Judge: David A. Rosen, Case: 21GDCV01300, Date: 2023-03-02 Tentative Ruling

Case Number: 21GDCV01300    Hearing Date: March 2, 2023    Dept: E

Hearing Date: 03/03/2023 – 10:00am

Case No:         21GDCV01300                                   
Trial Date: 03/13/2023

Case Name: AMERICAN CONTRACTORS INDEMNITY COMPANY, a California corporation v. Chase Fire Protection, a California corporation; NADAV PADEH, an indiv; YENY CARILLO-PADEH, an indiv; and DOES 1-50

PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT 

Moving Party:  Plaintiff, American Contractors Indemnity Company (Plaintiff or ACIC)

Responding Party: No Opposition submitted

Proof of service timely filed (CRC 3.1300(c)): Ok

Correct Address (CCP §§ 1013, 1013(a)): Ok

Defendant, Chase Fire Protection’s, counsel previously moved to withdraw as Chase’s counsel of record, but the motion was denied because Defendant is not an individual, but a corporation and thus cannot be self-represented. Counsel’s motion to withdraw as to the other two individual defendants was granted. The notice of non-opposition hereto notes that this motion seeks summary judgment only as to Chase Fire Protection because the two individual defendants are in bankruptcy.

Moving Papers: Notice of Motion/Motion; Separate Statement; Index of Exhibits; Decl. Fair; Decl. Nguyen; Proposed Order; Proof of Service.

Opposition: No Opposition Submitted

Reply: Notice of Non-Opposition

75/80 Days

Under 437c(2), notice of the motion and supporting papers shall be served on all other parties to the action at least 75 days before the time appointed for hearing. If the notice is served by mail, the required 75-day period of notice shall be increased by 5 days if the place of address is within the State of California. If the notice is served by facsimile transmission, express mail, or another method of delivery providing for overnight delivery, the required 75-day period of notice shall be increased by two court days. (CCP §437c(a)(2).)

The instant motion is timely.

30 Days
The motion shall be heard no later than 30 days before the date of trial, unless the court for good cause orders otherwise. The filing of the motion shall not extend the time within which a party must otherwise file a responsive pleading. (CCP §437c(a)(3).)

The Court, in its discretion, allowed this Motion to be heard within 30 days of Trial.

RELIEF REQUESTED

Plaintiff, American Contractors Indemnity Company (Plaintiff or ACIC), moves pursuant to CCP §437c, for summary judgment on the following causes of action in the Complaint: First Cause of Action for Breach of Contract; Second Cause of Action for Express Contractual Indemnity; and Third Cause of Action for Statutory Reimbursement.

Plaintiff’s notice of motion states it is entitled to judgment on the Complaint, with costs of suit against Defendants Chase Fire Protection, Nadav Padeh, and Yeny Carillo-Padeh, jointly and severally, on each the causes of action in the Complaint.

Alternatively, Plaintiff moves for summary adjudication on all three causes of action.

[The Notice of Non-Opposition filed on 02/23/2023 by Plaintiff notes that “pursuant to Plaintiff’s Notice of Bankruptcy Fillings filed on December 14, 2022 and January 12, 2023, Plaintiff will be seeking summary judgment pursuant to its Motion against Defendant Chase Fire Protection and not against the individual defendants Nadav Padeh and Yeny Carillo-Padeh at this time.”]

BACKGROUND
The following background was provided by Plaintiff’s memo in the “Introduction” section:

This case arises out of a General Indemnity Agreement (hereafter “Indemnity Agreement’). The explicit terms of the Indemnity Agreement, signed by defendants, entitle American Contractors Indemnity Company (“ACIC”) to judgment against defendants, Chase Fire Protection, Nadav Padeh, and Yeny Carillo-Padeh (hereafter collectively “Defendants”) for all of the damages ACIC incurred in connection with two surety bonds it provided for Chase Fire Protection (hereafter “Chase Fire Protection”), including attorney fees.

