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QBE Specialty Insurance Co. v. KIT Morrison

United States District Court, D. Nevada

September 8, 2014

QBE SPECIALTY INSURANCE COMPANY, a foreign corporation, Plaintiff,
v.
KIT MORRISON, an individual; GLOBAL RESOURCE PARTNERS, INC., a foreign corporation; and KSM, LLC, a foreign limited liability company, Defendants.

ORDER GRANTING MOTION FOR PARTIAL SUMMARY JUDGMENT [#14]

JENNIFER A. DORSEY, District Judge.

This is a breach of contract and equitable subrogation case in which defendants-investors hoping to purchase real estate in Idaho-twice failed to fulfill the written agreements they made with the specialty insurance company whose surety bonds helped them secure that real estate. I grant the insurance company's motion for partial summary judgment, a motion to which defendants failed to respond.[1]

Background

On September 4, 2009, defendants Kitt Morrison, Global Resource Partners, Inc., and KSM LLC, entered into real estate purchase contracts for property in Elmore County, Idaho with Trinity Springs LLC.[2] The contracts required defendants to provide Trinity with surety bonds guaranteeing that if defendants failed to perform their part of the contract, the surety would pay Trinity a penal sum of $900, 000.[3]

QBE Specialty Insurance Company is an insurance company that issues surety bonds. It entered into separate but essentially identical written agreements with defendants five days after they penned the Trinity deal.[4] These agreements stipulated that (1) QBE would provide the required surety bonds for defendants to complete the Trinity[5] purchase, and (2) defendants would fully indemnify QBE for any sums paid.[6]

Defendants defaulted on their obligation to Trinity in May 2010, triggering QBE's surety obligation for the full $900, 000.[7] QBE notified defendants of its payment on their behalf and demanded to be fully indemnified as promised by the surety agreements.[8]

More than two years passed with no indemnification. Then, on October 10, 2012, QBE and defendants reached a settlement agreement in which defendants agreed to pay QBE a reduced sum of $366, 000 within 90 days of the execution of the agreement. Those 90 days passed with no payment whatsoever.[9]

On January 31, 2013, QBE sued defendants for specific performance, breach of contract, equitable subrogation, unjust enrichment, and breach of the duty of good faith and fair dealing.[10] Defendants answered.[11] QBE now moves for partial summary judgment on its breach of contract claim and equitable subrogation claim. Having considered both claims on their merits, I grant QBE's motion.

Discussion

A. Breach of Surety Bond Contract and Settlement Agreement

A cause of action for breach of contract requires (1) the existence of a valid contract, (2) a breach by the defendant, and (3) damage as a result of the breach.[12]

It is undisputed that defendants entered into valid contracts with QBE for $900, 000 in surety bonds in September of 2009. It is undisputed that these contracts included an indemnity clause that fully protected QBE in the event that QBE, acting on behalf of defendants, suffered any financial damages. It is undisputed that QBE, acting on behalf of defendants, suffered financial damages totaling $900, 000 when defendants defaulted on their obligations to Trinity, thus forcing QBE to pay that amount to Trinity. And it is undisputed that, when this happened, defendants, in direct violation of the surety contracts, failed to indemnify QBE.

It seems undisputed, therefore, that defendants breached their surety bond contracts with QBE. There was a valid contract, properly authenticated by Donna L. Messick, the Senior Claims Handler of Credit and Surety for QBE.[13] There was a clear breach of the contract's indemnity clause by the defendants. And there was, as result, damage: QBE is out the $900, 000 the indemnity clause was designed to protect it from losing.

It also seems undisputed that defendants, after breaching the surety contracts, then breached their settlement agreement with QBE. Again there was a valid contract, in the form of a settlement agreement in which defendants agreed to collectively pay QBE $366, 000 within 90 days of October 12, 2012. Again there was a clear breach by defendants: they did not pay QBE the agreed-upon sum in the agreed-upon amount of time. And again ...


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