United States District Court, D. Hawaii
ORDER GRANTING PLAINTIFF'S MOTION FOR PARTIAL
SUMMARY JUDGMENT, ECF NO. 47
MICHAEL SEABRIGHT CHIEF UNITED STATES DISTRICT JUDGE.
DKSL, LLC dba Paramount Builders (“DKSL”) was the
contractor on three construction projects that were not
completed, or were cancelled, after problems arose related to
DKSL's contractor's license. Plaintiff Developers
Surety and Indemnity Company (“Developers” or
“Plaintiff”) issued surety bonds on those
projects, with DKSL as the principal. DKSL, as well as co-
Defendants Steven Lee, Daniel Kim, Julia Kim, and Patricia
Lee, individually (collectively, “Indemnitors” or
“Defendants”) agreed to indemnify Developers for
claims made on those surety bonds. After Indemnitors failed
to perform on the indemnity agreement, Developers brought
this diversity action, and has now filed a Motion for Partial
Summary Judgment, ECF No. 47, seeking to enforce the
on the following, Developers' Motion is GRANTED.
Defendants are required to post collateral security in the
amount of $260, 000 in accordance with the “Reserve
Account” provisions of the indemnity agreement.
Developers, however, may not expend or disburse any of this
security without further order from the court.
Motion is supported by a concise statement of facts
(“CSF”) filed pursuant to Local Rule 56.1. ECF
No. 48. In response, DKSL, Steven Lee, Daniel Kim, and Julia
Kim (joined by Patricia Lee, who is represented separately)
forthrightly “do not dispute any of the facts proffered
in Plaintiff's [CSF], ” at least for purposes of
this Motion. Defs.' Opp'n CSF at 3, ECF No. 62 at 3.
They do, however, proffer evidence supporting additional
facts for their position that other “genuine issues
exist that are necessary to be litigated, ”
id., arguing that it is premature to grant relief.
Accordingly, the essential facts as proffered by Plaintiff
are established, and are summarized as follows:
Indemnitors executed a General Indemnity Agreement
(“GIA”) with Developers on June 18, 2007.
Pl.'s CSF ¶ 6. Under the GIA, the Indemnitors
agreed, among other matters, to indemnify Developers for
claims or liabilities on surety bonds (performance or payment
bonds) that Developers issued on behalf of DKSL as principal.
Specifically, regarding indemnification, the GIA provides:
I. INDEMNIFICATION. In consideration of the execution and
delivery by Surety [Developers] of a Bond or any Bonds on
behalf of Principal [DKSL], Principal and Indemnitor shall
pay all premiums charged by Surety in connection with any
Bond (including extensions, renewals or modifications) issued
by Surety on behalf of Principal and shall indemnify
and hold harmless Surety from and against any and all
liability, loss, claims, demands, costs, damages,
attorneys' fees and expenses of whatever kind or nature,
together with interest thereon at the maximum rate allowed by
law, which Surety may sustain or incur by reason of or in
consequence of the execution and delivery by Surety of any
Bond on behalf of Principal, whether or not Surety
shall have paid any amount on account thereof[.]
GIA at 1, Compl. Ex. 1, ECF No. 1-1 (emphasis added). The GIA
also has the following terms regarding a reserve account by
3. RESERVE ACCOUNT. If Surety shall establish a reserve
account to cover any liability, claim asserted, suit or
judgment under any Bond, the Indemnitor shall,
immediately upon demand and whether or not Surety shall have
made any payment therefor, deposit with Surety a sum of money
equal to such reserve account and any increase thereof as
collateral security on such Bond, and such sum and
other money and property which shall have been or shall
thereafter be pledged as collateral security on any such Bond
shall be available, at the discretion of Surety, as
collateral security on all Bonds coming within the scope of
this Agreement or for any other indebtedness of Indemnitor or
Principal to Surety. If Indemnitor shall fail,
neglect or refuse to deposit with Surety the collateral
demanded by Surety, Surety may seek a mandatory injunction to
compel the deposit of such collateral together with any other
remedy at law or in equity that Surety may have.
Surety shall have the right to retain such collateral until
Surety has received evidence satisfactory to Surety of
Surety's complete discharge and exoneration from any
claim or potential claim under all Bonds and until Surety has
been fully reimbursed for any and all liability incurred or
for claims, demands, damages, costs, loss, expense and
Id. at 2 (emphases added).
surety bonds issued by Developers, with DKSL as the
principal, are at issue in this action: (1) “the Ala
Wai project, ” regarding improvements at Ala Wai
Elementary School, with a bond amount of $266, 430 (and with
the State of Hawaii as obligee); (2) “the Kalakaua
project, ” regarding improvements at Kalakaua Middle
School, with a bond amount of $2, 097, 900 (and with the
State of Hawaii as obligee); and (3) “the Kokea
project, ” regarding improvements at a Kokea Street
maintenance facility building, with a bond amount of $733,
000 (and with the City and County of Honolulu as obligee).
Pl.'s CSF ¶¶ 7 to 9.
“has failed and/or has been unable to meet its
obligations” for all three projects. Id.
¶ 13. The State of Hawaii, Department of Education
(“DOE”), terminated the Ala Wai and Kalakaua
projects by letters dated May 29, 2015. Id.
¶¶ 10 & 11. The termination letters both
stated, among other things, that “[w]e have been made
aware that effective October 1, 2014 DKSL LLC dba Paramount
Builders contractor's license and RME Daniel Kim's
license has been terminated, ” and that under Hawaii
laws “any contractor engaged on a State of Hawaii
public works project is required to have a current state of
Hawaii contractor's license and be in good
standing.” Pl.'s Ex. 6 at 1, ECF No. 48-5;
Pl.'s Ex. 7 at 1, ECF No. 48-6. Likewise, they both
declared the surety bonds forfeited, stating, “If the
work required to complete the remaining contract items are
greater than what will remain, the Contractor and Surety will
be liable for all expenses to complete the project. . . . The
bond is hereby forfeited.” Pl.'s Ex. 6 at 7;
Pl.'s Ex. 7 at 2. Similarly, by letter to DKSL dated
August 3, 2017, the City and County of Honolulu issued a
notice of default and intent to terminate the Kokea project.
Pl.'s CSF ¶ 12.
has incurred actual expenses under its bonds and has set
reserves for future expenses. Developers has paid claims and
expenses on the Bonds totaling over $85, 000 as of October
27, 2017. Id. ¶ 15. The evidence indicates that
(1) on March 29, 2016, Developers paid $2, 000 to the DOE to
settle the outstanding bond claim for the Ala Wai project,
(2) on May 12, 2016, Developers paid $17, 329.00 to Ala Kai
Mechanical Corporation, and (3) on January 23, 2015,
Developers paid $12, 021.31 to Ted's Wiring Service.
Pl.'s Ex. 9, ECF No. 48-8; Svitenko Decl. ¶¶ 6
to 10, ECF No. 78-1; Pl.'s Exs. 13 & 14, ECF Nos.
78-2 & 78-3. Developers has also paid attorneys' fees
and costs of over $49, 000 (as of June 2017), apparently
related only to the bond claims. Pl.'s Supp. CSF
¶¶ 25, 27, ECF No. 77; Svitenko Decl. ¶¶
10, 11; Ogawa Supp. Decl. ¶ 6, ECF No. 78-6. It also
paid a consultant $18, 629.34 on January 10, 2018, for