In consideration of the Indemnity Agreement, ACIC, as surety, issued construction bonds, a Subcontractor Performance Bond (“Performance Bond”) and a Subcontractor Labor and Material Payment Bond (“Payment Bond”) (collectively, the “Bonds”), both guaranteeing contractual obligations Chase Fire Protection undertook in connection with a public work of improvement to complete a fire sprinkler suppression system (“Bonded Contract”).

The obligee terminated the Bonded Contract for cause and made claims against the Bonds, seeking compensation for damages they sustained because of Chase Fire Protection’s failure to fulfill its contractual obligations. The undisputed material facts will show that claims were made against the Bonds, ACIC investigated the claims pursuant to its rights and obligations under the Indemnity Agreement (UMF 24, 31), ACIC had the right “in its sole and absolute discretion” to settle the claims (UMF 7), and ACIC paid to settle the claims (UMF 26, 33) and incurred legal and consulting expenses in satisfying the bond claims (UMF 37-38).

The terms of the Indemnity Agreement impose a contractual duty upon Defendants to indemnify ACIC and hold it harmless against all loss, liability, costs, and expenses arising from ACIC having issued the Bonds for Chase Fire Protection. Therefore, ACIC has a contractual right under the Indemnity Agreement to reimbursement of the bond disbursements, including any and all losses associated therewith. ACIC also has a statutory right under Civil Code §2847 to reimbursement of the bond disbursements plus interest. The Indemnity Agreement entitles ACIC to reimbursement for the legal and other expenses it incurred in connection with the claims against the Bonds, as an item of damages. Finally, ACIC has a contractual right under the Indemnity Agreement to recover the attorney fees and other costs incurred in this action to enforce Defendants’ obligations thereunder, as an items of damages. ACIC is entitled to judgment against Defendants, jointly and severally, in the total sum of $288,155.15, inclusive of interest at the legal rate and costs of suit.

ACIC made claim against the Defendants for reimbursement of it losses, however, Defendants failed to reimburse ACIC for any of its losses under the Bonds. Defendants failed to hold ACIC harmless, resulting in damage to ACIC in satisfying the bond claims and associated attorney fees.

(Pl. Mot. p. 1-2.)

LEGAL STANDARD

A party may move for summary judgment in an action or proceeding if it is contended that the action has no merit or that there is no defense to the action or proceeding. The motion may be made at any time after 60 days have elapsed since the general appearance in the action or proceeding of each party against whom the motion is directed or at any earlier time after the general appearance that the court, with or without notice and upon good cause shown, may direct. (CCP §437c(a)(1).)

The motion shall be supported by affidavits, declarations, admissions, answers to interrogatories, depositions, and matters of which judicial notice shall or may be taken. The supporting papers shall include a separate statement setting forth plainly and concisely all material facts that the moving party contends are undisputed. Each of the material facts stated shall be followed by a reference to the supporting evidence. The failure to comply with this requirement of a separate statement may in the court’s discretion constitute a sufficient ground for denying the motion. (CCP §437c(b)(1).)

A party may move for summary adjudication as to one or more causes of action within an action, one or more affirmative defenses, one or more claims for damages, or one or more issues of duty, if the party contends that the cause of action has no merit, that there is no affirmative defense to the cause of action, that there is no merit to an affirmative defense as to any cause of action, that there is no merit to a claim for damages, as specified in Section 3294 of the Civil Code, or that one or more defendants either owed or did not owe a duty to the plaintiff or plaintiffs. A motion for summary adjudication shall be granted only if it completely disposes of a cause of action, an affirmative defense, a claim for damages, or an issue of duty. (CCP §437c(f)(1).)

A motion for summary adjudication may be made by itself or as an alternative to a motion for summary judgment and shall proceed in all procedural respects as a motion for summary judgment. (CCP §437c(f)(2).)

