Continental Casualty Co. v. Associated Pipe & Supply Co., Civ. A. No. 12713

• Decision Date: 13 December 1967
• Docket Number: 12701 and 12579.,12714,12681,Civ. A. No. 12713
• Citation: 279 F. Supp. 490
• Parties: CONTINENTAL CASUALTY COMPANY v. ASSOCIATED PIPE & SUPPLY CO., Inc., et al. TEXACO, INC. v. OFFSHORE GATHERING CORP. et al. UNDERWATER SERVICES, INC. v. OFFSHORE GATHERING CORP. COMMONWEALTH OIL COMPANY, DIVISION OF JUPITER CORPORATION, Inc. v. OFFSHORE GATHERING CORP. et al. UNITED TUGS, INC. v. CONTINENTAL CASUALTY COMPANY, Texaco, Inc. and Offshore Gathering Corp.
• Court: U.S. District Court — Eastern District of Louisiana

279 F. Supp. 490

CONTINENTAL CASUALTY COMPANY v. ASSOCIATED PIPE & SUPPLY CO., Inc., et al.

TEXACO, INC. v. OFFSHORE GATHERING CORP. et al.

UNDERWATER SERVICES, INC. v. OFFSHORE GATHERING CORP.

COMMONWEALTH OIL COMPANY, DIVISION OF JUPITER CORPORATION, Inc. v. OFFSHORE GATHERING CORP. et al.

UNITED TUGS, INC. v. CONTINENTAL CASUALTY COMPANY, Texaco, Inc. and Offshore Gathering Corp.

Civ. A. Nos. 12713, 12714, 12681, 12701 and 12579.

United States District Court E. D. Louisiana, New Orleans Division.

December 13, 1967.

Eugene D. Saunders, Lawrence K. Benson, Jr., K. H. Gilly and Ernest L. O'Bannon, New Orleans, La., for Thos. Jordan, Inc. and Associated Pipe & Supply Co., Inc.

Rbt. D. Edwards and John E. Fleury, Gutna, La., for Pipe Line Serv. Corp.

Geo. A. Frilot, III, New Orleans, La., for Ayers Materials Co., Inc.

Quinton T. Hardtner, III, for D. E. Stearns Co.

Wm. A. West, Jr., New Orleans, La., for Evans Cooperage Co., Inc.

Cicero Sessions and Donald P. Endom, Michale J. Molony, Jr., New Orleans, La., for Howard T. Tellepsen, d/b/a Tom Hichs Transfer Co.

John B. Hattier, New Orleans, La., for Leson Chevrolet Co., Inc.

Vincent C. Rodriguez, New Orleans, La., for Acme Truck Line, Inc.

Melvin J. Duran, New Orleans, La., for Gerhardt's Inc.

Richard J. McGinity, Jr., New Orleans, La., for Offshore Gathering Corp.

Robert Rainold, Robert E. Leake, Jr., New Orleans, La., for Wigwam, Inc.

James O. Manning, New Orleans, La., for Borrucci Bros. Construction Co., Inc.

Melvin W. Mathes, New Orleans, La., for Electronic Service, Inc.

T. M. McBride, III, Arabi, La., for Frolich Bros. Marine Divers, Inc.

Patrick J. Butler and William J. Wegmann, New Orleans, La., for O. S. Justus, d/b/a Globe Equipt. Co Milton L. Williams, Shreveport, La., for Williams Pressure Service.

A. D. Freeman, Jr., New Orleans, La., for B & G Lumber Co., Cran Rental Co., Buras Drugstore, C. L. Dill Co., and E. N. Despaux.

Patrick E. Carr, Metaire, La., for John R. Lambert, Jr., and Marshland Aviation, Inc.

Sidney W. Provensal, Jr., New Orleans, La., for Ellzey Marine Supplies, Golden Meadows Oil Co. and Irby Charping.

Warren M. Simon, Jr., New Orleans, La., for New Orleans Armature Works, Inc.

Felix W. Gaudin, New Orleans, La., for New Orleans Blue Print & Supply Co.

A. Morgan Brian, Jr., New Orleans, La., for Continental Cas. Co. and Texaco, Inc.

Richard Blaise Jurisich, New Orleans, La., for Tassin Marsh Equipment Co.

E. Howard McCaleb, Jr., William W. Messersmith, III, and James J. Morrison, New Orleans, La., for Empire Machine Works, Inc.

Daniel P. Hurley, Wiley G. Lastrapes, New Orleans, La., for Texaco, Inc.

John M. Page, New Orleans, La., William Vandry, for Circle, Inc.

Warren Rush, Lafayette, La., Harold B. Judell, New Orleans, La., for Glaser Construction Co., Inc.

Robert G. Hebert, Herbert O'Neill, Thibodaux, La., for Alcide Bernard.

Joseph E. Friend, New Orleans, La., for Industrial Welding Supply Co.

Emile Turner, Peter L. Bernard, Jr., New Orleans, La., for Underwater Services, Inc.

Cicero C. Sessions, New Orleans, La., Edward T. Diaz, Golden Meadow, La., for United Tugs, Inc.

Gilbert P. Cohen, Gutna, La., Paul F. Rogyom, Kenner, La., and Rbt. I. Broussard, Gutna, La., for Boechk Engineering Co., Crescent Welding and Charles Spahr.

Peter H. Beer, New Orleans, La., Richard Cocke, Houston, Tex., for Commonwealth Oil Co.

Charles J. Hanemann, Jr., New Orleans, La., Philip E. Henderson, Joseph L. Waitz, Houma, La., for Foods and Service, Inc.

