Lindy Investments v. Shakertown Corp.
| Decision Date | 02 May 2000 |
| Docket Number | No. 98-30971,98-30971 |
| Citation | 209 F.3d 802 |
| Parties | (5th Cir. 2000) LINDY INVESTMENTS, LP, Etc; ET AL; Plaintiffs LINDY INVESTMENTS III, a Louisiana Limited Partnership; MAGNOLIA CREEK APARTMENTS, a Louisiana Partnership; Plaintiffs-Appellants-Cross-Appellees MAGNOLIA CREEK, Louisiana Limited Corp. Appellant-Cross-Appellee v. SHAKERTOWN CORPORATION; ET AL; Defendants SHAKERTOWN 1992 INC; COMMERCE AND INDUSTRY INSURANCE CO. OF CANADA Defendants-Appellees-Cross-Appellants |
| Court | U.S. Court of Appeals — Fifth Circuit |
Appeals from the United States District Court For the Eastern District of Louisiana
Before KING, Chief Judge, DUHE and DeMOSS, Circuit Judges.
In this redhibition case arising under Louisiana law, Lindy Investments III, Magnolia Creek Apartments, and Magnolia Creek (collectively "Appellants") challenge the district court's order predicating the execution of the Appellants' judgment upon return of defective siding to the manufacturer, Shakertown 1992, Inc. ("Shakertown"). Additionally, Appellants contest the district court's refusal to award "litigation-related expenses" to Appellants. 1 At the same time, the Appellants and Shakertown challenge the district court's conclusions on summary judgment regarding the scope of the commercial general liability policy (the "Policy") issued to Shakertown by Commerce and Industry Insurance Company of Canada ("C&I"). C&I cross-appealed contesting the award for diminution in value. For the reasons stated herein, we AFFIRM the trial court's decision except as to the issue of litigation-related expenses which we DISMISS for lack of appellate jurisdiction.
Appellants own and operate two apartment complexes in River Ridge, Louisiana. Appellants purchased from Shakertown and installed "Cascade Classic" exterior siding on both complexes. Cascade Classic is a cedar shingle and plywood exterior siding that Shakertown manufactured between 1992 and early 1995.
After noticing that the siding had begun to "peel" and "delaminate," the Appellants sued Shakertown and C&I in Louisiana state court, alleging that the siding contained redhibitory defects under Louisiana law. 2 Defendants removed the suit to federal court. Following a trial on the merits3, the jury found for the Appellants and awarded them a total of $298,029 for "Rescission of sale/Reduction in purchase price," $9,059 for "Diminution of value" of the buildings and $177,418 in "Reasonable Expenses." The jury also found that the Appellants received a total of $14,901 of value from their use of the defective shingles.
The trial court entered judgment in the amount awarded by the jury discounted by the $14,901 credit for use of the product and subject to judicial interest running from the date of judgment. The court conditioned execution of this judgment upon Appellants' return of the siding to Shakertown.
Pursuant to the parties' agreement in the pre-trial order, the court took up the issue of attorney's fees and litigation-related costs after entering judgment on the merits. The court granted Appellants' motion for attorney's fees and denied under Federal Rule of Civil Procedure 54(d) Appellants' request for litigation-related expenses. The court postponed determination of the amount of fees and costs pending the outcome of this appeal.
Appellants appealed challenging the trial court's decisions regarding return of the siding, the denial of litigation-related expenses, and the scope of C&I's coverage. Shakertown cross-appealed challenging the summary judgment ruling limiting the scope of C&I's coverage. C&I cross-appealed challenging the sufficiency of Appellants' evidence supporting the award for diminution in value of the apartment complexes.4
Although no party contests our jurisdiction to decide this matter, we must on our own motion consider it. See Thornton v. General Motors Corp., 136 F.3d 450, 453 (5th Cir. 1998). Except in rare circumstances not applicable here, our jurisdiction is limited to final decisions of the district court. See 28 U.S.C. 1291.
