Choate Construction Company v. Auto-Owners Insurance Company

In this suit to impose liability on payment and performance bonds, general contractor Choate Construction Company (“Choate”) appeals the trial court’s denial of partial summary judgment as to its claims for liability on the bonds against surety Auto-Owners Insurance Company (“AOIC”) and its grant of partial summary judgment to AOIC as to Choate’s claims for surety bad faith and attorney fees.1 *332On appeal, Choate argues that the trial court misinterpreted the bonds’ principal and the incorporated subcontract, misinterpreted the parties’ intentions (as reflected in the bonds), erred in its application of the rules of contract construction, and erred in finding that AOIC was entitled to summary judgment as to its claims for surety bad faith and attorney fees. For the reasons set forth infra, we affirm.

We have previously reviewed this case on appeal from a summary-judgment ruling, and our prior opinion sets forth many of the facts relevant to the instant appeal.2 But by way of review (and viewing the evidence in the light most favorable to Choate, the nonmoving party),3 the evidence shows that, in November 2008, Choate entered into a contract with the Board of Regents of the University System of Georgia for the construction of sorority and fraternity houses at the University of Georgia.4 Thereafter, Choate hired Dedmon Electrical Services (“Dedmon”) to perform the electrical work on the project, which was referred to as “Greek Park.”5 Choate and Dedmon entered into a subcontract, which required Dedmon to obtain payment and performance bonds.6 Choate provided the bond forms to Thad Ded-mon, the sole proprietor of Dedmon, to complete and return to Choate.7 And prior to beginning work on the project, Dedmon opened an account with, and purchased materials from, Atlanta Electrical Distributors, Inc. (“AED”).8 Thad Dedmon personally guaranteed payment on the account.9

In January 2009, Dedmon began work on the project before providing the required bonds to Choate.10 But a month later, Choate received payment and performance bonds that designated AOIC as the surety, D.E.S. Electrical Contractors (“DES”) as the principal, and Choate as the obligee.11 The bonds provided that the obligee had a contract with the “Bd. of Regents [,] Univ. System of Georgia for the construction of Greek Park,” described the services to be provided by *333the principal as “Electrical Installations,” listed the date and value of the subcontract, and incorporated the subcontract by reference.12 Jacqueline Payne signed the bonds as the owner of DES,13 and neither Dedmon nor Thad Dedmon was named on the bond.14 Nevertheless, a Choate employee wrote “Dedmon Electric” at the top of the performance bond.15 Choate did not confirm that Dedmon and DES were the same company, and it did not contact Thad Dedmon, Payne, DES, Dedmon, or AOIC to inquire about the discrepancy between DES, the name of the principal on the bonds, and Dedmon, the name of the company with which Choate had a subcontract.16 Instead, Choate allowed Dedmon to continue working on the project based on its assumption that the bonds covered Dedmon’s work.17 Eventually, Dedmon defaulted on the subcontract with Choate and failed to pay its account with AED.18

In a letter dated June 9, 2009, Choate notified Dedmon that it had failed to fulfill its commitments under the subcontract. In addition, Choate informed Dedmon that it had 24 hours to provide sufficient supervision, skilled manpower, materials, tools, and equipment, as well as a written statement of its intentions for completing the work. Choate cautioned that if Dedmon failed to do so, it would be required to reimburse Choate for the cost of completing the electrical work on the project. Choate’s project manager forwarded a copy of the letter to AOIC.

In a letter dated June 25, 2009, AOIC responded to Choate and “acknowledged] receipt of a claim against payment and performance bonds issued to [DES]” in conjunction with the Greek Park project. The letter further noted that AOIC was “still investigating this claim,” and to assist in that investigation, AOIC requested that Choate provide information regarding the relationship between DES and Dedmon. AOIC’s attorney explained that this information was necessary because AOIC had not issued any bonds that required it to respond to a default by Dedmon.

