Reversal: Bonded projects not ‘completed’ under language of agreement

The Indiana Court of Appeals reversed and remanded the grant of summary judgment in favor of an investment firm after it found that a series of bonded projects were not completed within the scope of the meaning of “completion” as set forth by an agreement between the litigants.

In 2004, Dale Elrod and Jeffrey Elrod and Mary Ann Waymire were majority shareholders in the John K. Elrod Company, a business involved in the construction of stadium seating and safety barriers. An agreement was made between Champlain Capital Partners, L.P. and the Elrods in 2005 when Champlain acquired JKE in a leveraged buyout, becoming majority shareholder.

Champlain placed JKE into Chapter 7 liquidation bankruptcy in October 2006 following a “dire” cash flow situation. As a result, Safeco Surety, which issued construction bonds on JKE’s behalf, drew down the $3.5 million available in a substitute letter of credit to pay claims against those bonds. Champlain then demanded reimbursement from the Elrods under provisions of their business agreement, but a trial court entered judgment for the Elrods, finding they had not breached the agreement.

The Court of Appeals affirmed in part in 2016 but ruled that the trial court misconstrued the agreement’s reimbursement terms. Safeco conditionally returned $554,537.00 to Champlain, but Champlain filed a motion for summary judgment against the Elrods in September 2017, arguing both parties possessed evidence from Safeco that the eight bonded projects in question were completed.

The Morgan Superior Court granted Champlain’s motion for summary judgment, triggering the reimbursement obligation. Judgment was also entered against the Elrods jointly and severally in the amount of $1,472,731.30, and the trial court concluded the final bonded project was completed no later than March 2013.

On appeal, the Elrods requested that the Court of Appeals revisit determinations that the agreement was intended to allocate the risk of loss between parties and that it applied to both performance and payment bonds. In response, Champlain argued that under the law-of-the-case doctrine, the intent and scope of the agreement would not be relitigated.

The appellate court noted in its findings that it remanded in the previous appeal only to permit the introduction of evidence of completion of the construction projects, and that any new evidence presented by the Elrod’s would not be relevant to an issue for the trial court. Therefore, the court decided Friday, the Elrod’s provided no basis for disregarding the law of the case.

However, the appellate court also concluded the designated materials did not establish that each of the bonded projects was completed “within the scope of the meaning of completion as set forth by the Agreement.” Therefore, the case was reversed and remanded to permit the introduction of evidence in Elway Company, LLP, Dale K. Elrod, Jeffrey L. Elrod, and Mary Ann Waymire v. Champlain Capital Partners, L.P., 18A-CC-443.

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