Plaintiff has met his or her burden of showing that there is no defense to a cause of action if that party has proved each element of the cause of action entitling the party to judgment on the cause of action. (CCP §437c(p).) Once the plaintiff has met that burden, the burden shifts to the defendant to show that a triable issue of one or more material fact exists as to the cause of action or a defense thereto. (Id.)

ANALYSIS

First Cause of Action – Breach of Contract
“Indemnity agreements are construed under the same rules which govern the interpretation of other contracts.” (Continental Heller Corp. v. Amtech Mechanical Services, Inc. (1997) 53 Cal.App.4th 500, 504 citing Myers Building Industries, Ltd. v. Interface Technology, Inc. (1993) 13 Cal.App.4th 949, 969.)

“To prevail on a cause of action for breach of contract, the plaintiff must prove (1) the contract, (2) the plaintiff’s performance of the contract or excuse for nonperformance, (3) the defendant’s breach, and (4) the resulting damage to the plaintiff.” (Richman v. Hartley (2014) 224 Cal.App.4th 1182, 1186 citing Careau & Co. v. Security Pacific Business Credit, Inc. (1990) 222 Cal.App.3d 1371, 1388.)

Element 1 – The Contract
To establish the existence of the contract, Plaintiff submitted the Declaration of James Nguyen and Exhibit 1 (the General Indemnity Agreement) in the Index of Exhibits.

In relevant part of the Nguyen Declaration, Nguyen states:

I am employed as Bonds Claim Examiner by Tokio Marine HCC, parent company of American Contractors Indemnity Company ("ACIC"), the plaintiff in this action. As Bonds Claim Examiner for ACIC, I was responsible for overseeing the handling of claims made against the surety bonds issued by ACIC on behalf of Chase Fire Protection, which are the subject of this action. I make this declaration based upon my personal knowledge in support of ACIC's Motion for Summary Judgment. (Nguyen Decl. ¶1.)

Generally, my responsibilities as Bonds Claim Examiner include, but are not limited to, the investigation, analysis, defense or resolution of claims made against bonds issued by ACIC. If ACIC retains outside counsel, I oversee outside counsel in their representation of ACIC. It is my responsibility to document the claims handling activities and maintain the electronic files on claims asserted against surety bonds issued by ACIC. (Nguyen Decl. ¶2.)

As Bonds Claim Examiner, I am familiar with ACIC's claims handling practices as well as its business records procedures. I have access to the business records of ACIC and am authorized to act and do act as the custodian of records for ACIC with respect to the underwriting, bond and claim documentation maintained in connection with Chase Fire Protection. I am the person responsible for handling the claims against the surety bonds ACIC issued for Chase Fire Protection, which are the subject this action. (Decl. Nguyen ¶3.)

ACIC's business records reflect that the General Indemnity Agreement dated November 18, 2019, with notarized signatures of Chase Fire Protection, Nadav Padeh, and Yeny  Carrillo-Padeh (hereinafter collectively, "Defendants") was submitted to ACIC as part of a request for ACIC to issue surety bonds. A copy of the General Indemnity Agreement (hereinafter, 25 "Indemnity Agreement") is attached to the Index of Exhibits marked Exhibit 1.(Nguyen Decl. ¶5.)

Further, in relevant, part, Plaintiff points the Court to the following portions of the Indemnity Agreement, and Plaintiff alleges that in the following portions Defendants agreed to indemnify and reimburse ACIC for any loss it incurred under the Bonds:

NOW THEREFORE, in consideration of the premises set forth herein and other good and valuable consideration, receipt and sufficiency of which is hereby expressly acknowledged by the Principal(s) and Indemnitor(s), the Principal(s) and Indemnitor(s), for themselves and their successors and assigns, hereby covenant and agree as follows:

