Construction Law Insights

Great Am. Ins. Co. v. 53rd Place, LLC, 2020 U.S. Dist. LEXIS 133631 (E.D. Va. July 28, 2020)

On April 12, 2017, Great American Insurance Company (“Great American”) entered into a written indemnity agreement with 53rd Place, LLC (“53rd Place”), as principal and corporate indemnity, and Guy Prudhomme du Hancourt and Patricia Prudhomme du Hancourt, in their individual capacities as personal indemnitors. On October 24, 2018, Great American entered into a second writtenindemnity agreement with: 53rd Place as principal and corporate indemnitor; A M Homes, LLC (“A M Homes”) and 3114 13th Land Trust, as corporate indemnitors; and Patricia Prudhomme

du Hancourt, and Adrian Molnar, in their individual capacities as personal indemnitors. Under the indemnity agreements, the defendants, jointly and severally, agreed to indemnify Great American. The defendants further agreed to deposit with Great American, upon demand, an amount sufficient to discharge any claim on the bonds. After the parties executed the indemnity agreements, Great American issued warranty bonds on various condominium properties in the District of Columbia. 53rd Place and 3114 13th Land Trust then named the District of Columbia as obligee for each of the properties. Great American later learned of multiple claims on the warranty bonds, for which the defendants failed to provide collateral under the indemnity agreements. Great American claimed that it was exposed to $950,000.00 in potential losses due to the issuance of the bonds. Great American paid $211,800.00 in losses on three warranty bonds and demanded that the defendants satisfy the claims or indemnify Great American. Great American also received three additional bond claims totaling $210,281.37 ($120,000 of which had not been paid but was expected to be paid). Thus, Great American sought $331,800 in losses paid or expected to be paid and injunctive relief to cover future losses and attorney’s fees, costs, and expenses.

The Court granted in part and denied in part Great American’s motion for default judgment. Great American sufficiently established a breach of contract claim under the District of Columbia’s law. The Court found that Great American’s affidavits, copies of the indemnity agreements, copies of the warranty bonds, and copies of the checks it paid demonstrated that Great American had suffered $211,800.00 in actual damages. However, the Court found that Great American was not entitled to additional damages because it had not yet suffered the additional loss of $120,000.00.

The Court ordered injunctive relief to cover the amount of Great American’s future losses in the amount of $738,200.00. Great American sought quia timet injunctive relief, which is the right of a surety to demand that the principal place the surety “in funds” when there are reasonable grounds to believe that the surety will suffer a loss in the future because the principal is likely to default on its primary obligation to the creditor. Here, Great American contended that it received additional claims under the warranty bonds after paying losses on three warranty bonds, which underscored the ongoing nature of Great American’s exposure under the warranty bonds. To receive a permanent injunction, Great American had to show: (1) that it suffered an irreparable injury; (2) that remedies at law are inadequate to compensate for the injury; (3) that considering the balance of hardships between the plaintiff and defendant(s), a remedy in equity is warranty; and (4) that the public interest would not be disserved by a permanent injunction. First, Great American established that it remains exposed to additional losses under the warranty bonds. Second, there is no adequate remedy at law for the defendants’ material breach of their obligations under the indemnity agreements to provide collateral. Third, a remedy in equity is warranted because Great American has no other means to enforce its rights under the indemnity agreements. Finally, it is in the public interest to enforce contracts. The Court, therefore, ordered appropriate injunctive relief pursuant to the doctrine of quia timet.

PLDR Law Scott Kowalski 1 PLDR Law Mark Burgin 1

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