Unpublished Disposition, 928 F.2d 1138 (9th Cir. 1988)

Before REINHARDT and CYNTHIA HOLCOMB HALL, Circuit Judges, and RE,^*  Chief Judge

MEMORANDUM^** 

Appellant Garfield Bank appeals from two orders issued by the United States District Court for the Central District of California. The first order, entered September 8, 1988, granted a motion for summary judgment by appellee, Southern California Bank (SC Bank), against Garfield Bank, on a cross-claim for indemnity under a Purchase and Assumption Agreement executed by Garfield Bank and SC Bank. The second order, entered October 11, 1988, directed Garfield Bank to pay $23,279.75 in attorney's fees to SC Bank.

On appeal, Garfield Bank contends that the district court erred in granting SC Bank's motion for summary judgment. Garfield Bank asserts that "the district court erred in finding that there was no triable issue of fact with regard to the interpretation of Garfield Bank's obligation under the purchase and assumption agreement."

The question presented on this appeal is whether the district court erred in granting SC Bank's motion for summary judgment. It is clear that if there is any genuine issue of material fact as to the liability of Garfield Bank, under the Purchase and Assumption Agreement, summary judgment should not have been granted. Therefore, the specific question presented before this court is whether, under section 9.1(5) of the Purchase and Assumption Agreement, there is a "liability or obligation" on the part of Garfield Bank, and Garfield Bank is required to indemnify SC Bank.

Since we conclude that, on the record before this court, there is a genuine issue of material fact as to whether there is a "liability or obligation" on the part of Garfield Bank, and therefore as to whether Garfield Bank is required to indemnify SC Bank under section 9.1(5) of the Purchase and Assumption Agreement, we reverse.

BACKGROUND

This case arises out of a construction contract awarded by the Department of the Navy in November, 1984, to the Huntington Builders Corporation. Pursuant to the contract, the principals of Huntington Builders, Ali G. Labib and Magdy M. Rashed, executed payment bonds, guaranteeing payment for work completed for all parties having a direct or subcontractor relationship with Huntington Builders. Each payment bond included an affidavit of surety, containing a financial statement of the affiant, and a certificate of sufficiency signed by a third party, stating that, to the best of the third party's knowledge, the information contained in the affidavits was true. The certificates of sufficiency for the affidavits of Labib and Rashed were executed by Marilyn Chambers, an employee of the Huntington Beach branch of Garfield Bank.

Subsequently, Southern California Bank (SC Bank) entered into a Purchase and Assumption Agreement with Garfield Bank. Under the Agreement, SC Bank purchased certain assets of Garfield Bank's Huntington Beach branch.

Huntington Builders subcontracted part of the work under the construction contract to Marathon Weatherproofing International, which in turn entered into a contract with A.C.M. Distributors, Inc. (ACM). Huntington Builders failed to pay money owed to Marathon, and Marathon failed to pay money owed to ACM.

Subsequently, the use-plaintiffs¹  Marathon and ACM brought suit against Huntington Builders, Labib, and Rashed on the payment bonds, and against Huntington Builders for breach of contract. The use-plaintiffs alleged various other causes of action, including fraud and negligent misrepresentation against Huntington Builders, Labib, Rashed, Marilyn Chambers, Garfield Bank, and SC Bank, the successor in interest of Garfield Bank's Huntington Beach branch. The use-plaintiffs also brought a negligence claim against Marilyn Chambers, Garfield Bank, and SC Bank.

In their complaints, in support of their claims against Marilyn Chambers, Garfield Bank, and SC Bank, the use-plaintiffs alleged that "defendant Garfield by and through its employee Chambers, did attach to ... the surety bonds an executed statement certifying that she, as a loan officer, representative and agent of Garfield, had reviewed [the] applications ... and to the best of her knowledge they were correct and proper." The use-plaintiffs also alleged that " [i]n fact Chambers and Garfield did not know whether or not [the] statements were true or accurate but did certify the statements of defendants Huntington Builders, Labib and Rashed...."

SC Bank cross-claimed against Garfield Bank, alleging that, pursuant to the Purchase and Assumption Agreement, Garfield Bank was required to indemnify SC Bank for any liability which it might be found owing to the use-plaintiffs. SC Bank also sought attorney's fees and costs from Garfield Bank. Garfield Bank cross-claimed against SC Bank for declaratory relief on that same issue. SC Bank then filed motions for summary judgment against the use-plaintiffs in the underlying action, and against Garfield Bank on the cross-claim.

