C & I Entm't, LLC v. Fid. & Deposit Co.

C & I Entm't, LLC v. Fid. & Deposit Co.

Opinion

MEMORANDUM OPINION AND ORDER DENYING DEFENDANT'S MOTION FOR SUMMARY JUDGMENT

In this construction bond case, Defendant Fidelity & Deposit Company of Maryland ("Fidelity") has filed its second motion for summary judgment seeking a ruling that it is not liable as a matter of law to Plaintiff C&I Entertainment, LLC ("C&I"), for breach of contract and bad faith. For the reasons that follow, summary judgment is denied.

Factual and Procedural Background

On or about August 7, 2001, C&I contracted with Ralph McKnight & Son Construction, Inc. ("McKnight"), to build a movie theater and skating rink ("Project") in Kosciusko, Mississippi. McKnight obtained a performance bond ("Bond") from Fidelity. The Bond, an AIA A312 standard bond, named C&I as Owner, McKnight  [*2] as Contractor, and Fidelity as Surety. In addition, McKnight and Fidelity signed an indemnity agreement obligating McKnight to repay to Fidelity any sums Fidelity may pay to C&I under the Bond.

After a significant portion of the Project was complete, a dispute arose between C&I and McKnight over the quality of the construction.¹ C&I withheld final payment, consisting of retainage only. The summary judgment record indicates that on June 16, 2003, C&I, through one of its owners, Emma Ivester, sent Fidelity a letter describing McKnight's deficient work and failed repair attempts, and asked Fidelity to "discuss and resolve a satisfactory solution to us." In the letter, which referenced and attached multiple letters that C&I had sent to McKnight complaining about deficiencies in the work, Ivester stated, among other things, that the Project reached substantial completion on November 15, 2002, as to the movie theater and January 23, 2003, as to the skating rink. Fidelity claims it has no record of ever receiving this letter.

On June 19, 2003, McKnight filed a  [*3] construction lien against the Project. On August 29, 2003, McKnight filed a complaint against C&I in the Circuit Court of Attala County, Mississippi ("State Court Action"), to enforce the construction lien, seeking the unpaid retainage. C&I filed an answer and counterclaim,² asserting that McKnight breached the construction contract.

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