Justia Contracts Opinion Summaries

A construction worker employed by a subcontractor was injured when a scaffold collapsed at a Manhattan worksite. The worker sued the property owner and general contractor in New York Supreme Court, alleging negligence and violations of state labor laws. The owner’s insurer, Liberty Insurance Corporation, sought a declaration in federal court that the subcontractor’s insurer, Hudson Excess Insurance Company, was obligated to defend and indemnify the owner as an additional insured under the subcontractor’s commercial general liability policy. The subcontract between the general contractor and the subcontractor required the latter to provide insurance coverage for the owner and general contractor.In the New York Supreme Court, summary judgment was granted to the injured worker on some claims, while other claims remained pending. The court denied summary judgment to the owner on its contractual indemnification claim against the subcontractor, finding factual questions about the scope of the subcontractor’s work. Later, after the federal district court’s decision, the state court dismissed all third-party claims against the subcontractor, finding the indemnity provision in the subcontract invalid due to lack of a meeting of the minds.The United States Court of Appeals for the Second Circuit reviewed the case. It affirmed the district court’s finding, after a bench trial on stipulated facts, that the subcontractor’s actions proximately caused the worker’s injuries and that Hudson owed a duty to indemnify the owner under the policy. The Second Circuit held that the later state court decision did not alter this result. However, the Second Circuit reversed the district court’s award of attorney’s fees to Liberty, holding that Hudson was entitled to a statutory safe harbor under New York Insurance Law, and thus was not required to pay Liberty’s attorney’s fees for the federal action. View "Liberty Insurance Corp. v. Hudson Excess Insurance Co." on Justia Law

The dispute arose when a property owner, after selling his San Diego County home and purchasing property in Trinity County, sought to transfer the base year value of his former property to his new one. In 2009, he sued the Trinity County Board of Supervisors to compel such a transfer under California law. The parties settled in 2012, agreeing that if the County later adopted an ordinance or if a change in law required it, the owner would be entitled to retroactively transfer the base year value. In 2020, after the passage of Proposition 19, which expanded the ability to transfer base year values between counties, the owner requested the transfer from the county assessor, who denied the request.The Superior Court of Trinity County held a bench trial and found in favor of the property owner on his breach of contract claims, ordering the County to specifically perform the settlement agreement and awarding damages. The court rejected the County’s arguments that the agreement was limited to intra-county transfers and that the Board lacked authority to bind the assessor. The court also found that the new law triggered the County’s obligations under the agreement.On appeal, the California Court of Appeal, Third Appellate District, concluded that the Board of Supervisors did not have the authority to direct the county assessor in setting or transferring base year values, as this is a duty assigned by law to the assessor, an elected official independent of the Board’s control. The court held that the 2012 settlement agreement was void and unenforceable because it exceeded the Board’s legal authority. As a result, the judgment on the breach of contract claims was reversed, while the remainder of the judgment was affirmed. The County was awarded its costs on appeal. View "Sceper v. County of Trinity" on Justia Law

Talisker Finance, LLC and its affiliates defaulted on a $150 million loan secured by real property, which they had borrowed to develop parcels in Utah. After several loan modifications and assignments, the lenders—Wells Fargo Bank, N.A. and Midtown Acquisitions L.P.—foreclosed on the collateral and purchased it at two sheriff’s sales, where they were the only bidders. The sale proceeds did not satisfy the debt, and the lenders continued to pursue the deficiency. Later, Talisker discovered information suggesting that the lenders, in coordination with a court-appointed receiver, may have taken actions to depress the sale price, including deterring potential bidders and bundling properties in a way that made them less attractive.Talisker filed suit in the Third District Court, Summit County, seeking equitable relief from the deficiency judgments, alleging that the lenders’ conduct during the foreclosure process violated Utah Rule of Civil Procedure 69B(d) and constituted fraud or grossly inequitable conduct. The lenders moved to dismiss, arguing that Talisker had broadly waived any rights or defenses related to the foreclosure process in the loan documents. The district court accepted Talisker’s factual allegations as true for purposes of the motion but concluded that the waivers were enforceable and covered the rights Talisker sought to assert, including those under Rule 69B(d). The court found no unlawful irregularity in the sales and dismissed the complaint.On direct appeal, the Supreme Court of the State of Utah affirmed the district court’s dismissal. The court held that Talisker’s broad and explicit waivers in the loan documents encompassed all rights and defenses related to the foreclosure sales, including the right to challenge the method of sale or seek equitable relief based on alleged unfairness or irregularities. The court concluded that, regardless of the alleged conduct, Talisker had contractually relinquished any basis for relief. View "TALISKER PARTNERSHIP v. MIDTOWN ACQUISITIONS" on Justia Law

