American Druggists Ins. Co. v. Henry Contracting, Inc.

• Decision Date: 04 March 1987
• Docket Number: No. 86-273,86-273
• Parties: AMERICAN DRUGGISTS INSURANCE COMPANY, Plaintiff-Garnishor-Appellant and Appellee, v. HENRY CONTRACTING, INC., et al., Defendant, Village of Leonville, Garnishee-Appellee and Appellant.
• Court: Court of Appeal of Louisiana — District of US

Page 734

505 So.2d 734

AMERICAN DRUGGISTS INSURANCE COMPANY, Plaintiff-Garnishor-Appellant and Appellee, v. HENRY CONTRACTING, INC., et al., Defendant, Village of Leonville, Garnishee-Appellee and Appellant.

No. 86-273.

Court of Appeal of Louisiana, Third Circuit.

March 4, 1987.

Rehearing Denied May 5, 1987.

Dan B. McKay, Jr., Bunkie, for plaintiff-appellant, appellee.

Morrow and Morrow, James P. Ryan, Opelousas, for defendant-appellee-appellant.

Before DOMENGEAUX, FORET and KNOLL, JJ.

DOMENGEAUX, Judge.

In this garnishment proceeding the plaintiff American Druggists Insurance Company ¹ seeks to enforce a judgment against Henry Contracting, Inc., Rodney Henry, and Karen F. Henry, by garnishing funds which the Village of Leonville allegedly owed to Henry Contracting under a construction contract. The trial court rendered judgment in favor of American Druggists', setting the amount the Village owed Henry Contracting at $11,692.28, with interest, and ordering the Village to withhold that amount and pay it to the Sheriff of St. Landry Parish for credit on the Writ of Fieri Facias issued upon motion of American Druggists. From this judgment both American Druggists and the Village of Leonville appeal.

On June 22, 1981, Henry Contracting entered into an agreement with the Village to construct an eight inch water transmission line. The agreement required Henry Contracting to begin work within ten days of the Notice to Proceed, and to complete the work within 120 calendar days. The Notice to Proceed was dated October 2, 1981, with the 120 days for completion starting on October 12, 1981. During this period there were 87 "non-work" days. On June 29, 1982, the Board of Health gave its approval for the water transmission system.

In its bid for the Leonville water transmission line project, Henry Contracting completed a bid schedule which listed 20 items, giving the unit price bid for each item as well as the total bid for the item based on the total number of units. The total bid for the contract was reached by taking the sum of all 20 individual units. Henry Contracting made a total bid of $139,019.57.

On February 15, 1984, the Ninth Judicial District Court rendered judgment in favor of American Druggists and against Henry Contracting, Rodney Henry, and Karen F. Henry in the sum of $32,000.00, plus $1,500.00 as attorney's fees, and interest. American Druggists brought this proceeding in the Twenty-seventh Judicial District Court for the Parish of St. Landry to make the Ninth Judicial District Court judgment executory, to have a Writ of Fieri Facias issued to the St. Landry Parish Sheriff for seizure of a debtor's property, and further to have the Village cited as garnishee and served with garnishment interrogatories. Subsequently, American Druggists filed a Rule to Traverse the Village's answers to the interrogatories.

In answer to the garnishment interrogatories, the Village stated that while the original contract bid price was $139,019.57, the amount owed under the contract was $125,422.56, that $113,360.08 had been paid, and that, after deducting $7,048.56 for damages, $4,983.92 was due Henry Contracting on the contract.

After trial on the rule to traverse the answers to the interrogatories, the trial court made the following conclusions: that the contract was ambiguous in that it was uncertain whether the price was fixed or dependent on the quantity of work actually required; that testimony determined that the contract price was dependent on the amount of work actually performed; that that price was $125,422.56, plus allowable extras and interest; that the price of allowable extras totaled $4,830.00; and that there is an offset of $5,200.00 for 52 days delay as stipulated damages. The trial court concluded that the net amount which the Village owed Henry Contracting was $11,692.28, plus interest.

American Druggists makes the following assignment of error:

(1) that the trial court erred in awarding less than the difference between the amount bid on the contract and the amount actually paid prior to garnishment based on his conclusion that the contract was ambiguous and that the testimony showed the parties intended a contract price dependent on the quantity of work actually performed, which price was found to be $125,422.56;

(2) that the trial court erred in assessing $5,200.00 in stipulated damages based on 52 days delay as offset deductible from the amount the Village owes; and

(3) that the trial court erred in not allowing legal interest to accrue from the date of substantial completion on the amounts owed on the contract and with respect to the extras erred in allowing legal interest to accrue only from the date of judicial demand.