In September, 1988, the district court issued an order that granted SC Bank's summary judgment motions both against the use-plaintiffs in the underlying action, and against Garfield Bank on the cross-claim.

In its "Statement of Uncontroverted Facts and Conclusions of Law" in support of its order granting SC Bank's motion for summary judgment against the use-plaintiffs, the district court stated that "SCB is not liable to the Plaintiffs for any fraud, negligent misrepresentation or negligence committed by Chambers or Garfield Bank."

As to SC Bank's summary judgment motion against Garfield Bank, the district court held that Garfield Bank must indemnify SC Bank since " [s]ection 9.1 of the Agreement clearly provides for such indemnity." The court also granted SC Bank attorney's fees, since "the person indemnifying is bound, on request of the person indemnified, to defend actions against the latter." (citing Cal.Civ.Code Sec. 2778(4)). Finally, the court granted SC Bank attorney's fees for its cross-claim against Garfield Bank, since section 10.1 of the Purchase and Assumption Agreement provided for an award of attorney's fees to the prevailing party, in an action for breach of the Agreement. In October, 1988, the court awarded SC Bank attorney's fees in the amount of $23,279.75.

STANDARD OF REVIEW

In this circuit an award of summary judgment, which reflects a district court's determination of law rather than fact, is entitled to de novo review. See Mead Reinsurance v. Granite State Ins. Co., 873 F.2d 1185, 1187 (9th Cir. 1988). The reviewing court must consider "the evidence in the light most favorable to the non-moving party, ... [and] must determine whether there are any genuine issues of material fact and whether the district court correctly applied the relevant law." Id. An award of summary judgment is improper when, on the record before the court, there remains any genuine issue of material fact. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).

DISCUSSION

Section 9.1(5) of the Purchase and Assumption Agreement provides that "Garfield agrees to indemnify SCB and its officers, directors, employees and agents and hold them harmless from any loss, liability, damage, or expense based on or arising out of ... any liability or obligation of the Branch not assumed by SCB in this Agreement." Section 1.2 of the Purchase and Assumption Agreement states that:

SCB agrees to assume as of the Closing Date in accordance with Garfield's agreements with depositors, all deposit liabilities of the Branch shown on the books of the Branch as of the end of the business day next preceding the Closing Date. Such deposit liabilities include but are not limited to (i) all demand deposits, (ii) all time, public time, money market and savings deposits, and (iii) interest accrued on all deposit liabilities as of the end of the business day next preceding the Closing Date....

It is undisputed that, under the Purchase and Assumption Agreement, SC Bank did not expressly assume "any liability or obligation" for the tortious conduct of Garfield Bank's employees. Hence, in this case, SC Bank is entitled to indemnity from Garfield Bank only if Garfield Bank is liable to the use-plaintiffs in the underlying action.

In granting SC Bank's motion for summary judgment on the indemnity claim, the district court made no express finding that Garfield Bank was liable to the use-plaintiffs. Hence, in order to affirm the district court's order, we must conclude, on the record before this court, that there is no genuine issue of material fact as to Garfield Bank's liability, and that, as a matter of law, Garfield Bank is liable to the use-plaintiffs in the underlying action.

The record contains no indication that there has ever been a determination or finding that Garfield Bank is liable to the use-plaintiffs. Indeed, the only evidence in the record that lends support to Garfield Bank's liability to the use-plaintiffs is the deposition of Marilyn Chambers, Garfield Bank's employee.

In her deposition, Marilyn Chambers was questioned about her execution of the certificates of sufficiency for the affidavits of Labib and Rashed, the sureties for Huntington Builders. In response to the questioning, Marilyn Chambers admitted that she did not question Labib or Rashed about their property.

It is clear that this deposition by itself is insufficient for this court to conclude that, as a matter of law, Garfield Bank is liable to the use-plaintiffs. Beyond the admission, there is nothing that indicates as a matter of law that there was negligence on the part of Garfield Bank. Furthermore, there is nothing that indicates that the alleged negligence of Garfield Bank caused the loss to the use-plaintiffs.

CONCLUSION

Since, on the record before this court, there is a genuine issue of material fact as to whether there is a "liability or obligation" on the part of Garfield Bank under the Purchase and Assumption Agreement, it is the conclusion of the court that SC Bank is not entitled to indemnity from Garfield Bank as a matter of law. Accordingly, the order of the district court granting SC Bank summary judgment on its cross-claim is reversed. The order directing Garfield Bank to pay attorney's fees to SC Bank is also reversed, and the case is remanded to the district court.

REVERSED AND REMANDED.