Two companies, HBKY and Elk River, each claimed rights to thousands of acres of timber in Kentucky based on their respective contracts with a third party, Kingdom Energy Resources. Kingdom had entered into a timber sales contract with Elk River, allowing Elk River to cut and remove timber from certain land. Separately, Kingdom obtained a $22 million loan from a group of lenders, with HBKY acting as their agent, and mortgaged several properties—including the timber in question—as collateral for the loan. Kingdom later breached both agreements: it ousted Elk River from the land, violating the timber contract, and defaulted on the loan, leaving both HBKY and Elk River with competing claims to the timber.After HBKY secured a judgment in a New York federal court declaring Kingdom in default, it registered the judgment in the United States District Court for the Eastern District of Kentucky and initiated foreclosure proceedings on the collateral, including the timber. Elk River and its president, Robin Wilson, were joined as defendants due to their claimed interest. The district court granted summary judgment to HBKY, finding that Elk River did not obtain title to the timber under its contracts, did not have a superior interest, and was not a buyer in the ordinary course of business under Kentucky law.The United States Court of Appeals for the Sixth Circuit reviewed the case de novo. The court held that the loan documents did not authorize a sale of the timber free of HBKY’s security interest, as the mortgage explicitly stated that the security interest would survive any sale. The court also found that Elk River failed to provide sufficient evidence to establish its status as a buyer in the ordinary course of business. Accordingly, the Sixth Circuit affirmed the district court’s grant of summary judgment in favor of HBKY. View "HBKY, LLC v. Elk River Export, LLC" on Justia Law

Kevin and Jeannine Extreme appealed from the Fourth Judicial District Court, Mineral County's order enjoining them from violating restrictive covenants applicable to their property in the Sloway Flats Minor Subdivision. The District Court also ordered them to remedy their violations and awarded attorney fees to Sloway Cabin, LLC (Sloway).The District Court found that the covenants were enforceable and that the Extremes had violated them by operating a commercial towing company, diesel repair shop, and impound lot on their property, among other activities. The court enjoined the Extremes from further violations and ordered them to remedy their current violations. The court also awarded attorney fees to Sloway.The Supreme Court of the State of Montana reviewed the case. The court held that the Subdivision’s covenants were clear and unambiguous, and therefore enforceable. The court rejected the Extremes' arguments that the covenants were never meant to be enforced and that their enforcement was barred by the doctrines of waiver and laches. The court found that the Extremes had been repeatedly informed about the covenants and that Sloway had promptly acted to enforce them upon noticing violations. The court also found that the Extremes' arguments regarding the use of surrounding properties were irrelevant as those properties were not subject to the Subdivision’s covenants.The Supreme Court affirmed the District Court’s decision, holding that the District Court did not manifestly abuse its discretion by enjoining the Extremes from violating the covenants and that the award of attorney fees to Sloway was proper under the circumstances. The court found that the equities supported an award of attorney fees and that the tangible parameters test was met. View "Sloway Cabin v. Extreme" on Justia Law

Rodney Alexander and Steve Hobart entered into an agreement granting Alexander a right of first refusal to purchase Steve’s cattle and to have Steve’s national forest livestock grazing permit transferred to him. An addendum later clarified that the agreement extended to Steve’s son, Nick. Years later, Nick sold the cattle and transferred the permit to a third party without notifying Alexander, who then sued for breach of contract and fraud. The defendants moved for judgment on the pleadings, arguing the contract was void due to impossibility of performance or because it was for an unlawful object, and that the right of first refusal was an unreasonable restraint on property alienation.The Circuit Court of the Seventh Judicial Circuit, Pennington County, South Dakota, granted the motion, ruling the contract void for impossibility of performance. Alexander appealed, asserting the court erred in its conclusion. Nick, through notice of review, sought to challenge the court’s ruling that the right of first refusal was not an unreasonable restraint on alienation.The Supreme Court of the State of South Dakota reviewed the case de novo. It found that the contract did not require the Hobarts to transfer the permit directly, but rather that the purchase was contingent on the USFS transferring the permit to Alexander. The court concluded that the contract was not void for impossibility of performance. Additionally, the court affirmed the lower court’s ruling that the right of first refusal was not an unreasonable restraint on alienation, considering the purpose, price, and duration of the agreement, and the mutual consent of the parties.The Supreme Court reversed the circuit court’s order and judgment, remanding the case for further proceedings. View "Alexander v. Estate Of Hobart" on Justia Law

The Vinales family leased a home at Randolph Air Force Base, managed by AETC II Privatized Housing, LLC, and other associated entities. They experienced issues with the home's condition, including mold and asbestos, which they claimed led to health problems and property damage. They sued the housing providers for breach of contract, fraud, and other claims, seeking damages and attorneys' fees.The United States District Court for the Western District of Texas granted summary judgment for the defendants on most claims, citing the federal enclave doctrine, which limits applicable law to federal law and pre-cession state law. The court dismissed the fraud claim for lack of evidence and denied the plaintiffs' motion for attorneys' fees. The breach of contract claim proceeded to trial, where the jury awarded the plaintiffs over $90,000 in damages. The magistrate judge denied the plaintiffs' motion for attorneys' fees and the defendants' motion for judgment as a matter of law.The United States Court of Appeals for the Fifth Circuit reviewed the case. The court affirmed the application of the federal enclave doctrine, which barred most of the plaintiffs' claims. It upheld the dismissal of the fraud claim, agreeing that the plaintiffs failed to identify actionable fraudulent statements. The court also affirmed the denial of attorneys' fees, finding no legal basis for the award. The exclusion of certain evidence at trial was deemed not to be an abuse of discretion. The court found sufficient evidence to support the jury's damages awards for personal property and diminution in rental value. Finally, the court held that the jury instructions were proper and did not create substantial doubt about the jury's guidance. The judgment of the magistrate judge was affirmed. View "Vinales v. AETC II Privatized Housing, LLC" on Justia Law

