Opinion
Civil Action. No. 1:04-cv-3537-GET.
January 25, 2006.
ORDER
The above-styled matter is presently before the court on:
1) plaintiffs' motion to dismiss the counterclaim [docket no. X18];
2) R.L. Brown Associates' motion to dismiss its claims against D N Construction Company and Standard Roofing of Georgia, Inc. [docket no. 191].
Plaintiffs filed the instant action on December 3, 2004, seeking damages resulting from the breach of a construction contract. Plaintiffs issued a performance bond to Latco Construction Company, Inc. ("Latco"), the general contractor on the school construction project, in favor of DeKalb County Board of Education ("DCBE") In addition to Latco, DCBE hired R.L. Brown Associates, Inc. ("R.L. Brown") to serve as architect for the project and Heery/Mitchell, a joint venture between Heery International, Inc. and E.R. Mitchell and Company {hereafter, collectively, "Heery/Mitchell") to serve as program manager. After deficiencies were discovered in the construction, DCBE declared Latco in violation of the contract and plaintiffs completed the project as obligated by the performance bond. DCBE also claimed additional payments from plaintiffs. In an agreement settling those claims, DCBE assigned all claims against third parties in connection with the design, construction and supervision of the project to plaintiffs.
Plaintiffs filed the instant suit against Heery/Mitchell and R.L. Brown asserting third party breach of contract and common law indemnity claims in their own right, as well as negligent misrepresentation, professional negligence, and breach of contract claims in their own right and as subrogees of DCBE. R.L. Brown filed third party claims against several companies who performed or inspected work on the project. Heery/Mitchell filed a third party claim against Latco, and counter-claims against plaintiffs for indemnity and contribution. On September 9, 2005, plaintiffs filed a motion to dismiss the counterclaim. On November 21, 2005, R.L. Brown filed a motion to voluntarily dismiss its claims against third party defendants D N Construction Company and Standard Roofing of Georgia, Inc. R.L. Brown's Motion to Dismiss
R.L. Brown filed a motion to dismiss its claims against third party defendants D N Construction Company and Standard Roofing of Georgia, Inc., without prejudice. Rule 41 permits voluntary dismissal of claims by the court, upon plaintiff's application, upon such terms and conditions as the court deems proper. Fed.R.Civ.P. 41(b). Counsel for D N Construction Company and Standard Roofing of Georgia signed the motion, consenting to the dismissal. None of the other parties to the suit, though served with a copy of the motion, have filed a response. Local Rule 7.1B provides that, "[failure to file a response shall indicate that there is no opposition to the motion." LR 7.1B, ND Ga. Accordingly, as all parties concede to the dismissal, R.L. Brown's motion to dismiss its claims against D N Construction Company and Standard Roofing of Georgia, Inc, without prejudice [docket no. 191] is hereby GRANTED.
Plaintiffs' Motion to Dismiss
Plaintiffs have filed a motion to dismiss under Federal Rule 12(b) (6), alleging that Heery/Mitchell cannot state a claim for indemnity or contribution as a matter of law, because there is no basis in contract or tort to support such a claim. Fed.R.Civ.P. 12(b)(6).
Standard
A motion to dismiss under Rule 12(b)(6) attacks the legal sufficiency of the complaint. It is viewed with disfavor and rarely granted. See e.g., Int'l Erectors Inc, v. Wilhoit Steel Erectors Rental Serv., 400 F.2d 465, 471 (5th Cir. 1958), A complaint should not be dismissed for failure to state a claim unless the plaintiff can prove no set of facts entitling him to relief. Hishon v. King Spaldina, 467 U.S. 69, 73, 104 S. Ct. 2229 (1984); Pataula Elec. Membership Corp. v. Whitworth, 951 F.2d 1238, 1240 (11th Cir. 1992). The court is to presume true all of the complaint's allegations and make all reasonable inferences in favor of the plaintiff. Duke v. Cleland, 5 F.3d 1399, 1402 (11th Cir. 1993). The rules require nothing more than "a short and plain statement" that will give the defendant fair notice of the claims and the grounds upon which they are based. Coney v. Gibson, 355 U.S. 41, 45-46, 78 S. Ct. 99 (1957).In determining whether a plaintiff has asserted a claim, "[a] copy of any written instrument which is an exhibit to a pleading is a part thereof for all purposes." Fed.R.Civ.P. 10(c). Therefore, authentic documents attached to the complaint may be considered in deciding a 12(b)(6) motion to dismiss. See Bryant v. Avada Brands, Inc., 187 F.3d 1271, 1281 n. 16 (11th Cir. 1999); Hoffman-Pugh v. Ramsey, 312 F.3d 1222, 1225 (11th Cir. 2002).
Discussion
Plaintiffs assert claims against Heery/Mitchell on the theory that Heery/Mitchell had a duty to ensure the quality of Latco's work before approving payment to Latco, and because it did not, substandard construction continued that plaintiffs and DCBE had to correct once the defects were discovered. Heery/Mitchell asserts a counterclaim for indemnity and contribution, arguing that plaintiffs, as sureties for Latco, are liable for damages incurred due to Latco's substandard construction. Plaintiffs contend that Heery/Mitchell cannot state claims for indemnity or contribution because plaintiffs had no duty to Heery/Mitchell to ensure construction in accordance with the contract. The court will address the indemnity claims first."Indemnity is defined as the obligation or duty resting on one person to make good any loss or damage another has incurred or may incur by acting at his request or for his benefit." Bohannon v. S. Ry. Co., 97 Ga. App. 849, 850 (1958) (internal citations omitted). "Georgia law continues to recognize two broad categories of indemnity: as created by contract, as between a surety and a debtor; and under the common law of vicarious liability, as between principals and agents." City of College Park v. Fortenberry, 271 Ga. App. 446, 451 (2005). Plaintiffs argue that Heery/Mitchell has no basis in contract or tort for its claim for indemnity.
