Group Resources, Inc. v. City of Waycross

FIFTH DIVISION

MCFADDEN, P. J.,

BRANCH and BETHEL, JJ.

NOTICE: Motions for reconsideration must be

physically received in our clerk’s office within ten

days of the date of decision to be deemed timely filed.

http://www.gaappeals.us/rules

March 8, 2018

In the Court of Appeals of Georgia

A17A1699. GROUP RESOURCES, INC. v. CITY OF WAYCROSS

et al.

BETHEL, Judge.

This appeal arises out of a breach of contract claim brought by Group

Resources, Inc. against the City of Waycross and Raphel Maddox1 (collectively “City

Defendants”). Group Resources and the City Defendants filed cross-motions for

summary judgment on the issue of whether the fraudulent misrepresentation claims

asserted against Group Resources in a separate lawsuit relieved the City Defendants

of their obligation to indemnify Group Resources under an Administrative Services

Agreement (“Agreement”). We answer in the affirmative and find that the trial court

was authorized to grant summary judgment in favor of the City Defendants.

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Raphel Maddox was sued in his capacity as the City of Waycross’s human

resources director.

“Summary judgment is proper when there is no genuine issue of material fact

and the movant is entitled to judgment as a matter of law. A de novo standard of

review applies to an appeal from a grant of summary judgment, and we view the

evidence, and all reasonable conclusions and inferences drawn from it, in the light

most favorable to the non-movant.” BBL-McCarthy, LLC v. Baldwin Paving Co., 285

Ga. App. 494, 494-95 (646 SE2d 682) (2007) (citations omitted).

The facts of this case are undisputed. In 2012, Group Resources contracted

with the City Defendants to act as the third-party administrator for the City of

Waycross’s employee health benefit plan (the “Plan”). Per the terms of the

Agreement, Group Resources acted as the Plan’s administrative services agent and

was responsible for verifying eligibility, authorizing coverage, handling claims, and

processing payments for the City of Waycross’s employees and their eligible

dependents under the plan.

The indemnification provision of the Agreement pertinent to the issues on

appeal reads:

The Plan Administrator and the [City Defendants] agree to indemnify

and hold harmless [Group Resources] from and against any claim,

action, cause of action, loss (including the loss of a PPO discount due

to the Plan Administrator’s failure to timely fund benefit payments),

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liability, cost, expense, fee, damage, tax, or penalty (including

reasonable attorney and accountant fees) which may be made or imposed

by any employee or dependant or any other person or persons (including

any governmental authority or service provider to the Plan) resulting

from, or in connection with, the operation of the Plan (whether before,

during, or following the term of this Agreement) or any action or

inaction by [Group Resources], unless such claim, action, cause of

action, liability, loss, cost, expense, fee, damage, tax or penalty results

from [Group Resources’s] willful misconduct or fraud...

In June 2013, a hospital sued Group Resources in a Florida federal court,

claiming that Group Resources underpaid charges owed to the hospital for services

rendered to a patient covered by the Plan. The hospital alleged, inter alia, that Group

Resources fraudulently misrepresented the amount the hospital would be reimbursed

for a patient who was covered by the Plan and had received treatment at the hospital.

During the pendency of that suit, Group Resources sent two letters to the City

Defendants demanding indemnification from any losses incurred as a result of the

pending litigation. Group Resources also filed a motion to add the City Defendants

to the lawsuit, which was denied. After a year and a half of litigation in Florida,

Group Resources negotiated a settlement with the hospital prior to the start of trial.

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Group Resources filed the action giving rise to this appeal against the City

Defendants alleging, inter alia, breach of contract for its failure to indemnify it in the

Florida lawsuit, and seeking reimbursement for litigation costs and settlement. After

a hearing on cross-motions for summary judgment, the trial court issued an order

summarily granting the City Defendants’ motion and denying Group Resources’s

motion, meaning that the City Defendants did not have to indemnify Group Resources

for its costs and expenses incurred in the Florida lawsuit. This appeal followed.

1. Group Resources argues that the trial court misinterpreted the terms of the

indemnity provision in the Agreement. Specifically, in order to trigger the

exclusionary clause of the indemnity provision, Group Resources contends that it

must have actually acted with willful misconduct or fraudulently, and that a mere

allegation of such conduct is insufficient. We disagree because the term “claim,” as

it appears in the Agreement, does not require an adjudication on the merits of a

willful misconduct or fraud claim in order to trigger the exclusionary clause.

Because the indemnity clause is a contractual provision, its interpretation is a

question of law, and we therefore review the trial court’s ruling on this issue de novo.

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Firmani v. Dar-Court Builders, LLC, 339 Ga. App. 413, 425 (4) (793 SE2d 596)

(2016). “The cardinal rule of construction is to ascertain the intention of the parties.

The language which the parties have used will be looked to for the purpose of finding

that intention, which once ascertained will prevail over all other considerations, in

determining the nature of the agreement.” Serv. Merch. Co. v. Hunter Fan Co., 274

Ga. App. 290, 292 (1) (617 SE2d 235) (2005) (footnotes and punctuation omitted).

