Travelers Casualty and Surety Co. v. PRA (2011)

MEMORANDUM OF DECISION ON MOTION FOR SUMMARY JUDGMENT

This case arises out of an indemnity agreement made between the plaintiff, Travelers Casualty and Surety Company, with the defendants, PRA Development Corp. and PRA Suites, LLC and Joseph Pacitti, President of PRA Development and a member of PRA Suites.   The agreement was titled “General Contract of Indemnity” and was executed on June 20, 2006, and provided for the issuance of construction surety bonds for the defendants, Travelers issued or caused to be issued several bonds relating to the defendants' construction projects.

Under the agreement, the defendants were to pay premiums on each bond, until such bond had been discharged.   Additionally, the defendants agreed to hold Travelers harmless from “any ․ loss, cost and expense of whatever kind, including unpaid premiums, interest, court costs and counsel fees, as well as any expense incurred or sustained by reason of making any investigation which it may incur or sustain as a result of or in connection with the furnishing of Bond(s), the assumption of obligations of [Travelers] of Bond(s), and of the enforcement of this Agreement ․”

The defendants also agreed, upon written demand of Travelers, to procure the full discharge of all bonds and provide evidence of such discharge.   If the defendants did not provide this discharge within seven days, they were to provide Travelers with an irrevocable letter of credit in an amount equal to all undischarged liability.

The agreement was to apply to any of the following:  “(1) One, some or all of the Indemnitors;  (2) Any joint venture or other form of common enterprise in which Indemnitors were members at the time the Bond(s) were furnished;  (3) Any present or future affiliate and/or subsidiary of Indemnitors:  (4) Any third party at the request of Indemnitors, their subsidiaries and/or affiliates.”   The parties agreed that “The sustaining of Loss by Company under Bond(s)” would constitute default, and further that if the agreement was breached, Travelers would be deemed to have an inadequate remedy at law;  therefore, they would be entitled to specific performance of the indemnity agreement.   The parties agreed that the agreement would have full force and effect until terminated by written agreement, and the agreement contained an integration clause which specified that there are no separate agreements or understandings outside of the written agreement.

Travelers then issued several bonds in favor of the defendants.   Some bonds were subsequently discharged, but three particular bonds totaling $676,205 were not.   On July 8, 2009, Travelers made written demand to the defendants seeking discharge of the bonds, or, alternatively, furnishment of an irrevocable letter of credit as the agreement provides.

When the defendants filed to provide either the letter of credit or discharge, Travelers instituted this action seeking injunctive and declaratory relief that the defendants are obligated to procure complete discharge of the bonds, or to post collateral in the form of an irrevocable letter of credit.

-I-

The plaintiff filed this motion for summary judgment on June 30, 2011, supported by the following evidence:  an affidavit of an attorney at Travelers, a copy of the agreement, a list of undischarged bonds, a copy of the written demand letter, and postal returns which indicated the defendants had received that letter.

-II-

The defendants argue that the contract was limited in that the agreement only applied to bonds issues in favor of PRA Suites, who was constructing a hotel in Glastonbury and that the bonds in this case were issued on favor of two other companies, PRA Norwich and PRA Wallingford, who were constructing a hotel in Norwich and Wallingford, respectively.   PRA Development was the general contractor on Glastonbury, Norwich and Wallingford projects.

The defendants maintain that there is a genuine issue of material fact as to the parties' intentions at the time of the signing of the agreement with regard to the potential liability of PRA Suites on the Glastonbury project.   The defendant also argues that since the bonds have yet to be called, the plaintiff has suffered no damage and this court lacks subject matter jurisdiction, since the plaintiff does not have standing.

-III-

Once the question of lack of jurisdiction of a court is raised it must be disposed of, no court must fully resolve it before proceeding further in the case.  D'Eramo v. Smith, 273 Conn. 610, 616, 872 A.2d 408 (2005).   Standing is not a technical rule intended to keep aggrieved parties out of court;  nor is it a test of substantive rights but rather to a practical concept designed to ensure that courts and parties are not vexed by suits brought to vindicate nonjusticiable interests.  Harris v. Zoning Commission, 259 Conn. 402, 409–10, 788 A.2d 1239 (2002).  “Justiciability requires (1) that there be an actual controversy between or among the parties to the dispute ․ (2) that the interests of the parties be adverse ․ (3) that the matter in controversy be capable of being adjudicated by judicial power ․ and (4) that the determination of the controversy will result in practical relief to the complainant ․” Connecticut Coalition for Justice in Education Funding, Inc. v. Rell, 295 Conn. 240, 254, 990 A.2d 206 (2010).

In this case the indemnity contract was made between sophisticated parties and provides for a specific performance of its terms.   There is no question that the plaintiff suffered loss as defined under the terms of the contract.   Additionally, it is undisputed that the defendants neither provided a letter of credit as the contract demands, or discharged the bond debt.   These facts are sufficient to create a live controversy between the parties so as to confer standing and that this court has subject matter jurisdiction over this action.

-IV-

The defendants argue that it is a question of fact whether the indemnity agreement applies to all bonds issued to the PRA family of companies, including those working on the Norwich and Wallingford projects for which PRA Development was the general contractor, or simply to the bonds issued for the PRA Suites project in Glastonbury.

A contract is ambiguous so as to present a question of fact if the intent of the parties is not clear and certain from the language of the contract itself.   Accordingly, any ambiguity in a contract must emanate from the language used in the contract rather than from one party's subjective perception of the terms.   O'Connor v. Waterbury, 286 Conn. 732, 743, 945 A.2d 936 (2008).

The contract language makes it clear that this contract applies to all bonds issued to PRA entities under the contract and containing no ambiguity.   See Remillard v. Remillard, 297 Conn. 345, 354–55, 999 A.2d 713 (2010).   The plain terms of the agreement show that the contract applies to “(1) One, some or all of the Indemnitors;  (2) Any joint venture or other form of common enterprise in which Indemnitors were members at the time the Bond(s) were furnished;  (3) Any present or future affiliate and/or subsidiary of Indemnitors:  (4) Any third party at the request of Indemnitors, their subsidiaries and/or affiliates.”   PRA Development signed the agreement as an indemnitor.   The contract also is clear in that it applies to contracts issued in any joint venture or common enterprise, in which some indemnitors were members at the time the Norwich and Wallingford bonds were furnished.   Further, it is undisputed that PRA Development, an indemnitor, was the general contractor for the sites of the undischarged bonds at issue.

Plaintiff's motion for summary judgment is granted.

Wagner, JTR

Wagner, Jerry, J.T.R.