First, plaintiffs argue that Heery/Mitchell has no basis in contract to assert a claim for indemnity. There is no contract alleged between plaintiffs and Heery/Mitchell. Plaintiffs' obligations to the school construction project are contained within the performance bond and construction contract. It is undisputed that Heery/Mitchell is not a direct party to either, and plaintiffs argue that Heery/Mitchell is also not a third party beneficiary of either.
Plaintiffs contend that they have no contractual obligation to Heery/Mitchell under the performance bond. "The contract of suretyship is one of strict law; and the surety's liability will not be extended by implication or interpretation." O.C.G.A. § 10-7-3. Accordingly, Georgia courts strictly interpret language in a performance bond in favor of the surety. See e.g. TRST Atlanta, Inc. v. 1815 Exchange, Inc., 220 Ga. App. 184 (1996);Roswell Festival, LLLP v. Athens Intern., Inc., 259 Ga. App. 445, 448-449 (2003). The performance bond at issue was specifically "provided for the sole and exclusive benefit of the owner, together with its successors or assigns. No other party, person or entity shall have any rights against the Co-Sureties hereunder." The owner is DCBE. Therefore, the bond obligates plaintiffs to DCBE only.
Plaintiffs deny that the construction contract could provide grounds for an indemnity claim against plaintiffs. When a performance bond incorporates another contract by reference, the contracts must be construed together using the principles of interpreting a surety contract: strictly in favor of the surety.Commercial Cas. Ins. Co. of Georgia v. Maritime Trade Center Builders, 257 Ga. App. 779, 783 (2002). Therefore, because the construction contract is incorporated into the performance bond, for the same reasons discussed above, plaintiffs are obligated only to DCBE. Further, "for a third party to have standing to enforce a contract it must clearly appear from the contract that it was intended for his benefit. The mere fact that he would benefit from performance of the agreement is not alone sufficient." Scott v. Mamari Corp., 242 Ga. App. 455, 457 (2000). The intention must be shown on the face of the contract.Id. Heery/Mitchell makes no allegations that the construction contract stated an intent to benefit Heery/Mitchell. Further, Heery/Mitchell's own contract with DCB E specifically provides that Heery/Mitchell "is not a third party beneficiary of any agreement by and between Owner and. Contractor," which includes the construction contract. Therefore, the construction contract cannot provide a basis for Heery/Mitchell's indemnity claim.
Accordingly, and for all the aforementioned reasons, Heery/Mitchell has no contractual basis for an indemnity claim. In fact, though it does not explicitly concede this conclusion, Heery/Mitchell offers no argument in its response supporting a contractual basis for its indemnity claim. Instead, Heery/Mitchell argues that it may base indemnity and contribution claims in tort.
First, Heery/Mitchell contends that tort law provides a basis for its indemnity claim. "Indemnification contemplates imputed liability arising from the torts of another. A person who is compelled to pay damages because of liability imputed to him as the result of a tort committed by another may maintain an action for indemnity against the person whose wrong has thus been imputed to him." Crawford v. Johnson, 227 Ga. App. 548, 549 (1997) (internal citations omitted). Secondly, Heery/Mitchell contends that tort law provides a basis for a contribution claim against plaintiffs. Contribution is a theory based in equity, which permits sharing of damages between parties who are jointly or severally liable. O.C.G.A. § 23-2-71. An action for contribution thus necessarily requires the party seeking contribution to prove that the other party was indeed a tortfeasor. Fartenberry, 271 Ga. App, at 450 (2005). Accordingly, for both indemnity and contribution claims, plaintiffs must have committed a tort for which Heery/Mitchell may also be found liable.
Heery/Mitchell contends that plaintiffs' complaint against it is based on imputing the contractor's substandard construction to Heery/Mitchell, and that plaintiffs, as sureties to the contractor, are liable for the contractor's errors. Specifically, Heery/Mitchell argues that the contractor made negligent misrepresentations to Heery/Mitchell, causing Henry/Mitchell to certify the construction as properly performed when it was not, and that plaintiffs are accountable for those representations through agency principles or vicarious liability.
Plaintiffs respond that the contractor made no negligent misrepresentations, and that, even if it did, plaintiffs are not liable for the torts of the contractor. Georgia law specifically precludes certain claims against sureties who issue a performance bond on a public project. "[U]nless surety contracts expressly provide for third-party liability coverage, third party claimants . . . should look for coverage under liability insurance to be provided by the contractor." Long v. City of Midway, 169 Ga. App. 72, 77 (1983). The performance bond Latco received from plaintiffs does not provide for coverage for third party claimants. The purpose of this rule is to reserve the full bond limit for completion of the contracted project to enable the public to depend on the project's completion, instead of permitting the depletion of bond funds by third party claims due to the contractor's actions. Id. Consequently, plaintiffs as sureties cannot be held liable for Latco's torts. Because plaintiffs could not be held liable for torts of the contractor that damage parties other than DCBE, the court need not determine whether Latco made negligent misrepresentations.
Because Heery/Mitchell has no contractual basis for an indemnity claim and is precluded from bringing a claim against the sureties based on Latco's actions, plaintiffs' motion to dismiss [docket no. 118] is hereby GRANTED.
Summary
1) plaintiffs' motion to dismiss the counterclaim [docket no. 118] is hereby GRANTED;
2) R.L. Brown Associates' motion to dismiss its claims against D N Construction Company and Standard Roofing of Georgia, Inc. [docket no. 191] is hereby GRANTED.
SO ORDERED.