…

The Principals and Indemnitors shall, jointly and severally, exonerate, indemnify, reimburse, and save and hold the Surety harmless from and against any and all demands, liabilities, losses, costs, damages, expenses and fees (including, but not limited to, those incurred by or in connection with accountants, attorneys, consultants, engineers, investigation, and other professionals), interest, court costs, and any and all other types of losses, costs or expenses of whatsoever kind or nature, which the Surety may sustain or incur or which arise by reason of or in any manner in consequence of any one or more of the following: (i) the execution or procurement by the Surety of any Bond; (ii) the failure of any Principal or Indemnitor to perform or comply with any provision of this Agreement; (iii) the enforcement of any provision of this Agreement; (iv) the conduct of any investigation regarding the Surety's alleged obligations or liabilities under any Bond or in connection with any Contract; (v) any attempt by or on behalf of the Surety to obtain a release or reduction of the Surety's liability or alleged liability under any Bond or Contract; (vi) any attempt by or on behalf of the Surety to recover any unpaid premium in connection with any Bond; (vii) the prosecution or defense of any action or claim in connection with any Bond or Contract; (viii) the loan or advance of any monies to any Principal or Indemnitor; or (ix) the Surety's attempt to determine, discharge or mitigate its loss or exposure to loss in connection with any Bond or Contract, or to enforce any of its rights pursuant to this Agreement, by suit or otherwise. The obligations provided for in this paragraph are without regard to whether the Surety, in its sole and absolute discretion, elects to employ its own counsel or, in lieu thereof or in addition thereto, permits or requires any Principal and/or Indemnitor to make arrangements for or assist in the Surety's legal representation and protection.

The Principals and Indemnitors further agree that they shall be liable for, and that the Surety shall be entitled to charge and recover for, any and all payments made by the Surety in the good faith belief that: (1) any Principal or Indemnitor is or has been in default under this Agreement; (2) the Surety was or might be liable for a claim asserted against a Bond, whether or not such liability actually existed; or (3) such payments were or are necessary or expedient to protect any of the Surety's rights or interests or to avoid or lessen the Surety's actual or alleged liability. The Surety shall be entitled to the rights and remedies set forth in this Section III and to all of the benefits of this Agreement with respect to any liability, payment, loss or cost that is incurred or made by the Surety in good faith. The foregoing obligations shall extend to and include an obligation to pay to the Surety interest on any payments made by the Surety as a result of having issued any Bond, at the rate of ten percent (10%) per annum or the maximum rate allowed by law, whichever is lower, calculated from the date such payment is made by the Surety.”

(Ex. 1, p.1-2.)

Defendant did not submit Opposition.

Plaintiff has established the existence of a contract as a matter of law.

Element 2 - the plaintiff’s performance of the contract or excuse for nonperformance

To establish Plaintiff’s performance, Plaintiff points to the following evidence:

ACIC's business records reflect that in consideration of Defendants' execution and delivery of the Indemnity Agreement and payment of premium, on January 30, 2020, ACIC issued a Subcontractor Performance Bond ("Performance Bond') and a Subcontractor Labor and Materials Payment Bond ("Payment Bond"), each in the penal sum amount of $ 184,300 and each 6 bearing the number 1001133433, both naming Chase Fire Protection as principal, and 2H Construction, Inc. ("2H Construction"), as obligee (hereafter collectively, the "Bonds"). Copies of the Performance Bond and Payment Bond are attached to the Index of Exhibits marked Exhibit 2 and Exhibit 3, respectively. (Nguyen Decl. ¶7.)

ACIC's business records reflect that in May 2021, ACIC and Defendants received an email correspondence, dated May 19, 2021 from Marlo Hitchcock, project engineer for 2H Construction, terminating the Bonded Contract and making claim and demand upon ACIC to satisfy its obligations under the Performance Bond because "Chase Fire Protection has failed to fulfill their contractual requirements and mobilize with proper materials/I.D. Documentation and manpower for installation of same for few weeks now. Their installations are delinquent and are delaying [the] project schedule," further requesting to terminate the Bonded Contract with Chase Fire Protection for Chase Fire Protection's "failure to comply with the contract requirements and file a claim against their bond." A copy of the email correspondence dated May 19, 2021, without the referenced enclosures, is attached to the Index of Exhibits marked Exhibit 4. (Nguyen Decl. ¶11.)