CASSIBRY, District Judge:

The principal issues involved in this case are whether the Louisiana Private Works Act¹ or the Louisiana Oil, Gas and Water Wells Act² (hereafter referred to as Oil Well Act) afforded lien coverage to suppliers of material, labor and services on an oil pipeline construction project which extended from land upon the Outer Continental Shelf of the Gulf of Mexico. Both Acts clearly cover the project involved, and I so hold.

Texaco, Inc. (hereafter called Texaco) and Offshore Gathering Corporation (hereafter called Offshore) entered into a contract dated October 27, 1961, and executed in writing November 1, 1961, which called for Offshore as prime contractor to construct for Texaco as owner, an underwater-underground pipeline gathering system to service Texaco's offshore oil and gas field known as South Pass Area Block 37. The pipeline is known as the "South Pass Gathering System." In connection with the above contract, Offshore provided Texaco a performance-indemnity bond with Continental Casualty Company (hereafter called Continental) as surety thereon. The original bond dated November 29, 1961, was in the amount of $397,000. By rider dated December 11, 1961, the amount of the bond was increased to $442,000. Neither the contract nor the bond and its rider were ever recorded. The work under the contract was completed by Offshore and accepted by Texaco on May 28, 1962. At that time many parties who had furnished labor, materials, equipment or services in connection with the contract were unpaid. After completion of the job and after deducting the progress payments which it had made to Offshore, Texaco still had on hand $178,796.16 which it owed to Offshore under the contract. But since Offshore had failed to pay the many suppliers and creditors, Texaco withheld the balance which it was entitled to do under its contract with Offshore, and filed its interpleader and deposited the money in the registry of the Court.

In the Continental interpleader action, Continental has placed in the registry of the Court $442,000, the full amount of its bond. Many of Offshore's creditors have filed claims upon the funds deposited in the Texaco interpleader and some of these creditors, having recorded liens, also filed claims under Louisiana lien laws. Some creditors also filed claims against Continental under the bond. Texaco concedes that if no lien law is applicable to the work performed by Offshore, it (Texaco) will be a mere stakeholder and have no interest in the fund. If, on the other hand, any claims filed against Texaco itself are valid, then Texaco does assert an interest in the fund for reimbursement of any sums it is called upon to pay. Continental denies any liability in the matter except as to indemnity it may owe Texaco to reimburse it for losses incurred as a result of claims filed under lien laws. In addition to the many claims made by creditors in the interpleader actions, three suits were filed by parties directly against Texaco and Continental. These suits have been consolidated with the interpleaders and all have been tried together.

Two of the claimants, United Tugs, Inc. (hereafter called United), and Thomas Jordan, Inc. (hereafter called Jordan), claim Offshore made assignments to them of contract funds in Texaco's hands which Texaco agreed to, and that Texaco independently guaranteed to pay United and Jordan what was due them to insure completion of the job.

The issues then, to be decided, are as follows:

(1) Whether the construction project performed by Offshore is of a nature contemplated by and within the scope of the Louisiana Private Works Statute, LSA-R.S. 9:4801 et seq.

(2) Whether the construction project performed by Offshore is of a nature contemplated by and within the scope of the Louisiana Oil, Gas and Water Well Statute, LSA-R.S. 9:4861 et seq.

(3) Whether Continental is liable to certain claimants by virtue of the bond it executed as surety for Offshore.

(4) The validity of assignment of contract funds made by Offshore to United and Jordan and/or whether Texaco made an independent promise or guaranty to pay the claims of United and Jordan.

Before discussion of these issues a closer look at the work performed by Offshore would be in order.

Texaco's "South Pass Gathering System," constructed and installed by Offshore, is a gathering system of pipelines through which fluids, including gas, move from well sites in the offshore field in the Gulf of Mexico (South Pass Area Blocks 37 and 38) to Texaco's inshore terminal located in the marshlands of Garden Island Bay in lower Plaquemine Parish, Louisiana. The gathering system consists of a series of connected pipelines. Fluids from well sites at "A", "B" and "D" Structures move through shorter pipelines to a central platform called "C" Structure, then, together with fluids from well sites at "C" Structure, move through a longer 12-inch pipeline to the inshore terminal for processing. (See Sketch "I")

The three shorter pipelines are as follows: (i) a 12-inch pipeline running between "D" Structure and "C" Structure; (ii) a 6-inch pipeline running between "B" Structure and "C" Structure; and (iii) a 4-inch pipeline running from "A" Structure to "C" Structure. These offshore platforms ("A", "B", "C" and "D") were constructed by Texaco, and are fixed to the Gulf bottom.

The method of laying the longer 12-inch pipeline between "C" Structure and the inshore terminal was based upon environmental conditions along the route. Through the inland marsh, the pipeline was laid in one continuous three-foot-deep dredged ditch which was backfilled. Under Cadro Pass and South Pass of the Mississippi River, the dredged ditch in which the pipeline was laid is three feet under Cadro's bottom soil and as deep as fifteen feet below the bottom of South Pass' channel. The entire ditch under Cadro Pass, and that part of the ditch on the side slopes of the South Pass crossing, was backfilled. In the Gulf, out to a point where the water is fifteen feet deep, the pipeline was laid in a continuation of the same three-foot-deep dredged ditch, which also was backfilled. For the rest of the distance to "C" Structure, the pipeline was laid below the mud-line surface of the Gulf bottom. However, except as noted hereinafter, it was not placed there by the dredged-trench method just described. It was coated with concrete until it weighed about 165 pounds per linear foot, and, in this condition,...