Tudor Construction Co. v. Core Tech Int'l Corp

Opinion

IN THE SUPERIOR COURT OF GUAM

2 TUDOR CONSTRUCTION CO., INC., and )

3 PHILIP C. AHN, ) CIVIL CASE NO. CV0513-12 4 )

Plaintiffs, )

5 ) DECISION AND ORDER vs. )

6 )

7 CORE TECH INTERNATIONAL )

CORPORATION and FIDELITY AND )

8 DEPOSIT COMPANY OF MARYLAND, )

)

9 Defendants. )

10

11

12 INTRODUCTION

13 This matter came before the Honorable James L. Canto II on Defendant Fidelity and

14 Deposit Company of Maryland's motion for summary judgment on Plaintiffs supplemental

15 complaint of bad faith, filed September 27, 2013. The final brief by the parties regarding this

16 motion was filed October 21, 2013, and the Court took the matter under advisement thereafter.

17 Having considered the parties' briefs and the applicable law, the Court now issues the following

18 Decision and Order. 19 BACKGROUND 20 On May 3, 2012, Plaintiff filed a complaint to allege nonpayment for work completed in

21 two construction projects as a subcontractor to Defendant Core Tech International Corporation

22 (hereinafter "CTI"), where one project was guaranteed by a payment bond executed with

23 Defendant Fidelity and Deposit Company of Maryland (hereinafter "Fidelity"). Plaintiff alleges 24 that CTI owes $103,525.15 plus interest for its work on the first project for the U.S. Navy 25 (hereinafter "Navy project"). (Complaint, 2, May 3, 2012). Plaintiff also alleges that CTI owes 26 $232,502.49 plus interest for its work on the second project for the Guam Waterworks

27 Authority (hereinafter "GWA project'). /d. at 2-3. The amount owed for work completed on 28 the GWA project is fully insured by Fidelity's payment bond pursuant to 5 GCA § 5304. /d.

On November 7, 2012, Plaintiff moved to supplement its complaint with an additional

2 claim that Fidelity has refused to pay undisputed debts in violation of a surety's good faith duty 3 to process claims. Plaintiffs proposed supplemental complaint alleges that the parties agreed

4 upon undisputed amounts of liability in August 2012 but that Fidelity withheld payment in bad 5 faith and caused further damages related to creditor claims, and the emotional distress and 6 hospitalization ofPlaintiff's President. (Mot. to Add Supplemental Claims, 5-6, Nov. 7, 2012). 7 On January 23, 2013, CTI and Fidelity moved to amend their answers to allege a set-off 8 defense and a breach of contract counterclaim for the GWA project. Plaintiff argues that 9 paragraphs nine and ten of the counterclaim do not state plausible claims for relief and are 1o therefore futile or alleged in bad faith. The proposed amended answers also deny the prior

11 admission that $232,502.49 plus interest is owed to Plaintiff for the GWA project. Defendants 12 assert that the prior admission was made in error and Plaintiff objects that the correction is made

l3 in bad faith and with delay that shall cause prejudice. 14 On April 16, 2013, the Court issued a Decision & Order granting Tudor's motion to 15 amend the complaint in part, but denied Tudor's motion to supplement a claim for emotional

16 distress damages. (Dec. & Order, April 16, 2013). The Court also granted CTI's motion to

17 amend their answer. /d. 18 On August 30, 2013, Tudor filed a motion for partial summary judgment on three

19 separate grounds: (1) there is no question of material fact that there is an undisputed amount 20 presently due and owing to Tudor from Defendants on the GWA project; (2) CTI is not entitled 21 to $75,940.41 in remediation costs as a matter of law regarding its counterclaim; and (3) Tudor 22 is entitled to the amount of $103,1525.13 plus interest for Tudor's extra work performed at 23 CTI's request on the Navy project. (Mot. Partial Summ. J., 1-2, Aug. 30, 2013). In opposition, 24 CTI and Fidelity argue that: (1) under Guam law, an obligee of a surety agreement may not 25 recover in tort for a surety's bad faith, and thus Tudor has failed to state a claim for relief

26 against Fidelity for bad faith; (2) the undisputed amount allegedly owed to Tudor is in dispute 27 and the construction subcontract authorized CTI to set-off all of the amounts asserted in its