“No construction is required or even permitted when the language employed by the

parties in the contract is plain, unambiguous, and capable of only one reasonable

interpretation.” Freund v. Warren, 320 Ga. App. 765, 768-69 (1) (740 SE2d 727)

(2013) (citation omitted). Moreover, “the words of a contract of indemnification must

be construed strictly against the indemnitee.” Svc. Merch. Co., 274 Ga. App. at 292

(1) (footnotes omitted).

With these principles in mind, we are unpersuaded by Group Resources’s

contention that the indemnification provision of the Agreement is ambiguous or that

it did not intend for the term “claim” to include allegations of fraud but rather

required proof of fraud before the City Defendants could avoid its obligation to

indemnify. The indemnification provision expressly releases the City Defendants

from any obligation to indemnify Group Resources for any “claim, action, cause of

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action, [or] liability” resulting from Group Resources’s willful misconduct or fraud.

Notably, the indemnification provision is bereft of any definition for the term “claim”

that requires an adjudication, judgment, or showing of proof on a claim for fraud.

Thus, construing the term according to its plain meaning,”claim” is commonly

understood as “[a] statement that something yet to be proved is true.” Black’s Law

Dictionary (10th ed. 2014). It is clear from the plain language of the indemnification

provision that allegations such as those in the Florida lawsuit fall into this definition

of a claim and that the exclusionary language applies. Therefore, the trial court was

authorized to grant the City Defendants’ motion for summary judgment.

2. In light of our holding in Division 1 that the City Defendants did not breach

their duty to indemnify Group Resources under the terms of the Agreement, we do not

need to address the merits of Group Resources’s remaining enumerations, as they are

now moot.

Judgment affirmed. Branch, J., concurs. McFadden, P. J., dissents.*

* THIS OPINION IS PHYSICAL PRECEDENT ONLY. COURT OF

APPEALS RULE 33.2 (a)

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A17A1699. GROUP RESOURCES, INC. v. CITY OF WAYCROSS

et al.

MCFADDEN, Presiding Judge, dissenting.

I respectfully disagree with the majority decision to affirm the grant of

summary judgment to the City Defendants. Contrary to the majority’s interpretation

of the contractual indemnification provision, that provision requires a showing of

willful misconduct or fraud by Group Resources in order for the City Defendants to

avoid their contractual obligation to indemnify. Because the City Defendants have

failed to show the absence of any genuine issues of material fact as to the alleged

willful misconduct or fraud of Group Resources, summary judgment in the defendants

favor was not authorized. Likewise, there are genuine issues of material fact as to the

other grounds for summary judgment raised by the City Defendants. Accordingly, I

dissent.

1. Indemnification provision.

The indemnification provision contained in the contract provides, in pertinent

part, that the City Defendants agree to indemnify and hold harmless Group Resources

from and against any claim, action, cause of action, loss . . ., liability,

cost, expense, fee, damage, tax, or penalty (including reasonable

attorney and accountant fees) which may be made or imposed by any . . .

persons . . . resulting from, or in connection with, the operation of the

Plan . . . , unless such claim, action, cause of action, loss, cost, expense,

fee, damage, tax or penalty results from [Group Resources’] willful

misconduct or fraud. (Emphasis supplied).

As the majority notes, Group Resources sought indemnification pursuant to this

provision for the costs and expenses it incurred in defending and settling a federal

action seeking payment for services rendered to a patient covered by the Plan. In

affirming the trial court’s grant of summary judgment to the City Defendants, the

majority focuses solely on the word “claim” as used in the exception emphasized

above; the majority concludes that because the “claim” in the federal action alleged

fraud by Group Resources, then the exception applies and the defendants are not

bound by the indemnification agreement. However, the majority has ignored the

qualifying language of the exception, which plainly provides that the exception

applies only if the claim, not to mention any costs and expenses, “results from willful

misconduct or fraud” of Group Resources. (Emphasis supplied.) Thus, contrary to the

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majority’s finding, the plain language of this exception does not provide that it

applies if a claim merely alleges fraud; rather, it applies only if the claim results from

fraud.

The verb “results” means “‘[t]o happen as a consequence.” The American

Heritage Dictionary of the English Language (5th Ed. 2018),

https://ahdictionary.com/word/search.html?q=results. So in order for the exception

to the indemnification requirement to apply, the claim (or the expenses or the costs)

in question must have happened as a consequence of fraud by Group Resources.

Whether or not the federal claim at issue in this case resulted from, or happened as

a consequence of, fraud by Group Resources necessarily requires a finding that Group

Resources in fact committed fraud; such a determination cannot rest on a mere

allegation of fraud. Although Group Resources settled that federal claim, it has

averred that the settlement was not an admission of liability or of fraud, but instead

was a decision to mitigate its losses from the lengthy litigation. Under these

circumstances, there remain genuine issues of material fact as to whether the federal

claim, as well as the costs and expenses incurred by Group Resources, resulted from

fraud by Group Resources. Accordingly, the defendants were not entitled to summary

judgment.