ACIC's business records reflect that on or about June 2021, ACIC received a claim on the Payment Bond from Five Star Plumbing &, Fire Sprinklers, Inc. ("Five Star Plumbing") for materials supplied to the Bonded Contract. (Nguyen Decl. ¶21.)

On or about August 4, 2021, ACIC and 2H Construction entered into a settlement agreement whereby ACIC paid 2H Construction $ 184,300 in satisfaction of its claim against the Performance Bond ("Performance Bond Settlement Agreement") via check no. 257404, on August 6, 2021. ACIC arranged to make this payment in a good faith belief that ACIC was liable for the amount paid and that it was necessary for ACIC to incur the loss under the Performance Bond. I hold no evil intent or malice toward Defendants. A copy of Performance Bond Settlement Agreement is attached to the Index of Exhibits marked Exhibit 8. A copy of check no. 257404, dated August 6, 2021, is attached to the Index of Exhibits marked Exhibit 9. (Nguyen Decl. ¶19.)

In August 2021, ACIC and Five Star Plumbing reached a settlement whereby ACIC paid Five Star Plumbing $ 15,840.21 in satisfaction of its claim against the Payment Bond  via check no. 258403, on August 24, 2021, pursuant to a Surety Release and Assignment of Claim executed by Five Star Plumbing on August 18, 2021 ("Payment Bond Settlement"). ACIC arranged to make this payment in a good faith belief that ACIC was liable for the amount paid and that it was necessary for ACIC to incur the loss under the Payment Bond. I hold no evil intent or malice toward Defendants. A copy of Payment Bond Settlement is attached to the Index of Exhibits marked Exhibit 11. A copy of check no. 258403, dated August 24, 2021, is attached to the Index of Exhibits marked Exhibit 12. (Decl. Nguyen ¶25.)

Defendant did not submit opposition.

Plaintiff established the second element of its breach of contract claim.

Element 3 - the defendant’s breach

To establish the third element, Plaintiff provided the following evidence:

Plaintiff referred to Paragraph 11 of the Nguyen declaration which this Court already cited.

Plaintiff referred to Paragraph 21 of the Nguyen declaration which this Court already cited.

On June 17, 2021, ACIC sent an email to Defendants notifying them of Five Star Plumbing’s claim on the Payment Bond, requesting Defendants to advise on the status of payment to Five Star Plumbing, and providing that should they dispute the claim, to provide a detailed response stating the reasons for the dispute per the terms of the Indemnity Agreement. A true and correct copy of the email dated June 17, 2021 is attached to the Index of Exhibits marked Exhibit 10. (Nguyen Decl. ¶22.)

Defendants never made a written request to ACIC to resist 2H Construction's claim on the Performance Bond. (Nguyen Decl. ¶16.)

Defendants never made a written request to ACIC to resist or dispute Five Star Plumbing's claim on the Payment Bond. (Nguyen Decl. ¶23.)

ACIC's business records reflect that on June 23, 2021, Robins Kaplan LLP sent a collateral demand letter on behalf of ACIC demanding the immediate deposit of cash collateral in the amount of $ 184,300, however, Defendants never deposited any collateral with ACIC. A true and correct copy of the correspondence dated June 23, 2021 is attached to the Index of Exhibits as Exhibit 7. (Nguyen Decl. ¶18.)

ACIC's business records reflect that ACIC contacted Defendants on several occasions notifying them of ACIC's losses and requesting an indemnification plan, but Defendants continued to fail to provide a plan or reimburse ACIC for its losses incurred. (Nguyen Decl. ¶27.)

ACIC's business records reflect that on September 10, 2021, Robins Kaplan LLP sent a final demand to Defendants requesting a plan for indemnification of ACIC's losses under the Bonds and notifying Defendants of ACIC's current loss under the Bonds in the total amount of $226,481.62, excluding future costs and attorneys fees. A copy of the correspondence dated September 10, 2021 is attached to the Index of Exhibits marked Exhibit 13. (Nguyen Decl. ¶28.)

