F.H. Paschen, S.N. Nielsen & Assocs., LLC v. Se. Commercial Masonry, Inc.

• Decision Date: 10 November 2015
• Docket Number: CIVIL ACTION No. 12-2799 SECTION "E"
• Parties: F.H. PASCHEN, S.N. NIELSEN & ASSOCIATES, LLC, Plaintiff v. SOUTHEASTERN COMMERCIAL MASONRY, INC., Defendant
• Court: U.S. District Court — Eastern District of Louisiana

F.H. PASCHEN, S.N. NIELSEN & ASSOCIATES, LLC, Plaintiff v. SOUTHEASTERN COMMERCIAL MASONRY, INC., Defendant

CIVIL ACTION No. 12-2799 SECTION "E"

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF LOUISIANA

November 10, 2015

FINDINGS OF FACT AND CONCLUSIONS OF LAW

This matter was tried before the Court, sitting without a jury, over two days¹ on the claims of Paschen, S.N. Nielsen & Associates, LLC ("Paschen") against Defendant Southeastern Commercial Masonry, Inc. ("SECM") for breaches of contract for masonry work on two school projects and improperly filing statements of claim and privilege on two public works projects.² SECM filed a counterclaim against Paschen for breach of contract, breach of oral contract, and enforcement of statutory liens.³

Plaintiff Paschen is a limited liability company organized under the laws of Illinois.⁴ The members of Paschen are citizens of Indiana, Illinois, Wisconsin, Michigan, Florida, and New Jersey.⁵ Defendant SECM is a corporation organized under the laws of Alabama with its principal place of business in Alabama.⁶ This Court has jurisdiction pursuant to 28 U.S.C. § 1332.

Paschen was the general contractor on two public works projects: the Mildred Osborne School ("Osborne project"), and the Charles J. Colton School ("Colton project"). Paschen entered into two subcontracts with SECM, one to perform masonry work on the Osborne project and the other to perform masonry work on the Colton project. The subcontracts on the Osborne and Colton projects were fixed-price agreements, whereby SECM agreed to perform all of the work within its scope of work under the subcontracts for a set price.⁷ Both were fast-track projects.⁸ Schedule A to each subcontract describes the work to be done (the "work").⁹ Paschen terminated both contracts with SECM.¹⁰

The Court heard testimony from Larry Van Zuidam, Mark Waller, John Wilkes, Chris Hase, Rupert Perez, Jeffery Posey, Justin Allen Posey, and admitted into evidence the deposition of Adam Lusk.¹¹

With respect to the Osborne project, the Court rules that Paschen is not entitled to recover for its breach of subcontract claim insofar as it is based on SECM's failure to perform and failure to perform in a timely manner. Nor is Paschen entitled to recover the cost of removing the statement of claim filed by SECM in the public record. However, Paschen is entitled to recover the amount it paid to SECM's sub-subcontractor, Tailored Foam, and attorney's fees and costs related to the prosecution of this portion of its claim. Further, the Court rules that SECM is entitled to recover on its breach of subcontract claimfor the amounts it is owed under Change Order 24 but not for other change order requests or its request for overtime pay and extra crew. Further, the Court rules that SECM is not entitled to recover on its breach of oral agreement claim for its time and material tickets or its claim for attorney's fees.

With respect to the Colton project, the Court rules that Paschen is not entitled to recover for its breach of subcontract claim insofar as it is based on SECM's failure to perform and failure to perform in a timely manner. Nor is Paschen entitled to recover the cost of removing the statement of claim filed by SECM in the public record or its attorney's fees. Further, the Court rules that SECM is entitled to recover the amounts due under Pay Application 17 and to recover its retainage due under the subcontract. SECM is not entitled to recover on Pay Application 18 for back charges related to additional scaffolding costs; Change Orders Change Orders 2, 3, 4, 5, 6, 7, 11, 12, 13, 20 (credit to Paschen) and 22; lost profits on the subcontract; or its attorney's fees.

To the extent any finding of fact may be construed as a conclusion of law, the Court adopts it as such. To the extent any conclusion of law may be construed as a finding of fact, the Court adopts it as such.

STANDARD OF LAW

Written contracts are the law between the parties, and courts are bound to enforce contracts as written. Quinn-L Corp. v. Elkins, 519 So. 2d 1164 (La. App. 1 Cir. 1987). The essential elements of a breach of contract claim are (1) the obligor's undertaking of an obligation to perform, (2) the obligor's failure to perform the obligation (the breach), and (3) the breach results in damages to the obligee. Favrot v. Favrot, 68 So. 3d 1099, 1109 (La.App. 4 Cir. 2011). The breach of a contractual duty cannot be assumed. Morgavi v. Mumme, 270 So. 2d 540 (La. 1972). The burden of proof in an action for breach of contract is on the party claiming rights under the contract. Vignette Publications, Inc. v. Harborview Enterprises, Inc., 799 So. 2d 531, 534 (La. App. 4 Cir. 2001). Thus, Paschen has the burden of proof on its breach of contract claims, and SECM has the burden of proof on its breach of contract counterclaims.