The Village assigns as error the trial court's finding that American Druggists was entitled to recover for extra work in the amount of $4,830.00 when the original petition contains no allegation of any such claim.

With respect to American Druggists first assignment of error, we must determine whether the trial court correctly concluded that the written contract was ambiguous and whether it correctly admitted parol evidence with regard to the contract's terms. The Louisiana rule on the admissibility of parol evidence was stated in Dixie Campers, Inc. v. Vesely Co., 398 So.2d 1087, at 1089 (La.1981), as follows:

"Although parol evidence is inadmissible to vary the terms of a written contract, La.C.C. art. 2276, when the terms of a written contract are susceptible to more than one interpretation, or there is uncertainty or ambiguity as to its provisions, or the intent of the parties cannot be ascertained from the language employed, parol evidence is admissible to clarify the ambiguity and to show the intention of the parties."

The contract in this case consists of a number of documents, including the advertisement for bids, information for bidders, the bid, notice of award, the agreement, a statement of general conditions, and a supplemental statement of general conditions. In its bid for the project, Henry Contracting states that it will perform all work for the construction of the Leonville water transmission line "in strict accordance with the CONTRACT DOCUMENTS, within the time set forth therein, and at the prices stated below." (Emphasis added). The "prices" stated in the bid are for twenty items. The bid gives a unit and total price for each of the twenty items. The bid also gives a total contract price based on the sum of the total price of each item. The use of the plural "prices" suggests that payment was to be based on the unit prices stated and not on the total contract price, which was also stated. In any event this language is unclear.

In the notice of award sent to Henry Contracting, the Village states "[y]ou are hereby notified that your BID has been accepted for items in the amount of $139,019.57." This language indicates to us that all items would be provided for at a set price of $139,019.57.

The language of the agreement, however, contributes to the uncertainty already created. Paragraph 4 of the agreement states: "The CONTRACTOR agrees to perform all of the WORK described in the CONTRACT DOCUMENTS and comply with the terms for the sum of $139,019.57 or as shown in the BID schedule." From this language it cannot be determined whether the work will be completed for the set sum of $139,019.57 or for a price based on the unit prices stated in the BID schedule.

Other provisions of the contract do not remove the ambiguities already mentioned. For instance, the definition of CONTRACT PRICE is not helpful. This definition, found at paragraph 1.2 of the General Conditions, merely states that the CONTRACT PRICE is the "total monies payable to the CONTRACTOR under the terms and conditions of the CONTRACT DOCUMENTS." Paragraph 14 of the General Conditions requires a change order to alter the contract price and lists the methods for determining the value of any increase or decrease in the CONTRACT PRICE. This provision does not, however, give any guidance for determining the initial value of the CONTRACT PRICE. Paragraph 19, regarding payments to the contractor, sets out the method for making partial payments to the contractor during performance of the contract for work completed. This provision does not indicate on what basis the CONTRACT PRICE is to be determined.

Our review of the contract's language leads us to conclude that the contract in this case is susceptible to more than one reasonable interpretation and uncertain as to the intention of the parties. The trial court, therefore, was correct in concluding that the contract was ambiguous.

Having concluded that the contract was ambiguous, the trial court correctly admitted parol evidence to determine the intention of the parties with regard to the basis for determining the contract price. David Naomi, a civil engineer, testified that he was the engineer on the job responsible for administering the contract between the Village and Henry Contracting. The transcript of Mr. Naomi's testimony on direct examination reveals the following dialogue concerning the contract price:

"Q. Now, I direct your attention to--you're familiar with the contract bid price in this particular contract, is that right?

A. That's correct.

Q. What was the amount?

A. $139,019.57.

Q. All right. Now, in No. 3 you've answered that the actual amount paid--no, the actual amount due under the original terms of the contract is $125,422.56, is that correct?

A. That's correct.

Q. As the engineer, how did you arrive at that figure?

A. Basically, the contract is a unit-price contract, what the contractor installs. However many feet of pipe or as many of valves, we pay him for that particular number of feet and that particular number of valves and whatever other item is in the contract.

Q. Was the original amount of pipe and the original amount of valves that was quoted in the original contract, was that actually installed by...