28 counterclaim, which amounts exceed any amounts allegedly owed to Tudor; and (3) there are genuine issues of material fact relating to the Navy project. (CTI's Opp'n. Mot., Sept. 27,

2 2013); (Fidelity's Opp'n. Mot., Sept. 27, 2013). 3 On September 27, 2013, Fidelity filed a motion for summary judgment on Plaintiffs

4 supplemental complaint of bad faith asserting that a cause of action for "surety bad faith" should

5 not be recognized, and even if it is recognized, Fidelity is still entitled to summary judgment

6 based on the facts ofthis case. (Fidelity's Mot. Summ. J., 8-19, Sept. 27, 2013).

7 DISCUSSION 8 I. Summary Judgment Standard 9 Guam Civil Procedure Rule 56(c) provides that a court may grant summary judgment "if

10 the pleadings, depositions, answers to interrogatories, and admissions on file, together with the

II affidavits, if any, show that there is no genuine issue as to any material fact and that the moving

I2 party is entitled to a judgment as a matter of law." Guam R. Civ. P. 56(c) (2010). A genuine

13 issue of fact exists when "there is 'sufficient evidence' which establishes a factual dispute

I4 requiring resolution by a fact-finder." Iizuka Corp. v. Kawasho Int'l (Guam), Inc., 1997 Guam I5 10 ~ 7 (citing T. W Elec. Serv., Inc. v. Pacific Elec. Contractors Ass'n, 809 F.2d 626, 630 (9th

I6 Cir. 1987)). "A 'material' fact is one that is relevant to an element of a claim or defense and

I7 whose existence might affect the outcome of the suit.. .. Disputes over irrelevant or unnecessary

I8 facts will not preclude a grant of summary judgment." !d. "If the movant can demonstrate that

I9 there are no genuine issues of material fact, the non-movant cannot merely rely on allegations

20 contained in the complaint, but must produce at least some significant probative evidence

2I tending to support the complaint." !d. at~ 8 (citing Anderson v. Liberty Lobby, 477 U.S. 242,

22 249, 106 S.Ct. 2505 (1986)). 23 In order to determine whether summary judgment may be granted, "the Court must view

24 the evidence and draw inferences in the light most favorable to the nonmovant." Edwards v.

25 Pacific Financial Corp., 2000 Guam 27 ~ 7 (citing Anderson, 477 U.S. at 249). "The court's 26 ultimate inquiry is to determine whether the 'specific fact' set forth by the nonmoving party,

27 coupled with undisputed background or contextual facts, are such that a rational or reasonable

28 jury might return a verdict in its favor based on that evidence." Iizuka, 1997 Guam 10 ~ 8

(quoting T W Elec. Serv., 809 F.2d at 631) (internal quotations omitted). "Stated simply, there 2 is a trial issue if there is sufficient evidence for a jury to return a verdict in the non-moving 3 party's favor." Kim v. Hong, 1997 Guam 11 ~ 8 (citing Anderson, 477 U.S. at 250). 4 II. Bad Faith Claim Against Surety 5 On January 29, 2013, the Court issued a Decision and Order recognizing a cause of 6 action for bad faith claims against a surety. (Dec. & Order, 4-6, Jan. 29, 2013). Fidelity argues 7 that, even if the Court deems surety bad faith a recognized tort on Guam, applying the 8 undisputed facts in this case to the relevant law warrants summary judgment in favor of 9 Fidelity, precluding this claim. 1o In the jurisdictions that recognize a cause of action for surety bad faith, courts have 11 noted that "[ s]o long as a surety acts reasonably in response to a claim made by its obligee, the 12 surety does not risk bad faith tort liability." Dodge v. Fidelity and Deposit Co. of Md., 778 P.2d 13 1240, 1243 (Ariz. 1989) (citation omitted). Conversely, "[w]hen the insurer unreasonably and 14 in bad faith withholds payment of the claim of its insured, it is subject to liability in tort."

