L & a Contracting Company, Inc. v. Ram Industrial Coatings, Inc.

• Decision Date: 23 June 2000
• Docket Number: No. 99 CA 0354.,99 CA 0354.
• Citation: 762 So.2d 1223
• Parties: L & A CONTRACTING COMPANY, INC. v. RAM INDUSTRIAL COATINGS, INC. and Transamerica Premier Insurance Company.
• Court: Court of Appeal of Louisiana — District of US

Page 1223

762 So.2d 1223

L & A CONTRACTING COMPANY, INC. v. RAM INDUSTRIAL COATINGS, INC. and Transamerica Premier Insurance Company.

No. 99 CA 0354.

Court of Appeal of Louisiana, First Circuit.

June 23, 2000.

COPYRIGHT MATERIAL OMITTED

Murphy J. Foster, III, Steven B. Loeb, Baton Rouge, for Plaintiffs—Appellees L & A Contracting Company and Fidelity and Deposit Company of Maryland.

Kurt S. Blankenship, Raymond A. Daigle, Jr., Metairie, for Defendants—Appellants Ram Coating Technology Corporation, (as Successor—In—Interest to Ram

Industrial Coatings, Inc.), and its Successor, Waste Technology Corporation, Inc. and Transamerica Premier Insurance Company.

Before: FOIL, WHIPPLE, and GUIDRY, JJ.

GUIDRY, J.

Appellants, Waste Technology Corporation, Inc. (Waste), successor-in-interest to Ram Coating Technology (Ram Coating), and Transamerica Premier Insurance Company (Transamerica), seek review of the lower court's judgment awarding breach of contract damages to appellee, L & A Contracting Company, Inc (L & A).

FACTS

In 1989, the Louisiana Department of Transportation and Development (DOTD) advertised for public bid a project involving the renovation of Miller's Bluff Bridge in Bossier Parish. The Miller's Bluff Bridge is a large bridge composed of two approach spans and five center trusses described as "camelbacks" or "camel's humps" because of the high-arching, curved shape of each truss. The center trusses and approach spans were further divided into sub-units, also referred to as spans, and numbered sequentially from one to twenty-two in a west to east direction. The layout of the bridge can basically be divided into three sections: the west approach, comprised of spans one to six; the east approach, comprised of spans twelve to twenty-two; and the superstructure, comprised of the five trusses labeled as spans seven to eleven.

L & A solicited bids from several companies to perform the subcontracting work on the project. One of the work assignments for which L & A was seeking subcontract bids was for the cleaning and painting of new steel used in refurbishing the bridge as well as for cleaning and repainting the existing steel. L & A successfully bid on the project. DOTD entered into a contract with L & A on August 2, 1989 for the work to be performed. Thereafter, L & A entered into a subcontract with Ram Industrial Coating, Inc. (Ram Industrial) on October 2, 1989. The subcontract was substantially based on the bid response submitted by Ram Industrial. The price listed in the contract was $410,399.00. Furthermore, the subcontract provided that L & A would release and hold Ram Industrial harmless if in fact DOTD did not approve the sublet.

On December 6, 1989, Ram Industrial was issued a contractor's license by the state licensing board. DOTD approved Ram Industrial to perform the subcontract work on the project on January 16, 1990. Because of the public nature of the project, no company could perform any work on the project without first receiving the pre-approval of DOTD.

Shortly after being granted the subcontract for cleaning and painting on the project, Ram Industrial sent a letter to L & A requesting that the amount of its bid be increased by $9,840.00, or that the requirement that it obtain payment and performance bonds be waived in light of the fact it had inadvertently overlooked this requirement and, therefore, did not include the costs of these bonds in its bid price. L & A rejected this offer, but instead offered to secure the bonds on Ram Industrial's behalf, with the costs of the bonds being deducted from the first progress payment, called pay estimates, made to Ram Industrial. On May 10, 1990, performance and payment bonds were issued to Ram Industrial by Transamerica.

In the meantime, disputes arose between DOTD and L & A which delayed commencement of the project and resulted in Ram Industrial not being ordered to commence its work until September of 1991. Prior to being ordered to commence work, on November 16, 1990, C.B. Roth, president and owner of Ram Industrial sent a letter to L & A discussing the costs of the delay in commencing the subcontract work and inquiring as to how soon it would be before they could commence said work. He also stated in the letter the company's former expectation to have commenced the work in the third or fourth quarter of 1989, when the job was bid.