Paschen and SECM must establish the elements of their claims essential to recovery by a preponderance of the evidence. Bond v. Allemand 632 So. 2d 326 (La. App. 1 Cir. 1993). "A preponderance of the evidence simply means evidence that persuades [the Court] that the plaintiff's claim is more likely true than not true." 5th Cir. Pattern Civil Jury Instruction 2.20 (West 1998); see also Layrisson v. H.S.S. Vending Distrib., No. 97-1440, 1998 WL 355461, at *2 (E.D. La. June 26, 1998).

Under Louisiana law, if an individual does not complete the work he has contracted to do or fails to execute it in the manner agreed upon, he is liable for the losses that ensue from his non-compliance. La. Civ. Code art. 2769. To establish a subcontractor's liability due to defective workmanship, the general contractor must prove the existence and nature of the defects, that the defects are due to faulty materials or workmanship, and the cost of repairing the defects. Cascio v. Carpet, 968 So. 2d 844, 850 (La. App. 2 Cir. 2007).

For a breach of contract claim under Louisiana Civil Code article 2769, the appropriate measure of damages is the cost of repairing any defects or the cost of completing the work. Mount Mariah Baptist Church, Inc. v. Pannell's Associated Electric, Inc., 835 So. 2d 880, 888 (La. App. 2 Cir. 2002). A plaintiff bringing a claim underLouisiana Civil Code article 2769 must prove the costs incurred are reasonably related to the repair. Regions Bank v. Ark-La-Tex Water Gardens, LLC 997 So. 2d 734, 739-40 (La. App. 2 Cir. 2008).

The burden of proof is upon the subcontractor to show that it is entitled to the amount requested in a change order request. Powerhouse Wholesale Electrical Supply v. Spartan Building Corporation, 525 So. 2d 1216, 1220 (La. App. 1 Cir. 1988).

A written construction contract may be modified by an oral contract and the conduct of the parties, even when the written contract contains a provision that change orders must be in writing. Modification of a written agreement can be presumed by silence, inaction, or implication. Aqua Pool Renovations v. Paradise Manor Community, 880 So. 2d 875, (La. App. 5 Cir. 2004). Whether oral agreements were confected that modified a written contract is a question of fact. Pelican Electrical Contractors v. Neumeyer, 419 So. 2d 1, 5 (La. App. 4 Cir.), writ denied, 423 So. 2d 1150 (La. 1982). The party asserting a modification of an obligation must prove by a preponderance of the evidence facts or acts giving rise to the modification. La. Civ. Code art. 1831; Amitech v. Nottingham Const., 57 So. 3d 1043 (La. App. 1 Cir. 2011).

A contract clause providing the architect or engineer shall be the final arbiter of disputes is binding upon the parties to a construction contract, unless the architect or engineer's decision is manifestly erroneous or rendered in bad faith. Where, therefore, the parties have agreed to abide by the decision of an architect, the courts will hesitate, in the interpretation of the contract, to set aside the architect's ruling, unless manifestly arbitrary, or it is shown to have been rendered in bad faith. Delta S. Co., Inc. v. La. & Ark. Ry. Co.,394 So. 2d 1299, 1301 (La. App. 1 Cir. 1981). See also Sabine Const. Co., Inc. v. Cameron Sewerage Dist., 298 So. 2d 319, 325 (La. App. 3 Cir. 1974); Baker v. Keller Const. Co., 219 So. 2d 569, 571 (La. App. 4 Cir. 1969); J. H. Jenkins Contractor, Inc. v. City of Denham Springs, 216 So. 2d 549, 553 (La. App. 1 Cir. 1968); see also Iteld v. Four Corners Const., L.P., 157 So. 3d 702, 715 (La. App. 4 Cir. 2013).

"Where the promisee makes performance impossible, it is unimaginable that any civilized system of law would allow that promisee to recover damages for the promisor's failure to perform under the contract. It is a long established principle of law that he who prevents a thing may not avail himself of the non-performance he has occasioned. The principle is founded upon the premise that one should not be able to take advantage of his own wrongful act." Lake Forest, Inc. v. Katz & Besthoff No. 9, 391 So. 2d 1286, 1289 (La. App. 4 Cir. 1980) (quoting Cox v. Dep't of Highways, 209 So. 2d 9, 11 (La. 1968)).

As a general rule, an independent contractor maintains the right to control and direct the scope of its work while in progress. See, e.g., Villaronga v. Gelpi P'ship No. 3, 536 So. 2d 1307, 1311 (La. App. 5 Cir. 1988). It is within the purview of the subcontractor to determine how and by what means it performs the work it was contracted to complete. See id. Unless stated otherwise in the contract between the parties, the general contractor is unable to exercise any direction or control over the performance of the subcontractor's work. See Trapani v. Jefferson Parish, 180 So. 2d 850, 852-53 (La. App. 4 Cir. 1965).

Contractors who control or direct the means, methods, and operations of a subcontractor may be held liable for the actions of that subcontractor. See, e.g., Sims v. Cefolia, 890 So. 2d 626, 631 (La. App. 5 Cir. 2004); Migliori v. Willows Apartments, 727So. 2d 1258, 1261 (La. App. 4 Cir. 1999); Villaronga v. Gelpi P'ship No. 3, 536 So. 2d 1307,...