1

15 Wilson v. 21st Century Ins. Co., 171 P.3d 1082, 1087 (Cal. 2007). 16 In its briefs, Fidelity references Fidelity Enterprises, Ltd., v. National Union Fire 17 Insurance Company of Pittsburgh, Pa., CV0753-05, at 8 (Super. Ct. Guam Jun. 7, 2012), which 18 quotes a California Court of Appeals case as follows: "[A]n insurer denying or delaying the 19 payment of policy benefits due to the existence of a genuine dispute with its insured as to the 20 existence of coverage liability or the amount of the insured's coverage claim is not liable in bad 21 faith even though it might be liable for breach of contract." Chateau Chamberay Homeowners 22 Assn. v. Associated Internal. Ins. Co., 108 Cal.Rptr.2d 776, 784 (Ct. App. 2001) (emphasis 23 added). However, this genuine dispute does not relieve an insurer from its obligations to 24 thoroughly and fairly investigate, process and evaluate the insured's claim. Wilson, 171 P.3d at 25 1089 (emphasis added). "A genuine dispute exists only where the insurer's position is 26 maintained in good faith and on reasonable grounds." !d. (citations omitted). 27 1 28 Under Guam law, suretyship is a type of insurance. 22 GCA § 18106 (2005).

Applying the genuine issue rule in the context of summary judgment motions filed in 2 bad faith claims, a reviewing court may "grant summary judgment when it is undisputed or 3 indisputable that the basis for the insurer's denial of benefits was reasonable-for example, 4 where even under the plaintiffs version of the facts there is a genuine issue as to the insurer's 5 liability under California law." Amadeo v. Principal Mut. Life Ins. Co., 290 F.3d 1152, 1161 6 (9th Cir. 2002). Under the above example, "because a bad faith claim can succeed only if the 7 insurer's conduct was unreasonable, the insurer is entitled to judgment as a matter of law." !d. 8 However, "an insurer is not entitled to judgment as a matter of law where, viewing the facts in 9 the light most favorable to the plaintiff, a jury could conclude that the insurer acted 10 unreasonably." /d. (citation omitted). Put simply, "an insurer is entitled to summary judgment 11 based on a genuine dispute over coverage or the value of the insured's claim only where the 12 summary judgment record demonstrates the absence of triable issues as to whether the disputed 13 position upon which the insurer denied the claim was reached reasonably and in good faith." 14 Wilson, 171 P.3d at 1089. 15 In this case, Fidelity maintains that it denied payment on Plaintiffs claim due to the 16 existence of a genuine dispute as to the amount of the claim and the validity of the claim. For 17 Fidelity to succeed on its motion for summary judgment, the record must indisputably 18 demonstrate that the basis for Fidelity denying Plaintiffs claim was reasonable and in good 19 faith. Amadeo, 290 F.3d at 1161. Viewing the facts in the light most favorable to Plaintiff, the 20 Court finds that there is a triable issue as to whether the disputed position upon which the 21 insurer denied the claim was reached reasonably and in good faith. Under the above standard, 22 there are insufficient facts to show that Fidelity thoroughly and fairly investigated, processed 23 and evaluated the Plaintiffs claim when it was first submitted to Fidelity. 24 In support of Fidelity's claim, Dennis Walsh, as Claims Counsel for Fidelity, declares 25 that he was "informed, believed, and determined that a legitimate dispute exists between CTI 26 and Tudor over the amount ofTudor's subcontract, the quality of work performed by Tudor, the 27 amount of costs and expenses incurred by CTI to repair and complete Tudor's scope of work, 28 and the amount, if any, owed between the parties." (Decl. Dennis Walsh, 3, Sept. 27, 2013).

Despite this unsupported, conclusory statement, this Court cannot grant Fidelity's summary 2 judgment motion on this claim, in the absence of any evidence proffered to detail the actual 3 nature, quality, and thoroughness ofthe alleged investigation. 4 Ill 5 Ill 6 Ill 7 CONCLUSION 8 Based upon the foregoing, Defendant Fidelity and Deposit Company of Maryland's 9 motion for summary judgment on Plaintiffs supplemental complaint of bad faith is hereby

10 DENIED. II

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13 SO ORDERED this /2-rrt day of February, 2014. 14

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17 HON. JAMES L. CANTO II

18 Judge, Superior Court of Guam 19

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