Ronquillo v Korea Automobile, Fire & Marine Insurance Company Ltd [2001] GUSC 25; 2001 Guam 25 (13 December 2001)

IN THE SUPREME COURT OF GUAM

MAXIMO V. RONQUILLO and NELLIE P. RONQUILLO,
Plaintiffs-Appellees/Counterclaim Defendants-Appellees,

vs.

KOREA AUTOMOBILE, FIRE, & MARINE INSURANCE
COMPANY, LTD., JANICE C. MANSFIELD aka JANICE O'NEILL, and ERNEST A. MURPHY,
Defendants-Appellants/Counterclaim Plaintiffs-Appellants.

OPINION

Cite as: 2001 Guam 25

Filed: December 13, 2001

Supreme Court Case No.: CVA01-004
Superior Court Case No.: CV1076-99

Appeal from the Superior Court of Guam
Argued and Submitted on September 12, 2001
Hagåtña, Guam

Attorney for Plaintiffs-Appellees: Stephanie G. Flores, Esq. Phillips & Bordallo, P.C. 410 West O'Brien Drive Hagåtña, Guam 96910

Attorney for Defendants-Appellants: Thomas C. Sterling, Esq. Klemm, Blair, Sterling & Johnson, P.C. Suite 1008, Pacific News Building 238 Archbishop F.C. Flores Street Hagåtña, Guam 96910

BEFORE: PETER C. SIGUENZA, JR., Chief Justice; F. PHILIP CARBULLIDO, Associate Justice; BENJAMIN J.F. CRUZ, Justice Pro Tempore.

CARBULLIDO, J.:

[1] Maximo V. and Nellie P. Ronquillo (ARonquillos@) sued Korea Automobile, Fire, and Marine Insurance Company (ASurety@) for quiet title and sought to enjoin Surety from foreclosing on a mortgage to certain real property. The mortgage was issued as security on an indemnity agreement that was issued pursuant to a construction performance bond. The issue is whether Surety's responsibilities under the performance bond were triggered by the contractor's defective work or breach of the construction contract. The trial court found against Surety and thereby quieted title to the disputed property in the Ronquillos. Surety appeals. We reverse.

I.

[2] This case arose from a defective construction claim. Phil-Guam Builders Corporation (APhil-Guam@) entered into a contract with Janice C. Mansfield, also known as Janice O'Neill, and Ernest A. Murphy (AO'Neill and Murphy@) to construct a home in Santa Rita, Guam. The contract price for the construction of the home was $191,500.00. In connection with the construction contract, and on behalf of Phil-Guam, a performance bond was issued by Surety. By an indemnity agreement, the Ronquillos, principal owners of Phil-Guam, agreed to indemnify Surety for any sums paid by Surety under the bond, and executed a mortgage of real property to Surety to secure the indemnity agreement. Construction proceeded on the home and an occupancy permit was issued on March 25, 1995.

[3] Shortly after O'Neill and Murphy moved into the home, the windows began to leak. O'Neill and Murphy notified Phil-Guam and Surety of the problem by a letter dated June 5, 1995. On June 8, 1995, Surety sent a letter to Phil-Guam indicating a potential claim and requesting that Phil-Guam correct the problem. On October 25, 1995, Surety again sent a letter to Phil-Guam requesting its cooperation in remedying the situation. On different occasions, Phil-Guam attempted to correct the problem but was not successful. In November 1995, the parties attended a pre-default hearing. By February 1996, Surety had retained the services of two different consultants who agreed that the cause of the problem was faulty installation by Phil-Guam. In July 1996, O'Neill and Murphy, pursuant to the terms of the construction contract, declared Phil-Guam in default. Surety hired another contractor to install new windows and fix the damage caused by the leakage. Surety paid $124,779.00 to replace the windows and repair the damages. Surety sought to foreclose on the mortgage executed by Ronquillo, and in April of 1999, Surety recorded a notice of sale under mortgage of the subject real property at the Department of Land Management.

[4] To stop the sale under mortgage, the Ronquillos filed the underlying complaint to quiet title against Surety, and O'Neill and Murphy. Surety filed an answer and a counterclaim against the Ronquillos and the Bank of Guam for the amount paid for the repairs.[1] The trial court rendered judgment for the Ronquillos, holding that Surety had not acted in accordance with the contract provisions when stepping in to make the repairs. The trial court further held that the defective work did not constitute a default under the contract triggering the obligations of Surety under the performance bond. This appeal followed.

II.

[5] This court has jurisdiction over an appeal from a final judgment. Title 7 GCA ' 3107(b) (1994).

III.

[6]