On September 17, 1991, C.B. Roth sent L & A a letter to inform it that his company would be mobilizing to the project site on September 18, 1991. In that letter, he again expressed concerns about the additional costs to his company caused by the nearly two-year delay, and he also expressed concern about the new steel installed in the bridge being in a raw (unprimed) condition, in derogation of the DOTD specifications. Nevertheless, on September 18, 1991, the company mobilized to the jobsite and commenced the work.

However, prior to mobilizing to the jobsite in September 1991, Ram Industrial had negotiated a corporate takeover due to the financial problems the corporation was experiencing. Specifically, in 1989, Ram Industrial reported a $100000.00 income loss and in 1990, the figure had doubled to $200,000.00. Therefore, in April 1991, arrangements were made with Waste, the parent company of Ram Coating, to have Ram Coating purchase all of the assets and liabilities of Ram Industrial. All of the same employees and the same management personnel would continue in the employ of Ram Coating in the same positions and capacities as held with Ram Industrial. This included C.B. Roth, who retained the position of president in the newly formed company, although he no longer held an ownership interest. For this reason, and allegedly unbeknownst to L & A, Ram Coating, rather than Ram Industrial, mobilized to the jobsite in September 1991. Ram Industrial was dissolved as a corporate entity on October 11, 1991.

Despite the complaints concerning the delay in starting the project and the extra work presented by the use of unprimed, new steel on the job, Ram Coating commenced operations without having resolved these two issues. Under the original (base) subcontract, all old or existing steel was required to be cleaned and then repainted. The process used to clean the steel consisted of sandblasting the steel to remove old paint and more importantly, any rust deposits that may have developed on the steel. After the cleaning was completed, the steel would be repainted to protect it against rust which could corrode the metal and compromise the structural integrity of the bridge.

The new steel used in the project was used to replace those of portions of existing steel that were too corroded to salvage. According to the Louisiana Standard Specifications for Roads and Bridges, 1982 edition (commonly referred to as the "gold book"), all new steel used was to be shop primed before arriving at the jobsite. However, the new steel supplied for the Miller's Bluff Bridge project was unprimed steel. Ram Coating employees were requested by L & A to "field prime" all the steel used on the project.

In the time period from September 1991 to December 1991, Ram Coating completed all of the work required on the approach spans and was starting to work on span 11 in one of the center trusses when the company demobilized for the winter months.¹ According to the "gold book," painting was prohibited when ambient air temperatures were less than 45 degrees Fahrenheit and humidity was higher than 85 percent, which temperatures are typical of the southeast in the winter months. Furthermore, lay and expert witnesses for both sides testified that such demobilization is typical of the painting industry in Louisiana.

Ram Coating remobilized to the jobsite in March 1992, and around that same time, L & A began to receive notices of unpaid invoices from creditors who had supplied equipment and material to Ram Coating in conjunction with the Miller's Bluff Bridge assignment. Some of the companies had filed materialmen's liens against L & A in conjunction with these unpaid bills. L & A began to retain funds from the pay estimates it sent to Ram Coating to cover the mounts owed of which it had been made aware and sent correspondence to Ram Coating questioning it concerning these complaints. In response, Ram Coating authorized L & A to use the retained funds to pay creditors and explained that because L & A was tardy in paying Ram Coating for the extra work it was performing, Ram Coating was not able to timely pay its creditors.

At the same time, L & A noted that Ram Coating's progress in completing the subcontract work had significantly decreased. On March 31, 1992, counsel for L & A sent a written demand letter to Ram Coating, in accordance with contractual provisions, requesting that there be a marked increase in Ram Coating's rate of production or L & A would place the company in default on April 6, 1992, and demand that Transamerica complete the job and indemnify L & A for all losses.

On April 6, 1992, Ray Sims, vice president of L & A, faxed Ram Coating and Transamerica to notify both companies that L & A was placing Ram Coating in default for failure to make any noticeable progress since its demand letter of March 31, 1992. He then requested that Transamerica have a crew in place to complete the work by April 13, 1992, at 8:00 am, or L & A would undertake to have the job completed, holding Ram Coating and Transamerica liable for all damages resulting therefrom. Transamerica sought to negotiate with L & A to allow Ram Coating to return to the job and complete the work within a sixty-day time frame and for the remaining funds due under the contract. This offer was refused and L & A placed Transamerica in default as of 5:00 pm, C.S.T. on May 1, 1992.

L & A subsequently sought bids to complete the painting and cleaning work on the project. On May 22, 1992, L & A entered into a subcontract with Global Construction Company, Inc. (Global) to...