United States District Court, D. North Dakota
The Cincinnati Insurance Company, an Ohio Corporation, Plaintiff,
B & B Paving, Inc. d/b/a B & B Dirtworks, Michael Baumgartner, Nancy Baumgartner, Defendants.
Charles S. Miller, Jr., Magistrate Judge United States
Cincinnati Insurance Company (“Cincinnati”)
previously moved for summary judgment against B & B
Paving, Inc., Michael Baumgartner, and Nancy Baumgartner
(collectively “the Defendants”). (Doc. No. 31).
In a previous order, the court granted that motion as to
Cincinnati's breach of contract claim but denied the
motion as to the amounts of damages Cincinnati sought to
collect. Cincinnati Ins. Co. v. B & B Paving,
Inc., Case No. 1-16-cv-340, 2017 WL 42468565 at *6
(D.N.D. September 25, 2017). The court directed Cincinnati to
provide supplemental briefing as to the amount of damages
collectable under North Dakota law. That briefing, along with
that from the Defendants, is now before the court. (Doc. Nos.
38, 39, 41).
speaking, Cincinnati and the Defendants executed two surety
bonds for various construction services to be provided by the
Defendants. As is relevant to this case, those bonds are
identical. Cincinnati and the Defendants also executed
corresponding indemnity agreements, under which the
Defendants agreed to indemnify Cincinnati “and hold it
harmless from and against any and all liability, losses,
costs, damages, attorneys' fees, disbursements and
expenses of whatever kind or nature which the Surety may
sustain or incur by reason or in consequence of having
executed or procured the execution of the” Surety
Bonds. (Doc. Nos. 1-1, 1-2). The Defendants executed these
indemnity agreements jointly and severally. Cincinnati
ultimately received and paid out claims under the bonds
totaling $82, 064.95. (Doc. No. 33-1). Cincinnati also
incurred $13, 985.70 in costs, expenses, and attorneys fees
in discharging its obligations under the surety bonds and in
prosecuting this breach of contract case under the indemnity
agreements. In sum, Cincinnati sought judgment for
$96.050.65, which was inclusive of the paid bond claims,
attorneys' fees, and costs and expenses.
court's previous order, the court granted
Cincinnati's motion for summary judgment insofar as the
Defendants breached the indemnity agreements for not
indemnifying Cincinnati. The court further concluded
Cincinnati was entitled to a judgment in the amount of $82,
064.95, which represented the amounts paid out under the
bonds. The court, however, denied, without prejudice,
Cincinnati's motion as to the remaining $13, 985.70
because Cincinnati had not properly itemized the expenses
comprising that total and the court was unsure about whether
North Dakota law allowed for the collection of that amount.
The court directed Cincinnati to provide supplemental
briefing and affidavits as to the itemization issue and the
court's collectability concerns.
court has reviewed the supplemental itemized statement of
loss submitted by Cincinnati. (Doc. No. 38-2). The statement
consists of three categories of losses: (1) amounts paid out
under the surety bonds; (2) investigation expenses; and (3)
attorneys' fees. In aggregate, Cincinnati seeks $97,
582.15, which is more than it sought in its previous motion
for summary judgment and which presumably reflects further
attorneys' fees incurred in this matter. As discussed
above, the court has already concluded Cincinnati is entitled
to $82, 064.95, which represents the amounts paid out under
the surety bonds, so the court will not address
Cincinnati's first category of loss any further. Thus,
the court is left to consider the collectability of the
balance of Cincinnati's requested amount.
second category of expenses, in its entirety, consists of a
$27.00 charge characterized as an investigation expense. The
Defendants have not made any serious effort to argue this
charge does not fall within the category of losses
collectable under the indemnity agreements, and such amounts
likely do no fall under the invalidation dictated by N.D.C.C.
§ 28-26-04. See First Nat. Bank of Decorah v.
Laughlin, 61 N.W. 473, 475 (N.D. 1894) (concluding
“the fact that no charges for collection were mentioned
in the statute, other than attorney's fees, shows
inferentially that attorney's fees alone were in the mind
of the legislature; and we are of the opinion that we would
not be justified in concluding from that statute, or from any
other, that expenses of collection aside from attorney's
fees are against the policy of express law.”). Thus,
the court concludes Cincinnati is entitled to additional
damages in the amount $27.00.
third category of expenses includes $15, 490.20 worth of
attorneys' fees. The court previous denied
Cincinnati's request for attorneys' fees based upon
the potential application of N.D.C.C. § 28-26-04. That
Any provision contained in any note, bond, mortgage, security
agreement, or other evidence of debt for the payment of an
attorney's fee in case of default in payment or in
proceedings had to collect such note, bond, or evidence of
debt, or to foreclose such mortgage or security agreement, is
against public policy and void.
court had concern about the collectability of
Cincinnati's requested fees when reading N.D.C.C. §
28-26-04 with Hartford Acc. & Indem. Co. v.
Anderson, 155 N.W.2d 728, 735-36 (N.D. 1968). In
Hartford, a surety issued a construction bond to
principals who also executed an indemnity agreement
containing an attorneys' fees provision. After concluding
the principals/indemnitors breached the indemnity agreement
by not providing proper indemnification, the trial court
taxed the indemnitors with attorneys' fees pursuant to
the indemnity agreement. In considering that aspect of the
case, the North Dakota Supreme Court stated:
Our study of this case has disclosed that the judgment
includes attorney fees, and this is perhaps because the
indemnity agreement so provides. It is our view, however,
that the legislature intended, under N.D.C.C. Sec. 28-26-04,
to prohibit a provision for the payment of ...