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St. Paul Fire & Marine Insurance Co. v. T.U. Parks Construction Co.

August 16, 2007


The opinion of the court was delivered by: Thomas W. Phillips United States District Judge



The matter before the Court involves a declaratory action by a surety against its principal/contractor and obligee/owner. The defendants have filed motions to dismiss [Docs. 8 and 10] pursuant to Rule 12(b) of the Federal Rules of Civil Procedure, alleging that the plaintiff surety has failed to demonstrate an "actual controversy" in its complaint as required by the Declaratory Judgment Act, 28 U.S.C. § 2201 ("Declaratory Judgment Act"). The Court has received and carefully considered responses and replies. For the reasons that follow, defendants' dispositive motions [Docs. 8 and 10] are GRANTED, as set forth below.*fn1

I. Facts

As the law requires, all disputed facts and inferences are resolved most favorably to the plaintiff. Furthermore, the Court merely provides an abridged summary of relevant facts for the purposes of this opinion.

On June 25, 2001, T.U. Parks Construction Co. ("Parks"), as contractor, and 800 Market Properties, LLC ("Market Properties"), as owner, entered into a contract for construction for the Lovemans on Market Project ("Lovemans Project"). Parks began construction pursuant to the contract, and St. Paul Fire & Marine Insurance Company ("St. Paul"), as surety, issued a performance bond for the Lovemans Project with Parks as principal and Market Properties as obligee, which was later changed to Lovemans on Market, LLC ("Lovemans").

Parks completed the work contemplated by the contract before any disputes arose between Parks and Lovemans. However, shortly thereafter, a dispute arose between Lovemans and Parks regarding certain allegedly defective stone and masonry work performed by Parks and/or its subcontractors. Accordingly, Lovemans placed Parks on notice of the allegedly defective work in September of 2003. On August 2, 2004, approximately one year after Lovemans put Parks on notice, Lovemans sent correspondence to both Parks and St. Paul asking for a conference with Parks and St. Paul, indicating that it was considering declaring a contractor default. However, through correspondence dated August 17, 2004, prior to a conference being scheduled, Lovemans informed St. Paul that Parks and Lovemans had resolved and settled their dispute; as a result, Lovemans was withdrawing its request for a conference with Parks and St. Paul; and Lovemans did not intend to declare Parks in default. This correspondence states as follows:

As a result of this agreement [between Parks and Lovemans], and in consideration of the initiation of immediate repair work, Lovemans does not anticipate declaring a contractor default in the interim while the repair work is proceeding. Therefore, there is no current immediate exposure to St. Paul on the above-referenced Performance Bond.

In Lovemans' August 17, 2004 correspondence to St. Paul, Lovemans informed St. Paul that Lovemans and Parks had entered into an Agreement Regarding Repair of Stonework ( "Settlement Agreement"). Pursuant to Section 4 of the Settlement Agreement, Lovemans agreed to pay Parks for the remedial work. Parks and its subcontractor(s) ultimately completed the work required under the Settlement Agreement, and the work was accepted by Lovemans. St. Paul was not informed of and did not participate in any of the negotiations giving rise to the terms and conditions of the Settlement Agreement; was not requested to be a party to the Settlement Agreement; and did not agree to be bound by the Settlement Agreement. Moreover, Lovemans did not request or demand that St. Paul be involved in any way with or agree to the method to correct the alleged defective work which was the subject of the Settlement Agreement.

Subsequent to Parks' repair of the stone and masonry work pursuant to the original contract for construction and the settlement agreement, Lovemans demanded that Parks arbitrate the question of which party is responsible for the cost of the stone and masonry repairs.

On June 28, 2006, Lovemans sent correspondence to St. Paul informing St. Paul of a failed attempt to mediate the dispute regarding costs on the Lovemans project. Further, Lovemans stated that it "is looking directly to T.U. Parks or its bonding company, St. Paul . . ., to pay the costs Lovemans incurred to cure the defects."*fn2

In correspondence to Lovemans, dated December 11, 2006, St. Paul attached a courtesy copy of the complaint in this action currently pending before this Court, and stated as follows in pertinent part:

While the [June 28, 2006] letter does not qualify as a "claim" under the referenced bond, it does put the surety on notice that Lovemans may have a claim in the event that it is successful in an arbitration award in its favor. Although there is not yet any claim to which the Surety is obliged to respond, the assertion raises several issues . .. .

[W]e thought it prudent to file a Complaint for Declaratory Judgment to obtain a determination of the obligations of the Surety under the surety bond prior to events taking place that ...

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