Liberty Mutual Insurance Company v. Vila Construction Company

Background

Liberty Mutual Insurance Company acted as a surety, meaning it guaranteed certain debts and obligations for Vila Construction Company. Liberty Mutual issued at least 19 payment and performance bonds on Vila Construction’s behalf. The RMV Family Trust dated September 19, 2013, Richard H. Vila individually and as trustee, and Maria E. Vila individually and as trustee were also parties to a General Agreement of Indemnity in Liberty Mutual’s favor.

The agreement required the Vila Construction defendants to reimburse Liberty Mutual for covered losses, including payments, fees, costs, and expenses connected with the bonds. After Vila Construction fell behind on project payables, claimants made bond claims. Liberty Mutual investigated the claims, paid claimants, and incurred other expenses. Liberty Mutual then sued the Vila Construction defendants and other defendants. The motion addressed only Liberty Mutual’s first claim, for breach of the indemnity agreement.

Liberty Mutual sought partial summary judgment and asserted that the Vila Construction defendants were jointly and severally liable for $45,055,493.92, consisting of principal and statutory interest. The Vila Construction defendants did not file an opposition. The court discussed their counsel’s explanation that technical problems with the court’s electronic filing system delayed notice of the motion, but counsel said the defendants would not seek permission to file a late opposition.

Legal standard

Summary judgment is appropriate when the evidence shows no genuine dispute about a fact that could affect the outcome and the moving party is entitled to judgment as a matter of law. Although the motion was unopposed, Liberty Mutual still had to support its claim with evidence.

Analysis

The court applied California law concerning breach of an indemnity agreement. It identified the relevant elements as the existence of a contract, Liberty Mutual’s performance or an excuse for nonperformance, the defendants’ breach, and resulting damages.

Contract. The agreement named Vila Construction Company, the RMV Family Trust, Richard H. Vila, and Maria E. Vila as indemnitors. Richard H. Vila and Maria E. Vila signed it, and Richard H. Vila also signed for Vila Construction as its president. The defendants also admitted in their answers that they signed the agreement. The court therefore found that a contract existed between Liberty Mutual and the Vila Construction defendants.

Liberty Mutual’s performance. The court found that Liberty Mutual provided sufficient evidence that it performed the obligations supporting its indemnity claim. That evidence included issuing the bonds, advancing funds to address project payables, investigating bond claims, hiring consultants, engaging contractors when necessary, and making payments to claimants and for fees, costs, and expenses. The court found that the defendants did not contest this evidence.

Loss and breach. The court found that Liberty Mutual suffered losses covered by the agreement because it made payments under the bonds and incurred expenses investigating and resolving bond claims. The agreement required the defendants to pay Liberty Mutual for those losses upon demand. Liberty Mutual’s evidence stated that it requested payment and indemnification, but the defendants failed to provide them. The court therefore found that the defendants breached the indemnity agreement.

Damages. The agreement stated that evidence of payments made in good faith would serve as initial evidence of the fact and amount of Liberty Mutual’s liability. Liberty Mutual submitted summaries based on its electronic claims records. The court found that the records met the requirements for summaries of voluminous materials under Federal Rule of Evidence 1006 and considered them initial evidence of damages.

After reviewing and summing the bond-by-bond reports, the court calculated principal losses of $39,988,194.09. It also found statutory interest of $5,057,760.83. The court recognized that its principal calculation was about $9,000 less than Liberty Mutual’s claimed principal and that the interest calculation relied on the higher claimed amount, but found that any resulting additional interest would be minimal.

Disposition

The court denied Liberty Mutual’s request for judicial notice of documents filed on the docket. It granted Liberty Mutual’s motion for partial summary judgment and found that the Vila Construction defendants were jointly and severally liable for $45,045,954.92 on Liberty Mutual’s breach-of-indemnity-agreement claim.