State v. Developers Surety & Indemnity Co.
324 Ga. App. 371
| Ga. Ct. App. | 2013Background
- GDOC contracted with Walker Roofing to re-roof facilities at Valdosta State Prison.
- Walker Roofing delayed completion; GDOC declared default on September 23, 2010.
- Developers Surety issued payment and performance bonds for Walker Roofing and had an indemnity agreement with Walker Roofing assigning payment rights to Surety.
- Two anti-assignment clauses in the contract attempted to prohibit assignment of rights; GDOC argued they were enforceable.
- Surety paid funds to Walker Roofing and incurred investigations costs; it sued GDOC for breach and sought a declaratory judgment on bonds.
- GDOC raised sovereign immunity as a defense; the trial court granted summary judgment for Surety; damages were awarded.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does sovereign immunity waive apply to subrogee Surety? | Surety, via subrogation, falls within the waiver for contract breaches by state entities. | Immunity barred claims because Surety was not a party to the GDOC–Walker contract. | Yes; subrogee may rely on waiver for contract actions by state agencies. |
| Are anti-assignment clauses enforceable against subrogation interests? | OCGA 11-9-406(d)(1) renders such restrictions unenforceable regarding accounts due under bonds. | Anti-assignment clauses prevent Walker Roofing from assigning rights to Surety. | Anti-assignment clauses unenforceable; Surety can rely on assignment under UCC; subrogation valid. |
| Did GDOC breach the construction contract by access restrictions? | GDOC restrictions caused delays and were contrary to contract terms; thus breach. | Actions were permitted under the contract and delays were excusable. | GDOC materially breached; admitted facts support breach finding. |
| Is the counterclaim for breach of the performance bond barred by principle of secondary liability? | Surety’s obligation is primary when principal is liable or as needed by bond. | If Walker Roofing isn’t liable, Surety isn’t liable; secondary liability applies. | Counterclaim dismissed; surety not liable where principal not liable. |
Key Cases Cited
- Ins. Co. of the West v. United States, 243 F.3d 1367 (Fed. Cir. 2001) (waiver extends to subrogees under Tucker Act)
- Argonaut Ins. Co. v. C&S Bank of Tifton, 140 Ga. App. 807 (Ga. App. 1976) (subrogation rights recognized under equity)
- Cotton States Mut. Ins. Co. v. Citizens and Southern Nat. Bank, 168 Ga. App. 83 (Ga. App. 1983) (subrogation principles explained)
- DeKalb County School Dist. v. Gold, 318 Ga. App. 633 (Ga. App. 2012) (sovereign immunity waiver framework in Georgia)
- Kennedy v. Ga. Dept. of Human Resources Child Support Enforcement, 286 Ga. App. 222 (Ga. App. 2007) (contract elements and existence of written contract)
- Board of Regents of the Univ. System of Ga. v. Tyson, 261 Ga. 368 (Ga. 1991) (state contract consideration and implied obligations)
- Turner v. Mize, 280 Ga. App. 256 (Ga. App. 2006) (summary judgment standards and admissions effects)
- Robinson v. Global Resources, Inc., 300 Ga. App. 139 (Ga. App. 2009) (summary judgment and admissions implications)