In this residential landlord-tenant dispute, the tenants, Michael Gogal and Hildy Baumgartner-Gogal, entered into a lease with landlords, Xinhui Deng and Jianhua Wu. The lease included a clause that capped recoverable litigation costs and attorney’s fees at $1,000. After successfully suing the landlords for retaliatory eviction, the tenants were awarded a monetary judgment and attorney’s fees exceeding the $1,000 cap. They then sought to recover additional litigation costs under California Code of Civil Procedure section 1032(b). The landlords argued that the lease’s $1,000 cap barred any further cost recovery.The Superior Court of San Diego County initially ruled in favor of the landlords, enforcing the $1,000 cap. However, after further arguments from the tenants, the court reversed its decision, allowing the tenants to recover nearly $14,000 in costs. The court reasoned that enforcing the cap would contravene the public policy intent of California Civil Code section 1942.5, which aims to protect tenants from abusive landlord conduct.The California Court of Appeal, Fourth Appellate District, reviewed the case. The main issue was whether parties to a contract could waive their statutory right to recover litigation costs under section 1032(b) through a pre-dispute agreement. The appellate court concluded that section 1032(b) establishes a default rule allowing prevailing parties to recover costs but does not prohibit parties from waiving this right by agreement. The court found that such waivers are consistent with Civil Code section 3513, which allows the waiver of rights intended for private benefit. The appellate court reversed the lower court’s order, directing it to strike the tenants’ memorandum of costs, thereby enforcing the $1,000 cap stipulated in the lease. View "Gogal v. Deng" on Justia Law

Jonathan and Angela McOmber purchased a home from Shane and Keri Thompson. After the purchase, the McOmbers discovered significant issues with the property, including dry rot, mold, and water damage, which were not anticipated. They also found that the roof leaked and was not professionally installed, and that the previous owner had rewired parts of the kitchen improperly. The McOmbers relied on the sellers’ disclosures, which indicated that a drainage problem had been fixed and that there were no current mold issues or roof leaks. The McOmbers did not conduct an independent property inspection.The McOmbers filed a lawsuit against the Thompsons for breach of duty to disclose/fraud, common law fraud, and breach of contract, among other claims. The district court dismissed Angela McOmber from two of the claims and denied the McOmbers’ motion to add a claim for constructive trust. The district court granted summary judgment in favor of the Thompsons, finding that they had complied with the Property Condition Disclosure Act by disclosing known defects. The court also awarded attorney fees to the Thompsons based on a provision in the Real Estate Purchase and Sale Agreement (REPSA). The McOmbers’ motion for reconsideration was denied.The Supreme Court of Idaho reviewed the case and affirmed the district court’s decisions in part, reversed in part, and remanded. The court held that the Thompsons complied with the disclosure requirements and that the McOmbers failed to raise a genuine dispute of material fact regarding the falsity of the Thompsons’ statements. The court also found that the district court did not err in denying the motion to amend the complaint or the motion for reconsideration. However, the court reversed the award of attorney fees against Angela McOmber, as she was not a party to the REPSA, and remanded for the district court to issue an amended judgment. Neither party was awarded attorney fees on appeal. View "McOmber v. Thompson" on Justia Law

A dispute arose between a surety bond company, Granite Re, Inc. (Granite), and a creditor bank, United Prairie Bank (UPB), over entitlement to funds held by a receiver in a receivership action. Granite issued payment bonds to Molnau Trucking LLC (Molnau) for public works projects, but Molnau defaulted on both the projects and loans from UPB. The issue was whether Granite or UPB had priority to the bonded contract funds held by the receiver. Granite argued for priority under equitable subrogation, having paid laborers and suppliers, while UPB claimed priority under the UCC, having perfected its security interests in Molnau’s accounts receivable before Granite issued the bonds.The district court granted summary judgment in favor of UPB, recognizing Granite’s equitable subrogation rights but ruling that UPB’s perfected security interest had priority. The court of appeals affirmed, applying a “mistake of fact” standard from mortgage context case law, which Granite did not meet.The Minnesota Supreme Court reviewed the case and held that the “mistake of fact” standard does not apply to performing construction sureties. The court concluded that Granite, as a surety, has the right to equitable subrogation without needing to show a mistake of fact. The court further held that a surety’s right to equitable subrogation is not a security interest subject to the UCC’s first-in-time priority rule. Instead, a performing surety has priority over a secured creditor regarding bonded contract funds.The Minnesota Supreme Court reversed the court of appeals’ decision and remanded the case to the district court for entry of judgment in favor of Granite, allowing Granite to request redistribution of the bonded contract funds. View "In re Receivership of United Prairie Bank v. Molnau Trucking LLC" on Justia Law