FLORIDA FEDERAL CASES

  • Performance Bonds: Surety issued non-standard performance and payment bonds to a Principal that underbid a project. After the Obligee, the general contractor, declared the Principal in default and made a claim on the performance bond, the Surety and Obligee entered into a Takeover Agreement which provided that the Surety would directly complete the Principal's remaining obligations under the subcontract.  The Takeover Agreement provided that "the total liability of the Surety under the Agreement and the Performance Bond… is limited to and shall not exceed the penal sum … as defined in the Performance Bond" and  that "nothing in this Agreement constitutes a waiver of such penal sum or an increase in the liability of the Surety under the Performance Bond."  Prior to completion of the subcontract agreement, the Surety walked off the Project. 

The Surety asserted five claims against the Obligee: (1) declaratory judgment that the Performance Bond was null and void; (2) rescission of the Performance bond; (3) unjust enrichment; (4) intentional misrepresentation; and (5) breach of the Takeover Agreement.  The Obligee filed a Counterclaim for breach of the Surety's obligations under the Performance Bond and under the Takeover Agreement. 

The Court first addressed the issue of whether a performing Surety's liability can exceed the bond's penal sum, and if so, whether a performing surety can still limit its liability by so providing in a contract with an obligee.  The Court held that a performing surety can be exposed to liability beyond the bond's penal sum, but a performing surety can limit its liability by expressly providing so in a contract with the benefitted obligee.  Because the Takeover Agreement clearly provided that the Surety's liability was limited to and shall not exceed the penal sum, the Surety's liability was capped at the penal sum. 

Next the Court addressed the issue of whether the Takeover Agreement was support by valid consideration.  The Obligee argued that the Surety agreed to perform obligations which it was already obligated to perform, thus the agreement lacked consideration.  However, the Court disagreed finding that by electing to directly perform the contract amongst the Surety's various options under the Performance Bond, the Surety agreed to do something that it was not previously bound to do. 

Third, the Court found that the Takeover Agreement was not ambiguous as the Surety's limitation of liability is consistent with reason, probability, and the practical aspects of a transaction between parties. 

Fourth, the Court declined to enter summary judgment on whether the Surety's expenditures were proper and could be credited against the penal sum of the bond due to the genuine issues of material fact as to this dispute.

The Court then addressed the Obligee's Motion for Summary Judgment against the Surety.  As to the intentional misrepresentation claim, the issue was whether an obligee has a duty to disclose material information to potential sureties seeking information about a would-be principal's financial condition.  Prior to the execution of the performance bond, the Surety requested the Obligee to provide an 'All Rights Letter' and requested information regarding the disparity between the Principal's bid and other drywall bids received by the Obligee.  The Obligee provided an All Rights Letter, but did not include information on the bid disparity.  The Court declined to issue summary judgment on this matter finding that a genuine issue of material fact existed as to whether the Surety actually relied upon the Obligee's representations or omissions in deciding whether to issue the performance bond.  

The Court found the Surety's declaratory judgment claim inappropriate as the Surety was not attempting to prospectively clarify its rights and obligations, but rather was seeking to recover for past harm.  Declaratory judgments are reserved for the clarification of legal duties for the future, rather than redressing a past harm. 

The Court also found in the Obligee's favor on the rescission claim.  The Court found that the Surety had an adequate remedy at law in its intentional misrepresentation claim.  The Court also found that given the equitable nature of rescission and the Surety's default judgment against the Principal, it was doubtful that rescission would return the parties to their preexisting conditions.

Allegheny Casualty Co. v. Archer-Western/Demaria Joint Venture III, Case No. 8:13-cv-128-SCB,Slip Copy, 2014 WL 4162787 (M.D. Fla. August 21, 2014).

FLORIDA STATE CASES

  • Attorneys’ Fees – Mandatory nature of section 57.105(1) necessitated award of attorney’s fee for frivolous claimA claim on a guaranty falls within the Statute of Frauds such that claim on an alleged guarantee which is neither reduced to writing nor signed is frivolous. Due to the mandatory nature of section 57.105, appellate court awarded fees to prevailing party.  The Law Offices of Lynn W. Martin, P.A. v. Madson, III., 39 Fla. L. Weekly D1782a, Case No. 1D3071 (Fla. 1st DCA August 22, 2014).
  • Valid Written Agreement to Arbitrate – Where clause in purchase agreement and export agreement are read together and indicate an intent to be part of same contract, arbitration provision will be enforced:  In ruling on a motion to compel arbitration of a dispute, the court must consider whether: (1) a valid written agreement to arbitrate exists; (2) whether an arbitrable issue exists; and (3) whether the right to arbitration was waived.  Generally, provisions  to arbitrate contained in one contract cannot be extended to a separate contract between the same parties unless the parties expressly agreed upon by the parties.  “For a contract’s arbitration clause to extend to another document, the contract must expressly refer to the document or sufficiently describe the document so that the document could be interpreted as part of the contract.”  In the purchase agreement at issue, the two clauses in the purchase agreement and the export agreement indicated an intent for the two agreements to become part of the same contract; thus, the arbitration clause applied to the dispute. Phoenix Motor Co. v. Desert Diamond Players Club, Inc., 39 Fla. L. Weekly D1769a, Case No. 4D13-4422 (Fla. 4th DCA August 20, 2014).
  • Failure to Prosecute – Rule 1.420(e) does not authorize dismissal of a complaint without prejudice and with leave to amend, rather it requires dismissal of the action: Plaintiff filed a mortgage foreclosure action and did not take any action on it for a period longer than ten months.  Defendant filed a Notice of Intent to Dismiss for Lack of Prosecution.  Plaintiff filed nothing within the sixty-day period immediately following service of such notice.  Defendant then filed its Motion to Dismiss for Lack of Prosecution.  Shortly after Defendant filed this motion and after the 60 day period following the notice of intent, Plaintiff filed a motion to amend the complaint.  The trial court then entered an order dismissing Plaintiff’s complaint without prejudice and granting Plaintiff’s motion to amend. On appeal, the Fifth DCA reversed the trial court holding that “during the throes of rule 1.420(e), when it is time to show cause, rule 1.190(a), authorizing amendment of pleadings is inapplicable.”  The Court further held that 1.420(e) does not authorize dismissal of a complaint as it requires dismissal of the action. Garcia v. BAC Home Loans, 39 Fla. L. Weekly D1779d, Case No.: 5D13-2237 (Fla. 5th DCA Aug. 22, 2014).