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2. Official immunity.

Defendant Raphel Maddox also argues that he, individually, was entitled to

summary judgment on the basis of official immunity. But he has failed to show by the

record that there are no genuine issues of material fact as to the issue of such

immunity.

“[T]he doctrine of official immunity provides that a public officer or employee

may be personally liable for his negligent ministerial acts, but he may not be held

liable for his discretionary acts unless such acts are wilful, wanton, or outside the

scope of his authority.” Clive v. Gregory, 280 Ga. App. 836, 841 (2) (635 SE2d 188)

(2006) (citation omitted). “A discretionary act calls for the exercise of personal

deliberation and judgment, which in turn entails examining the facts, reaching

reasoned conclusions, and acting on them in a way not specifically directed.” Smith

v. Lott, 317 Ga. App. 37, 38 (730 SE2d 663) (2012) (citation and punctuation

omitted).

Maddox claims that any role he had in the refusal to indemnify Group

Resources under the terms of the agreement constituted discretionary actions by him

that are protected by his official immunity. The only evidence he has pointed to in

support of this claim is evidence that he forwarded copies of Group Resources’

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requests for indemnification to the city’s insurance carrier and the city attorney. But

he has not cited any other evidence concerning the scope of his official authority; any

evidence showing that his purported discretionary actions were done without

wilfulness, malice, or corruption; or any evidence establishing without question that

his actions were not negligently performed ministerial acts.

A defendant moving for summary judgment must show that there is no genuine

issue of material fact and he “may do this by either presenting evidence negating an

essential element of the plaintiff’s claims or establishing from the record an absence

of evidence to support such claims.” Cowart v. Widener, 287 Ga. 622, 623 (1) (a)

(697 SE2d 779) (2010) (citation and punctuation omitted). Maddox has failed to carry

this burden and therefore was not entitled to summary on this basis.

3. Voluntary payment doctrine.

The City Defendants also contend that the voluntary payment doctrine set forth

in OCGA § 13-1-13 applies to Group Resources’ settlement of the federal lawsuit and

thus precludes Group Resources’ instant indemnity claim. The contention is without

merit.

OCGA § 13-1-13 provides:

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Payments of claims made through ignorance of the law or where all the

facts are known and there is no misplaced confidence and no artifice,

deception, or fraudulent practice used by the other party are deemed

voluntary and cannot be recovered unless made under an urgent and

immediate necessity therefor or to release person or property from

detention or to prevent an immediate seizure of person or property.

Filing a protest at the time of payment does not change the rule

prescribed in this Code section.

This voluntary payment “doctrine generally bars the recovery of excess payments, not

payments made to a third party who is not involved in the litigation.” Hibbard v.

McMillan, 284 Ga. App. 753, 756 (2) (645 SE2d 356) (2007) (emphasis in original;

citations omitted). See also Read v. Benedict, 200 Ga. App. 4, 9 (4) (406 SE2d 488)

(1991). While the doctrine is generally applied in the context of overpayment between

the parties to a lawsuit, that does not mean that the doctrine “can never apply in a case

involving a payment to a third party.” Progressive Electrical Services v. Task Force

Construction, 327 Ga. App. 608, 618 (2) (f), n. 5 (760 SE2d 621) (2014).

In this case, Group Resources is not seeking recovery of an excess payment

made to the City Defendants, but instead is seeking to enforce a contractual

indemnification provision in order to recover costs and expenses incurred in an action

brought by a third-party. Under Progressive, supra at 618, the voluntary payment

doctrine may apply to bar this type of third-party payment. Assuming that the doctrine

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can be applied here, Group Resources nevertheless asserts that the doctrine does not

bar recovery under the indemnification clause because the decision to settle the

federal case was “made under an urgent and immediate necessity.” OCGA § 13-1-13.

In that regard, we have held that the doctrine applies and bars recovery where “the

evidence submitted on the motion [for summary judgment] affirmatively shows that

[the plaintiff] voluntarily paid to [the defendant] the sums of money in settlement of

a disputed claim, and that [the plaintiff] was not under any duress or compulsion to

make payment, and having paid it out under these conditions, he cannot recover it

back.” Crawford v. Gulf States Mtg. Co., 153 Ga. App. 393, 394 (265 SE2d 327)

(1980) (citations and punctuation omitted).

Here, however, the evidence does not affirmatively show that Group Resources

was not under any duress to make the settlement. On the contrary, Group Resources

has shown that after a year-and-a-half of litigation, its legal fees and expenses had

ballooned to an exorbitant amount, that the City Defendants had failed to respond to

Group Resources repeated requests for indemnification under the contract, and that

even greater expenses would have been incurred during a lengthy trial that potentially

could have ended in a judgment that would have forced the company out of business.

Under these circumstances, I believe that there is a genuine issue of material fact as

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to whether the decision to settle was made under an urgent and immediate necessity.

Accordingly, summary judgment on the basis of the voluntary payment doctrine

would be improper.

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