Finding Surety Sufficiently Pled for Quia Timet, Court Denies Motion to Dismiss

Safeco Ins. Co. of America v. Tarragon Corp., 2008 WL 427969 (M.D. Fla. Sept. 16, 2008)

In Safeco, a third-party sued a general contractor and a surety in state court to recover against a Section 713.24 lien transfer bond.  Because the contractor refused to honor its obligations to the surety under their indemnity agreement, the surety then sued the contractor in federal court, asserting a claim quia timet, based on the future monies that the third-party was demanding on the bond.  Quia timet allows a person to seek equitable relief from future probable harm to a specific right.  Under Florida law, quia timet relief is not appropriate without proof that the surety realistically faces loss under the bond and is in jeopardy.

The Middle District found that the surety sufficiently pled for quia timet to survive a motion to dismiss because the surety alleged, based on the state court suit that:  (i) the surety may be called upon in the future to pay debts, and unless granted relief, the surety will not be adequately paid, secured, and/or collateralized for potential obligations prior to making any necessary and appropriate payments; (ii) the contractor failed to reimburse the surety for damages suffered to date or to collateralize the surety for potential liability; (iii) the contractor was experiencing financial difficulties and recently liquidated $91 million in real property; (iv) if relief is not granted, the contractor may continue to sell, transfer, dispose of or otherwise divert assets; and (v) the surety was without a plain, speedy or adequate remedy at law, and will be irreparably and permanently injured.

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