By separating the trial on the merits from the award of attorney's fees and costs, the trial court has created a two-track system for appeals purposes. The trial court's decisions on the merits are appealable final orders. See Budinich v. Becton Dickson and Co., 486 U.S. 196, 202-3 (1988) (). However, because the trial court has not yet determined the amount of attorney's fees and costs due to Appellants, we do not have appellate jurisdiction to entertain Appellants' challenge to the denial of recovery for litigation-related expenses. See Deloach v. Delchamps, Inc., 897 F.2d 815, 826 (5th Cir. 1990) (). Accordingly, we must dismiss for lack of appellate jurisdiction Appellants' challenge to the trial court's refusal to tax litigation-related expenses as costs under Rule 54(d).
Redhibition is the avoidance of a sale of a defective product when the defect has rendered the product useless, or its use so inconvenient and imperfect, that the buyer would not have purchased it had he known of the defect. See LA. CIV. CODE art. 2520 (1870). In general, the law requires the purchaser to "tender" the defective product to the seller before filing any action in redhibition. See Blue v. Schoen, 556 So.2d 1364, 1370 (La. App. 5th Cir. 1990); Vance v. Emerson, 420 So.2d 1032, 1035 (La. App. 5th Cir. 1982). Under the "tender requirement," the buyer need not physically return the product prior to suit; rather, he may satisfy the requirement simply by offering to return the product for repair and/or replacement. See Mitchell v. Popiwchak, 677 So.2d 1050, 1054 (La. App. 4th Cir. 1996).
Typically, the remedy contemplated in a redhibitory action is full rescission of the sale. Rescission requires the seller to return the purchase price and the buyer to return the thing purchased, thus placing the parties in the positions they held before the sale. See Capitol City Leasing Corp. v. Hill, 404 So.2d 935, 939 (La. 1981). This "return requirement," though involving the eventual tender of the defective product to the seller, is the end result of a successful rescission and should not be confused with the procedural pre-filing tender requirement mentioned above. See Vance, 420 So.2d at 1035.
Louisiana courts typically invoke rescissionary remedies in redhibition cases where the product is totally unfit for its intended use. When a redhibitory defect merely diminishes the product's value or utility, however, a party can recover quanti minoris damages for a reduction in the purchase price without having to return the defective product. See Blue, 556 So.2d at 1369. The trial court has discretion to award either rescission or quanti minoris in a successful redhibitory action, see LA. CIV. CODE art. 2543 (1870); but cannot award both. See Grimes v. Alenco Window Co., 638 So. 2d 1147, 1149 (La. App. 1st Cir. 1994) (). We must therefore determine which one of these two remedies is appropriate.
The trial record clearly indicates that Appellants sought a full rescission. The district court's pre-trial order indicates that "plaintiffs contend they are entitled to a rescission in the sale." Although the pre-trial order mentions the possibility that the shingles may be "mechanically fastened" to the plywood in order to prevent delamination, the parties downplayed this option as unworkable. Moreover, in a handwritten amendment to the section of the pre-trial stipulation marked "LISTING OF CONTESTED ISSUES OF LAW" the parties struck a question asking, "If a redhibitory defect exists, whether plaintiffs are entitled to a rescission of the sale, or merely a reduction of the sales price." Judging from the single remaining reference to rescission and the striking of the on-point question of law, we conclude that as of the beginning of trial, Appellants sought rescission.5
Turning to the jury's award, we note that the amounts awarded for "rescission of sale/reduction in purchase price" equal the stipulated purchase prices for the panels installed at both complexes. We agree with the trial court that the jury's awarding of the exact purchase price constitutes a proper rescission of sale. That Appellants might now be required to live up to their end of the rescissionary bargain and return the shingles should come as no surprise to them.6
Appellants argue that the district court erred in ordering them to return the siding to Appellees as a condition precedent to the execution of the judgment. Appellants contend that the district court should not have applied Louisiana Civil Code Article 2532 to require return because this provision was not in effect when Appellants' cause of action arose. In the alternative, Appellants note that Article 2532 does not require the purchaser to return the defective product "until all his claims, or judgments, arising from the defect are satisfied." LA. CIV. CODE art. 2532 (1995). Finally, Appellants insist that they should be excused from the return requirement under common law principles of equity.
Article 2532 of the Louisiana Civil Code reads in relevant part:
A buyer who obtains rescission because of a redhibitory defect is bound to return the thing to the seller, for which purpose he must take care of the thing as a prudent administrator, but is not bound to deliver it back until all his claims, or...
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