ACIC served Defendants with a Complaint, filed in Los Angeles County Superior Court, wherein it sought to recover its losses under the Bonds from Defendants. A copy of the Complaint, file stamped October 21, 2021, is attached to the Index of Exhibits marked Exhibit 14. (Nguyen Decl. ¶30.)

To date, Defendants have not reimbursed ACIC for any of ACIC’s losses on the Bonds. (Nguyen Decl. ¶31.)

No Opposition was submitted.

Plaintiff established this element for its breach of contract claim.

Element 4 – Resulting Damages to Plaintiff

In the motion itself, at pages 6-7, the bottom of 10 to top of 11, and page 14-15. Also note that in the conclusion of the motion, Plaintiff seeks $288,155.15; however, the first cause of action in the Complaint states “ACIC has to date sustained a loss in the amount of $226,481.62, inclusive of consultant expense and legal expense incurred to date as an item of damages.

TENTATIVE RULING CAUSE OF ACTION ONE

Summary Judgment is GRANTED on the breach of contract cause of action against Defendant Chase Fire Protection only.  Damages to be discussed at the hearing.

Causes of Action Two and Three
As to the second cause of action for Express Contractual Indemnity, Plaintiff makes no arguments with respect to this claim in its motion. It appears Plaintiff considered the first and second causes of action to be identical based on the moving papers because the moving papers only addressed breach of contract elements.

As to the third cause of action for statutory reimbursement pursuant to Civil Code §2847, the Court is unclear as to what Plaintiff is alleging as a cause of action.

Plaintiff’s motion states:

In addition to the broad terms of the Indemnity Agreement, Civil Code §2847 also confers on ACIC the right to recover its Performance Bond and Payment Bond disbursements as follows:

If a surety satisfies the principal obligation, or any part thereof, whether with or without legal proceedings, the principal is bound to reimburse what he has disbursed, including necessary costs and expenses; but the surety has no claim for reimbursement against other persons, though they may have been benefited by his act, except as prescribed by the next section.

Civil Code §2848 adds the following, “A surety, upon satisfying the obligation of the principal, is entitled to enforce every remedy which the creditor then has against the principal to the extent of reimbursing what he has expended . . . .”

The Bonds name Chase Fire Protection as principal and ACIC as surety. (UMF 12.) The Bonds name 2H Construction as obligee. (UMF 13.) As the named principal on the Bonds, Chase Fire Protection has the primary obligation to 2H Construction; ACIC’s obligation arises only if Chase Fire Protection fails to perform or pay under the Bonded Contract. (Schmitt, supra, 230 Cal.App.3d at 257.) There can be no dispute that ACIC satisfied Chase Fire Protection’s principal obligation when it disbursed at total amount of $200,140.21 from the Bonds to 2H Construction. (UMF 26 and 32.) The provisions of the Civil Code cited above impose a legal obligation upon Chase Fire Protection to reimburse ACIC for all amounts paid under the Bonds. Civil Code §2847 further entitles ACIC to recover the necessary costs and expenses incurred with the bond disbursement. The billing statements and detailed billing reports and claim handling fees invoice as well as the two declarations, filed concurrently herewith, provide support for the necessary costs and expenses incurred by ACIC in connection with ACIC’s satisfaction of Chase Fire Protection’s principal obligation.

Here, again the Court is confused as to what Plaintiff is alleging as the third cause of action because it appears Plaintiff’s basis for recovery is the same as it was for its breach of contract cause of action.

TENTATIVE RULING CAUSES OF ACTION TWO AND THREE

Plaintiff’s motion for summary judgment as to the second and third causes of action against Defendant Chase Fire Protection is DENIED because the Court is uncertain as to how or whether Plaintiff is differentiating these causes of action from the first cause of action.