*334According to AOIC, Payne applied for the bonds as the owner of DES under the company’s “Quick Bond Program,” which offers bonds to qualified individuals or contractors for projects that are completed in less than a year and have a total value of less than $250,000 for the work involved.19 Due to these limitations, AOIC does not require a bond applicant to provide the underlying contract as part of the application because it is “not relevant to the applicant’s bondability.”20 Nevertheless, on Payne’s application for the bonds, she stated that the underlying contract was with “Choate Construction Company,” that the contract was dated “01/17/2009,”21 and that the contract price was $231,960.64.22 And under “Job Description,” the work was described as “UN of GA/Greek Park/Athens, GA, Installation of electrical components per drawings.”23 The foregoing information included in the application is the same as the information provided in the subcontract between Choate and Dedmon.24

In November 2009, AED filed suit against numerous defendants, including Choate, Dedmon, DES, and AOIC, raising various claims related to Dedmon’s failure to pay its account. And Choate asserted cross-claims against AOIC, DES, and Dedmon for breach of contract and contractual indemnity under the payment and performance bonds. But ultimately, AED dismissed or settled some claims and assigned its remaining claims to Choate.25 Thereafter, Choate and AOIC filed cross-motions for summary judgment, and following a hearing, the trial court granted summary judgment to AOIC, finding, inter alia, that the bonds unambiguously identified the principal as DES, and that Choate failed to present evidence that DES and Dedmon were the same entity or that Thad Dedmon and Payne were ever involved with the same company.

On appeal, this Court disagreed and reversed the trial court’s grant of summary judgment to AOIC.26 Specifically, we agreed with Choate that the evidence, when viewed in its favor, presented a jury question as to “whether Dedmon and DES were the same company and/or whether Payne acted as an agent or ‘on behalf of’ Dedmon *335when she procured the bonds.”27 We further held that jury questions existed as to “whether Thad Dedmon and Payne worked together to defraud Choate; whether AOIC’s agent had actual or constructive knowledge of, or participated in, such fraud; [28] and whether AOIC intentionally or recklessly misrepresented to Choate one or more material facts when it issued the bonds.”29 Finally, we concluded that “questions of whether Choate exercised reasonable diligence to discover such fraud once it received the bonds, or whether Choate breached some duty to timely notify AOIC of facts that suggested the commission of a fraudulent act, are issues for jury determination.”30

After remittitur, the trial court granted the parties’ consent motion to realign Choate as the plaintiff and restyle the case accordingly. In June 2013, Choate filed a first amended complaint, asserting numerous claims against various defendants, but in relevant part, it asserted claims against AOIC for liability on the performance and payment bonds, surety bad faith, promissory estoppel, negligent misrepresentation, and attorney fees. And thereafter, the parties engaged in extensive discovery, including numerous depositions and affidavits and the exchange of documents.

On June 13, 2014, Choate and AOIC filed cross-motions for summary judgment. Specifically, Choate sought partial summary judgment as to its claims for liability under the payment and performance bonds and its surety bad-faith claim,31 while AOIC sought summary judgment as to all of Choate’s claims. Ultimately, the trial court denied Choate’s motion for partial summary judgment and granted AOIC’s motion, in part, as to Choate’s claims for surety bad faith and attorney fees. The court denied AOIC’s motion as to all of Choate’s remaining claims. This appeal by Choate follows.

*336At the outset, we note that a de novo standard of review applies to an appeal from a grant or denial of summary judgment, and we “view the evidence, and all reasonable conclusions and inferences drawn from it, in the light most favorable to the nonmovant.”32 Further, summary judgment is appropriate when the moving party shows that “there is no genuine issue of material fact and that the movant is entitled to judgment as a matter of law.”33 And a defendant meets this burden when the court is shown that “the documents, affidavits, depositions and other evidence in the record reveal that there is no evidence sufficient to create a jury issue on at least one essential element of the plaintiff’s case.”34 Finally, if the moving party satisfies this burden, “the nonmoving party cannot rest on its pleadings, but must point to specific evidence giving rise to a triable issue.”35 With these guiding principles in mind, we turn now to Choate’s specific claims of error.

