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Argonaut Insurance Co. v. Wolverine Construction, Inc.

United States District Court, D. Maryland, Northern Division

April 17, 2014

ARGONAUT INSURANCE COMPANY, Plaintiff,
v.
WOLVERINE CONSTRUCTION, INC., et al., Defendants.

MEMORANDUM OPINION

WILLIAM D. QUARLES, Jr., District Judge.

Argonaut Insurance Company ("Argonaut") sued Robert J. Zimmerman ("Zimmerman") for violations of the Maryland Trust Fund Statute (the "MTFS"), Md. Code Ann., Real Prop. ยงยง 9-201, et seq. Pending is Argonaut's motion in limine to exclude evidence concerning a purported agreement between Argonaut and Zimmerman. For the following reasons, Argonaut's motion to exclude evidence will be denied.

I. Background

A. Factual Background[1]

On June 23, 2009, Evangel Cathedral executed a construction contract ("the Contract") with Wolverine Construction, Inc. ("Wolverine"), in which Wolverine agreed to construct the Evangel Chapel project at 13901 Central Avenue, Upper Marlboro, Maryland (the "Project"). ECF No. 65 at 9-10. Argonaut, as surety, issued payment and performance bonds (the "Bonds"), for the Project naming Wolverine as Contractor and Evangel Cathedral as Owner. Id. at 10. The Bonds assured Evangel Cathedral that, if Wolverine did not perform its contractual obligations - such as paying Wolverine's subcontractors - Argonaut was required to. Id. In partial consideration for the Bonds, Wolverine, Wolverine Contractors, and Wolverine Management (collectively "the Indemnitors"), executed a General Indemnity Agreement ("the Indemnity Agreement") in favor of Argonaut; under that agreement they were required to indemnify Argonaut for any loss suffered from issuing the Bonds. Id. Zimmerman signed the Indemnity Agreement as the Corporate Secretary of the Indemnitors. Id. Zimmerman did not sign the Indemnity Agreement in his individual capacity. Id.

In 2009 and 2010, Wolverine did construction work on the Project. ECF No. 65 at 10. Evangel Cathedral paid Wolverine $3, 883, 026.08 for its work on the Project. Id. at 11. On July 26, 2010, the President of Wolverine, Douglas Dillon, died. Id. On February 14, 2011, Evangel Cathedral declared default under the Contract and asserted that Wolverine had failed to pay its subcontractors and suppliers, had failed to substantially complete the Project, and was responsible for liquidated damages. Id. By a February 14, 2011 letter, Evangel Cathedral advised Zimmerman that it would pursue its rights against him to the extent that construction trust funds were not properly paid to subcontractors and suppliers. Id. Wolverine's subcontractors and suppliers made claims against Argonaut's Bonds for Wolverine's non-payment for their work on the Project. Id. Wolverine informed Argonaut that the amounts were due and owing and provided Argonaut with statements of account for the claims of the subcontractors and suppliers. Id. Argonaut also requested that Evangel Cathedral release the remaining Contract funds to Argonaut. Id. After negotiations, Evangel Cathedral paid $237, 191 to Argonaut. Id.

B. Purported Agreement

Zimmerman asserts that, around the time of the Indemnity Agreement, Zimmerman and Argonaut reached an agreement for Zimmerman to invest $300, 000 in Wolverine's capital in exchange for Argonaut not requiring Zimmerman to be personally liable for indemnification. See ECF No. 73 at 1-2; ECF No. 65 at 7. Zimmerman testified: "And they said, you put in $300, 000 additional money and we won't make you sign bonds, and so I did." ECF No. 70, Ex. B at 150:1-3. Zimmerman further testified:

Q. This is a general agreement of indemnity. You did not want to agree to sign bonds -
A. As a guarantor.
Q. You did not want to [be], we refer to it as an indemnitor, it's similar to guarantor, you did not want to be an indemnitor on this indemnity agreement; is that correct?
A. Right, that's exactly what the discussion was, yes.
Q. So, I just want to make sure we're clear. In your mind you agreed to put $300, 000 into Wolverine Construction, Inc. so that you did not have ...

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