The Metropolitan Government of Nashville And Davidson County v. Wood Ridge Development, Inc.
M2015-01556-COA-R3-CV
| Tenn. Ct. App. | Nov 4, 2016Background
- Wood Ridge Development, Inc. (WRD) was required by Metro to complete public infrastructure for Carothers Crossing; WRD and Lexon Insurance Company (Lexon) executed three "performance agreements" (each labeled with a Bond #) in which WRD was principal and Lexon acted as surety.
- WRD failed to complete the improvements; Metro demanded payment under the performance agreements and sued WRD and Lexon to enforce them.
- Lexon denied liability to Metro, filed a cross-claim against WRD, and a third-party claim against Wood Ridge Investments and individual members (the Indemnitors), based on a separate General Agreement of Indemnity they had signed in 2007.
- Lexon settled with Metro and then moved for summary judgment against the Indemnitors seeking indemnification under the indemnity agreement; the Indemnitors moved for summary judgment arguing no separate bond was ever issued and thus no indemnity obligation arose.
- The trial court granted Lexon’s summary judgment and denied the Indemnitors’; the court found the performance agreements constituted surety undertakings within the scope of the indemnity agreement and that Indemnitors breached by failing to indemnify and post collateral.
- The Court of Appeals affirmed, holding Lexon’s execution of the performance agreements constituted "undertakings or other writings obligatory in nature of a bond" under the indemnity agreement, so Indemnitors were liable as a matter of law.
Issues
| Issue | Lexon (Plaintiff) Argument | Indemnitors (Defendant) Argument | Held |
|---|---|---|---|
| Whether the trial court complied with Tenn. R. Civ. P. 56.04 | Order contained factual findings and legal conclusions stating grounds for grant/denial | Order lacked required stated legal grounds; was a party-drafted rubber-stamp | Court complied with Rule 56.04; findings and conclusions were adequate and reflected court’s decision |
| Whether the performance agreements are "bonds/undertakings" within the indemnity agreement | Performance agreements signed by Lexon as surety are "undertakings or other writings obligatory in the nature of a bond" and trigger indemnity | No separate, statutorily defined bond was issued under Metro regulations, so indemnity condition never arose | Held that execution of the performance agreements operated as the contemplated undertaking/bond and triggered indemnity |
| Whether Indemnitors’ obligation required a prior judicial finding of WRD default or Lexon payment under a formal bond | Lexon had claim made, defended, settled, incurred loss and thus indemnity obligations arose under contract | Indemnitors argued no indemnity until formal default finding or payment under a separate bond instrument | Court found WRD admission of incomplete work and Lexon’s expenditures/settlement sufficient; no separate judicial default finding or separate bond document required |
| Whether judicial estoppel barred Lexon from seeking indemnity after settling Metro’s claim | Settlement does not contradict Lexon’s indemnity claim; Lexon consistently maintained indemnity rights | Settlement is inconsistent with prior positions (no bond issued) and should estop Lexon | Judicial estoppel inapplicable; settlement is not a sworn contradictory statement and prerequisites for estoppel not met |
Key Cases Cited
- Pitt v. Tyree Org. Ltd., 90 S.W.3d 244 (Tenn. Ct. App. 2002) (summary judgment appropriate for pure contract interpretation)
- Guiliano v. Cleo, Inc., 995 S.W.2d 88 (Tenn. 1999) (trial court’s contract interpretation not presumptively correct on appeal)
- Planters Gin Co. v. Fed. Compress & Warehouse Co., Inc., 78 S.W.3d 885 (Tenn. 2002) (unambiguous contract language controls)
- Cracker Barrel Old Country Store, Inc. v. Epperson, 284 S.W.3d 303 (Tenn. 2009) (judicial estoppel applies only to sworn statements contradicted later)