1. In three separate enumerations of error, Choate argues that the trial court erred in denying its motion for partial summary judgment as to its claims for liability on the payment and performance bonds. Specifically, Choate contends that the trial court misinterpreted the bonds, the incorporated subcontract, and the intentions of the parties. Choate also argues that the court erred in its construction of the contract. However, because this Court previously held that several genuine issues of material fact existed regarding Choate’s bond-liability claims, we must first consider whether a grant of summary judgment as to those claims is barred by the law-of-the-case doctrine.36

In Georgia, the law-of-the-case rule has “formally been abolished except as it applies to rulings by one of the appellate courts; they are binding in all subsequent proceedings.”37 Indeed, OCGA § 9-11-60 (h) provides, in relevant part, that “any ruling by the Supreme Court or the Court of Appeals in a case shall be binding in all subsequent proceedings in that case in the lower court and in the Supreme Court or the Court of Appeals as the case may be.” Nevertheless, there is an exception to the rule where “the evidentiary posture of the case in the *337trial court changes subsequent to the appellate decision.”38 And the evidentiary posture of a case “changes so as to bar application of the law-of-the-case rule in two different situations.”39 First, the eviden-tiary posture of a case changes when a new issue that the appellate court has not addressed is raised by amended pleadings or otherwise.40 Second, the evidentiary posture of a case changes when “the original evidence submitted is found to be insufficient, and the deficient evidence is later supplemented.”41

As previously noted, in Choate, we reversed the trial court’s grant of summary judgment to AOIC on Choate’s bond-liability claims, finding that there were several genuine issues of material fact that precluded summary judgment.42 Specifically, as to AOIC’s potential liability on the payment and performance bonds, we concluded that there were jury questions as to whether (1) Dedmon and DES were the same company, (2) Payne acted as an agent or “on behalf of” Dedmon when she procured the bonds, (3) Thad Dedmon and Payne worked together to defraud Choate, (4) AOIC’s agent had actual or constructive knowledge of, or participated in, such fraud, (5) AOIC intentionally or recklessly misrepresented material facts to Choate when it issued the bonds, (6) Choate exercised reasonable diligence to discover such fraud once it received the bonds, and (7) Choate breached some duty to timely notify AOIC of facts that suggested the commission of a fraudulent act.43

After remittitur, Choate was realigned as the plaintiff, filed its first amended complaint, and later moved for partial summary judgment as to its bond-liability claims. Nevertheless, as to those specific claims, Choate raised no new issues before the trial court that this Court had not already addressed, either explicitly or implicitly. For example, Choate primarily argues that it is entitled to summary judgment because DES and Dedmon are the same company and the bonds unambiguously provided that AOIC intended to insure Ded-mon’s work on the Greek Park project. However, this Court has already considered this argument, reviewed the bonds and the subcontract at issue, and determined that there were numerous material factual disputes regarding whether AOIC is liable to Choate under the bonds. And in so holding, we necessarily concluded that the bonds were ambiguous as to whether the parties intended for AOIC to *338insure Dedmon’s electrical work on the Greek Park project.44 Thus, because Choate has not raised any new issues that have not already been addressed by this Court, it cannot show that the evidentiary posture of the case has changed on that basis.45

Further, although extensive additional discovery was conducted after our first review of this case, Choate has not shown, or even argued, that “the original evidence submitted [was] found to be insufficient, and the deficient evidence [was] later supplemented.”46 Indeed, Choate cites to no new evidence that supplements the original record in such a way that resolves any of the aforementioned material factual disputes in its favor. If anything, the numerous depositions taken and other evidence submitted after remittitur serve only to confirm that there are indeed genuine issues of material factual disputes that preclude summary judgment. For example, we previously concluded that there is a genuine issue of material fact as to whether Dedmon and DES are different entities.47 In his deposition, which was not before this Court in Choate, Thad Dedmon testified that Dedmon and DES were two separate companies. However, he was the sole proprietor of both companies, through which he performed the same type of electrical work, and in one correspondence, he updated Choate with the same new contact information for both DES and Dedmon, stating “[o]ur new contact info, is located below.” Moreover, it was undisputed that Thad Dedmon used the *339Dedmon trade name in the subcontract with Choate, which we previously held was referenced and incorporated into the bonds, but the bonds bore the DES trade name and purported to insure electrical work for a project called “Greek Park.” Under these particular circumstances, Choate simply cannot show that the evidence regarding the relationship between DES and Dedmon has been supplemented in any meaningful way.48

