
DecidedMarch 25, 2014
DocketCivil No. 3:13cv195(AWT)
StatusPublished
Cited by6 cases

This text of 7 F. Supp. 3d 206 (Ohio Casualty Insurance v. Fratarcangelo) is published on Counsel Stack Legal Research, covering District Court, D. Connecticut primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Ohio Casualty Insurance v. Fratarcangelo, 7 F. Supp. 3d 206, 2014 U.S. Dist. LEXIS 38617 (D. Conn. 2014).

Opinion

RULING ON MOTION FOR PARTIAL SUMMARY JUDGMENT

ALVIN W. THOMPSON, District Judge.

This case arises out of a bond written by the plaintiff, Ohio Casualty Insurance Co. (“Ohio Casualty”), at the request of the defendants in order for the defendants to obtain a replacement stock certificate when their original was purportedly lost. Ohio Casualty asserts that it has received notice of a claim on this bond and that it has been unable to procure from the defendants its discharge from liability. Ohio Casualty filed a six count complaint seeking contractual indemnification (Count One), common law reimbursement (Count Two), contractual security (Count Three), common law exoneration (Count Four), quia timet (Count Five), and disclosure of financial information (Count Six). Ohio Casualty has moved for partial summary judgment on Counts Three and Six of the complaint, requesting that the court order specific performance of the contractual terms requiring the defendants to post collateral security and produce requested financial records. For the reasons set forth below, the motion is being granted.

I. Factual Background

On April 4, 2009, Ohio Casualty issued Bond #5052967 (the “Bond”) at the request of defendant PFRMF Investment Holdings LLC (“PFRMF”). PFRMF requested the Bond so it could obtain a replacement for Stock Certificate Number 0000276357 (the “Certificate”), which represented 173,113 shares of stock in The Interpublic Group of Companies (“IPG”). PFRMF represented to Ohio Casualty that it lawfully owned the Certificate and that the Certificate had been lost. The Bond includes a provision reading:

THE CONDITIONS OF THIS OBLIGATION ARE SUCH, ■ that' if [PFRMF], the heirs, legal representatives, successors or assigns of [PFRMF], or any of them shall in case the mislaid, lost, stolen or destroyed original or originals be found or come into the hands or power of any of them or into the hands, custody or power of any person, deliver or cause the same to be immediately [209]*209delivered unto [IPG and the Bank of New York Mellon (“BNY”) ] in order to be cancelled, and shall at all times indemnify and save harmless [IPG and BNY] from and against any and all claims, actions and suits whether groundless or otherwise, and from and against any and all liabilities, losses, damages, costs, charges, counsel fees and other expenses of every nature and character by reason of the said mislaid, lost, stolen or destroyed original or originals and/or the issuance of a new instrument or instruments in lieu thereof or the making of the payment, transfer, delivery or exchange called for by the original or originals without the surrender thereof, and whether or not based upon or arising out of the honoring or refusing to honor the original or originals when presented by any one or based upon or arising from inadvertence, accident, oversight or neglect on the part of [IPG and BNY] or their respective officers, agents, clerks and employees and/or omission or failure to enquire into, contest or litigate the right of any applicant to receive any payment, credit, transfer, registration, exchange or delivery in respect of the original or the originals and/or the new instrument or instruments issued in lieu thereof, and/or based upon or arising out of any determination which [IPG and BNY] may in fact make as to the merits of any such claim, right or title, and/or based upon or arising out of any other mattér or thing whatsoever, then this obligation shall be void; otherwise shall remain in full force and effect.

(Ex. D of Aff. of Peter Fratarcangelo (Doc. No. 32-4) (“Bond Language”), at 1-2.)

Along with the Bond, Ohio Casualty and PFRFM executed a General Agreement of Indemnity (the “GAI”). The individual defendants, Peter Fratarcangelo and Mary Fratarcangelo (together with PFRMF, the “Defendants”), were also signatories on the GAI in their individual capacities. The GAI provides, inter alia, that: (i) “[the Defendants] agree to pay to [Ohio Casualty] upon demand ... [a]n amount sufficient to discharge any claim made against [Ohio Casualty] on any Bond. This sum may be used by [Ohio Casualty] to pay such claim or be held by [Ohio Casualty] as collateral security against loss on any Bond”; (ii) Ohio Casualty “shall have the exclusive right for itself and the [defendants] to determine in good faith whether any claim or suit upon the Bond shall ... be paid, compromised, defended or appealed”; (iii) Ohio Casualty “may incur such expenses, including reasonable attorneys’ fees, as deemed necessary or advisable in the investigation, defense and payment of such claims”; (iv) “[t]he [Defendants] will, on request of [Ohio Casualty], procure the discharge of [Ohio Casualty] from any Bond and all liability by reason thereof’; (v) “[i]f such discharge is unattainable, the [defendants] will, if requested by [Ohio Casualty] either deposit collateral with [Ohio Casualty], acceptable to [Ohio Casualty], sufficient to cover all exposure under such bond or bonds, or make provisions acceptable to [Ohio Casualty] of the funding of the bonded obligation(s)”; and (vi) “[u]ntil [Ohio Casualty] shall have been furnished with competent evidence of its discharge, without loss from any Bonds, [Ohio Casualty] shall have the right to free access at reasonable times to the books, records and accounts of each of the [defendants] for the purpose of examining them.” (Aff. Of Robert O’Brien (Doc. No. 16) (“GAI Language”), Ex. 1.)

Having been issued the Bond, the Defendants were able to obtain the replacement for the Certificate (the “Replacement Certificate”), and subsequently entered into a “forward sale” agreement, dated April 15, 2011 (the “Agreement”). The [210]*210purpose of the Agreement was to sell the shares represented by the Replacement Certificate to the Bank of New York Mellon (“BNY”). On August 4, 2011, IPG sent a letter to the Defendants and BNY stating that the Replacement Certificate was wrongly issued and that none of the Defendants owned the shares represented by the Replacement Certificate. As a result of the letter, BNY advised the Defendants that they were in default under the Agreement and that it was reserving its right seek damages caused by the default. In response, the Defendants filed a suit against IPG (the “Suit”) in the Southern District of New York to determine their rights with respect to the shares represented by the Replacement Certificate. On July 10, 2012, the court ruled that the Defendants had no right to the shares represented by the Replacement Certificate. See PFRMF Investment Holdings v. Interpublic Group of Companies, Inc., No. 11 Civ. 6008(CM), 2012 WL 2849771 (S.D.N.Y. July 10, 2012).

The Defendants appealed the decision, but the case was subsequently settled and the appeal was withdrawn. The settlement agreement, entered into by IPG, the Defendants, and Ohio Casualty, includes a release from liability for costs IPG incurred, in litigating the Suit. However, it also provides that “[Ohio Casualty] agrees to indemnify and hold harmless IPG in connection with any claims asserted by BNY or other actions within the scope of the Bond coverage taken by BNY adverse to IPG’s interests arising out of or related to the [IPG shares] and/or Replacement Certificate” and that “the Bond remains fully operative for any losses incurred by IPG subsequent to the date of this Agreement that are owing” because of such claims or actions by BNY. (Ex. 4 of Aff. of Robert O’Brien (Doc. No.

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Bluebook (online)
7 F. Supp. 3d 206, 2014 U.S. Dist. LEXIS 38617, Counsel Stack Legal Research, https://law.counselstack.com/opinion/ohio-casualty-insurance-v-fratarcangelo-ctd-2014.