Corrosion Rectifying Co. v. Freeport Sulphur Co.

• Decision Date: 31 July 1961
• Docket Number: Civ. A. No. 13313.
• Citation: 197 F. Supp. 291
• Parties: CORROSION RECTIFYING COMPANY, Plaintiff, v. FREEPORT SULPHUR COMPANY, Defendant.
• Court: U.S. District Court — Southern District of Texas

197 F. Supp. 291

CORROSION RECTIFYING COMPANY, Plaintiff, v. FREEPORT SULPHUR COMPANY, Defendant.

Civ. A. No. 13313.

United States District Court S. D. Texas, Houston Division.

July 31, 1961.

Bracewell, Reynolds & Patterson, William Key Wilde, Houston, Tex., for plaintiff.

Andrews, Kurth, Campbell & Jones, Richard F. Bergner, Houston, Tex., for defendant.

INGRAHAM, District Judge.

This controversy concerns repairs by plaintiff Corrosion Rectifying Company on the Grand Island Mine artificial islands of defendant Freeport Sulphur Company, located some seven miles off the Louisiana coast. Negotiations for repairs and performance thereof occurred on these islands. A jury verdict awards plaintiff $13,579.37 for repairs. Two issues remain: (1) plaintiff's request for allowance of its attorney's fee; and (2) amount of interest and time of its commencement. I find that a reasonable attorney's fee for plaintiff would be $2,500. Claiming Texas law governs attorney's fee here, plaintiff relies upon Article 2226, Vernon's Civil Statutes of Texas.¹ Article 2226 plainly allows such fee in these circumstances. Its applicability is, however, disputed. Defendant claims Louisiana law governs attorney's fee here. Defendant says Louisiana law does not allow such fee in these premises.

Despite argument by defendant to the contrary, the court believes this to be a diversity case. As such, substantive matters are governed by Texas law. Erie R. Co. v. Tompkins, 1938, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188. This issue of attorney's fee appears "substantive" for Erie purposes. Crescent Lumber & Shingle Co. v. J. C. Rotherum Lumber Co., 5 Cir., 1955, 218 F.2d 638. This reference to Texas law includes its conflict of laws rules as well as other laws. Klaxon Co. v. Stentor Co., 1941, 313 U.S. 487, 61 S.Ct. 1020, 85 L.Ed. 1477. Our next concern is whether under Texas conflict rules attorneys' fees are characterized as "substantive" or "procedural" for choice of law purposes. If Texas labels them "procedural", the law of the Texas forum governs. If Texas terms them "substantive", reference must be made to the law of the place where the substantive rights involved accrued. This characterization process is analyzed on similar facts in Stokes v. Reeves, 9 Cir., 1957, 245 F.2d 700. Texas authorities and other cases clearly hold the issue of attorneys' fees to be one of substantive rights governed by the law of the state where the substantive rights in litigation accrued. Stokes v. Reeves, supra; Thompson v. H. Rouw Co., Tex.Civ.App. 1951, 237 S.W.2d 662; Meaders v. Biskamp, 1958, 1159 Tex. 79, 316 S.W.2d 75; Prudential Ins. Co. of America v. Carlson, 10 Cir., 1942, 126 F.2d 607.

At various times Texas courts have used all the standard tests for choosing law to govern contracts (contract or account rights being the substantive rights accrued herein). Thus, case law in Texas cites the place of making the contract as controlling, place of performance as controlling, or that law intended by the parties to govern as controlling. King v. Bruce, 1947, 145 Tex. 647, 201 S.W.2d 803; Grace v. Orkin Exterminating Co., Tex.Civ.App.1947, 255 S.W.2d 279. A general discussion of Texas rules governing contract rights is found in 12 Tex. Jur.2d, Conflicts of Laws, Secs. 9-12 (2d Ed. 1960). Regardless of theory applied, substantive law other than Texas controls here. This repairs contract was neither made nor performed in Texas. Nothing indicates parties' intention that Texas law govern.