In addition, Choate identifies no evidence that resolves the jury questions of whether Thad Dedmon and Payne worked together to defraud Choate, whether an AOIC representative was complicit in any such fraud, or whether Payne signed the bonds as an agent for Dedmon. Although Payne agreed to sign the bonds at Thad Dedmon’s request, she testified that she had no idea what type of insurance he was seeking, she had no connection to DES, and she had never heard of the Greek Park project. And as we noted in Choate, AOIC’s own attorney admitted that the insurance agent involved identified Payne as the principal of DES because Thad Dedmon, the actual owner, lacked the credit to qualify for the bonds.49 But in his deposition, the AOIC agent testified that he believed that Thad Dedmon and Payne were joint owners of DES, that he received all of the information for the bond applications from Thad Dedmon, and that Thad Dedmon provided him with misinformation. Nevertheless, the bond application itself identified Payne as the 100 percent owner of DES. Jury issues still exist, then, regarding who, if anyone, was involved in an effort to defraud Choate.

In sum, Choate has not shown that the evidentiary posture has changed such that the law-of-the-case doctrine does not apply. As a result, our prior holding in Choate — that several genuine issues of material fact remain as to Choate’s claims for liability on the payment and performance bonds — is law of the case, and the trial court did not err in denying Choate’s motion for partial summary judgment on those claims.50 Thus, we need not address each of Choate’s specific claims of error regarding that ruling.

*3402. Choate also argues that the trial court erred in granting summary judgment to AOIC as to its claim for surety bad faith when undisputed evidence shows that AOIC denied liability on the bonds with full knowledge of Dedmon’s scheme to obtain the bonds and when AOIC was responsible for any ambiguity in the bonds. We disagree.

OCGA § 33-4-6 (a) provides:

In the event of a loss which is covered by a policy of insurance and the refusal of the insurer to pay the same within 60 days after a demand has been made by the holder of the policy and a finding has been made that such refusal was in bad faith, the insurer shall be liable to pay such holder, in addition to the loss, not more than 50 percent of the liability of the insurer for the loss or $5,000.00, whichever is greater, and all reasonable attorney [ ] fees for the prosecution of the action against the insurer. . . .

And to support a cause of action under OCGA § 33-4-6, “the insured bears the burden of proving that the refusal to pay the claim was made in bad faith.”51 Moreover, a defense going far enough to show reasonable and probable cause for making it would “vindicate the good faith of the company as effectually as would a complete defense to the action.”52 Indeed, penalties for bad faith are not authorized where “the insurance company has any reasonable ground to contest the claim and where there is a disputed question of fact.”53

In its first amended complaint, Choate asserted a new claim against AOIC for surety bad faith, arguing that AOIC “stubbornly refused to meet its obligations under the [b]onds despite clear and undisputed evidence of its liability under the [b]onds.” But as discussed in Division 1 supra, there are genuine issues of material fact as to whether Choate is entitled to coverage under the payment and performance bonds. Thus, because AOIC had reasonable grounds to contest Choate’s claims by asserting that it issued bonds to DES *341and Payne, as opposed to Dedmon, bad-faith penalties are not warranted.54

3. Finally, Choate argues that the trial court erred in granting summary judgment to AOIC on its claim for attorney fees. This claim likewise lacks merit.

Choate first asserts that it is entitled to seek attorney fees because AOIC acted in bad faith when it denied liability on the bonds. But given our holding in Division 2 supra (i.e., that AOIC had a reasonable basis for contesting liability and did not do so in bad faith), Choate is not entitled to attorney fees under the surety bad-faith statute.55 Choate also argues that, in the context of its negligent-misrepresentation claim, it is entitled to reasonable attorney fees under OCGA § 13-6-11 becauseAOIC has been stubbornly litigious.56 But when a bona fide controversy clearly exists between the parties, “the defendant is entitled to judgment as a matter of law on the plaintiff’s claim for attorney fees and expenses of litigation based on stubborn litigiousness or the causing of unnecessary trouble and expense.”57 Because, as discussed supra, there are genuine disputes between the parties that must be decided by a jury, Choate is not entitled to attorney fees under OCGA § 13-6-11 as a matter of law, and the trial court did not err in granting summary judgment to AOIC on that claim.

For all of the foregoing reasons, we affirm the trial court’s denial of Choate’s motion for partial summary judgment and its partial *342grant of summary judgment to AOIC as to Choate’s claims for surety bad faith and attorney fees.

Judgment affirmed.