United States District Court, S.D. Ohio, Western Division
Stephanie K. Bowman Magistrate Judge
DECISION AND ENTRY ADOPTING THE REPORT AND
RECOMMENDATION OF THE UNITED STATES MAGISTRATE JUDGE (Doc.
57) AND TERMINATING THIS CASE IN THIS COURT.
Timothy S. Black United States District Judge.
case is before the Court pursuant to the Order of General
Reference to United States Magistrate Judge Stephanie K.
Bowman. Pursuant to such reference, the Magistrate Judge
reviewed the pleadings filed with this Court and, on November
22, 2017, submitted a Report and Recommendation. (Doc. 57).
Defendant, the United States of America, and Plaintiff,
Fidelity and Deposit Company of Maryland, each filed
objections on 12/13/17. (Doc. 59; Doc. 60).
objections are not well-taken. After reviewing both the
Report and Recommendation and Defendant's objections, the
Court finds that each of Defendant's five objections lack
merit because: (1) The Report and Recommendation correctly
determined that evaluating the existence of property rights
under state law is a prerequisite for determining whether a
federal tax lien can attach to alleged property; (2)
non-party Cosmos in fact had no property interest in the
disputed funds generated after September 1, 2015-the property
interest in those funds was held by Plaintiff as the
performing surety; (3) The Report and Recommendation
correctly applied the doctrine of subrogation to the facts of
this case; (4) Plaintiff is entitled to the disputed funds
generated before September 1, 2015 by virtue of its
satisfaction of the outstanding mechanics' liens and
fringe benefit claims that led to the withholding of those
funds; (5) A declaration of default is not an absolute
prerequisite to a performing surety's right to claim
ownership of funds generated through performance.
reasoning of the Report and Recommendation speaks for itself,
and the Court fully adopts that reasoning as its own (with
the exceptions of the minor adjustments articulated in this
Order). Ultimately, Defendant advocates an untenable and
inequitable resolution to this case. A ruling in
Defendant's favor would hold that Plaintiff, despite
doing all the work and generating all the expense required to
generate the disputed funds in this case, had no property
rights over any of the fruits of its labor.
“Ultimately, the doctrine [of subrogation] will be
invoked when necessary to prevent injustice.” Am.
Ins. Co. v. Ohio Bur. of Workers Comp., 577 N.E.2d 756,
759 (Ohio Ct. App. 1991). That doctrine is appropriately
invoked in this case.
required by 28 U.S.C. § 636(b) and Fed.R.Civ.P. 72(b),
the Court has reviewed the comprehensive findings of the
Magistrate Judge and considered de novo all of the
filings in this matter. Upon consideration of the foregoing,
the Court does determine that such Report and Recommendation
should be and is hereby adopted.
objections, while agreeing with the reasoning and conclusion
of the Report and Recommendation, request certain
clarifications which, after review, the Court finds are
appropriate. The first such clarification is a minor
typographical error from the Report and Recommendation. The
Report and Recommendation states that “[b]etween
September 2, 2014 and November 19, 2015, F&D also paid
all thirteen outstanding mechanics' liens that ODOT had
received.” (Doc. 57, at 6). That first date should read
“September 1, 2015” and not “September 2,
2014.” The second request for clarification involves
the Report and Recommendation's occasional reference to
non-party Cosmos Industrial Services, LLC
(“Cosmos”) having “made a claim under the
bonds.” (See, e.g. Id. at 15). Cosmos, as the
principal, was the primary obligor under the bonds, and not a
beneficiary-Cosmos accordingly could not “make a
claim” under the bonds. Plaintiff's obligation to
perform by maintaining the work flow on the bonded projects
at issue in this case arose not due to any claim made by
Cosmos but due to Plaintiff's status as the surety and
secondary obligor with duties to the oblige under the bonds
(in this case, the Ohio Department of Transportation). This
clarification of the roles of Plaintiff and Cosmos does not
affect this Court's complete adoption of the Report and
Recommendation's conclusion or of its reasoning regarding
the application of the principles of subrogation to this
case. Other than the minor corrections identified above, the
Report and Recommendation is adopted in its entirety.
IT IS ORDERED that:
Report and Recommendation (Doc. 57) is
ADOPTED in full but for the minor
clarifications set forth in this Order at p. 3;
Plaintiff's motion for summary judgment (Doc. 43) is
Defendant's motion for summary judgment (Doc. 45) is
funds previously deposited with this Court pursuant to Local
Rule 77.2 (see Doc. 42) shall be released in their
entirety to Plaintiff, subject to the handling fees outlined
in Local Rule 77.2(c);
Clerk shall enter a judgment accordingly, whereupon this case
shall be CLOSED.