This repairs agreement was both made and performed on the artificial islands of defendant seven miles off the coast of Louisiana. Texas conflict rules lead unerringly there. These islands or artificial structures are not within Louisiana waters. These are, however, within the territory governed by the Outer Continental Shelf Lands Act, which Act provides in 43 U.S.C.A. § 1333(2):

"To the extent that they are applicable and not inconsistent with this Act or with other federal laws * * * civil and criminal laws of each adjacent state * * * are hereby declared to be the law of the United States for that portion of the subsoil and seabed of the outer Continental Shelf, and artificial islands and fixed structures erected thereon, which would be within the area of the State if its boundaries were extended seaward to the outer margin of the outer Continental Shelf * * *".

The "adjacent state" within Section 1333(2) is Louisiana. Authority on Section 1333(2) is nearly non-existent. A recent opinion by our Court of Appeals furnishes a hint that Section 1333(2) makes Louisiana law controlling here. Guess v. Read, 5 Cir., 290 F.2d 622. That case certainly lends no more than a "hint" though. Finding no conflict between Section 1333(2) and "other Federal laws" in these circumstances, the court believes this section makes applicable Louisiana law as to allowance of attorneys' fees.

The controlling Louisiana law is quite clear as to allowance of attorneys' fees upon these facts. A successful litigant cannot recover such fees as an element of damages unless a contract or statute so provides. In Chauvin v. LaHitte, 1956, 229 La. 94, 85 So.2d 43 (rescission of auto sales contract), the Supreme Court of Louisiana commented at 85 So. 2d 45, "On numerous occasions this court has said that ordinarily attorney's fees are not assessable as an item of damages unless provided for by law or by contract." Winkler v. Ascension Bank & Trust Co., 1935, 182 La. 69, 161 So. 23 (suit on mortgage notes); Brentley v. Tugwell, 1953, 223 La. 763, 66 So.2d 800 (action on check). The repairs agreement in suit did not provide for attorney's fee. No Louisiana statute of the Art. 2226 variety has been found. Dissolution of conservatory writs which furnishes yet another exception in Louisiana is not present. Griffin v. Bank of Abbeville & Trust Co., 1955, 228 La. 857, 84 So.2d 437 (dissolution of conservatory writ). Louisiana law denies allowance of plaintiff's attorney's fee.

I turn to the interest problem. Plaintiff again relies upon Texas law, citing particularly Article 5070, Vernon's Civil Statutes of Texas:

"When no specified rate of interest is agreed upon by the parties, interest at the rate of six per cent per annum shall be allowed * * * on all open accounts, from the first day of January after the same are made."

Defendant again argues Louisiana law must govern for the same reasons such law controlled attorneys' fees. Defendant contends plaintiff's claim is predicated upon quantum meruit, and Louisiana law considers such unliquidated until reduced to judgment. Such unliquidated claims are said to garner interest only from the date of judgment and at five per cent. Plaintiff interprets Louisiana law as allowing interest either from date on its invoices or date of judicial demand.

I am satisfied Louisiana law must govern interest. Texas considers interest damages a "substantive" matter controlled by law of state where cause of action arose. For example, Texas courts will apply Mexican interest rules to a contract or account made in Mexico. Pauska v. Daus, 1868, 31 Tex. 67, 68; 75 A.L.R.2d 540 (1961). "A question of damages pertains to the right, not to the remedy and is not governed by the law of the forum." 12 Tex.Jur.2d, Conflicts of Laws, Sec. 14 (2d Ed. 1960).

The parties agree the applicable interest rate under Louisiana law is five per cent per annum. They disagree as to commencement date of interest. After examining numerous Louisiana cases on the issue, the court agrees with this comment in 7 LSA-C.C. p. 302 as to LSA-C.C. Art. 1938,² the basic statute:

"The application of the rule of Articles 1938 of the Civil Code and 554 of the Code of Practice has proved difficult in many cases, and is marked by inconsistencies and, at times, complete indifference to the obvious

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